Japanese consumers are finicky while the country’s distribution channels are highly complex. For those who can’t afford to set up direct presence, Japan is a market best tackled leveraging on the wisdom and network of others who have already succeeded.
BY YOKE HAR LEE
The average Japanese consumer leads a hurried life – a look at Japan’s bullet train system will give Kiwi exporters an idea of how ridiculously fast-paced life is. However, doing business with Japan, the New Zealand exporter can be anything but hurried.
Japanese businesses take time to understand who they are buying from and what they are buying. Understanding exactly what will meet Japanese requirements is a process that takes investment in time and money.
Contrary to what most think, conducting business in Japan is less about the culture or etiquette and more about whether a Kiwi business grasps what its target market wants and at what price.
New Zealand’s trade commissioner for Japan, Ben Wilson says: “What Japan is not about is this: it is not about the protocols or the etiquette. People tend to get worried about upholding the honour of the other side. To be blunt about it – the rituals are for the Japanese. They won’t hold it against you if you hand over your business card upside down — it won’t break a deal.”
Kiwi exporters should really be worried about how to sell to Japan, Wilson says. In this respect, selling to Japan should be no different to selling to the rest of the world.
KNOW YOUR CUSTOMERS WELL
“The questions exporters need to ask are what do they need to do to please their consumers, how much do they need to know about them and how much are they willing to pay for what they want to buy,” Wilson says.
Japanese businessmen are known as tough negotiators. The first meeting will not cut you a deal unless under the special circumstance where you have the exact product at the right price, according to an Asia Foundation guide to doing business in Japan.
Managing director Scott Kington says the company was lucky it was approached by a Japanese distributor with experience of dealing with Japanese department stores. The best thing MadeBlunt did, Kington says, was to employ the translation services of a New Zealand company called JanzFreight, which handled all the language issues in the negotiation process. “It was a critical factor for us, having our own interpreter, as no one we were negotiating with spoke English,” Kington says.
MadeBlunt’s umbrellas had to be tailored to fit the Japanese market. “Our distributors are 100% focused on having quality,” Kington says. But he doesn’t mind because that sets the company up to meet high standards elsewhere in the world.
Fine-tuning was also needed, such as adding a carrying sleeve, essential for commuting Japanese.
Trading company JanzFreight’s Yuri Iizuka says language is a big barrier for Kiwi exporters. Unless dealing with a global Japanese company, it is advisable to use email rather than phone calls while negotiating.
One of the biggest decisions an exporter has to make is whether to go direct into a market or use a distributor or representative.
Wilson says not many companies tackle the Japanese market directly, although he thinks it should be the preferred option. There is a high cost associated with using an intermediary in the Japanese market, potentially leaving a producer with about 30% of the price of a product, with the rest going to the distributor.
Wilson reckons one of the most common hurdles faced by Kiwi companies is non-performing distributors, usually by the second or third year of their products having been sold into Japan. “By then, a company would usually have had enough of their distributor and tries to find another. Regrettably, that’s always a bit late. Others would view this as a second opportunity – the better distributors would tend not to take you on unless you have a new product and a strong brand, or there is some mileage to be had.” Iizuka, however, advocates use of a Japanese distributor with hurdles faced by Kiwi companies is non-performing distributors, usually by the second or third year of their products having been sold into Japan. “By then, a company would usually have had enough of their distributor and tries to find another. Regrettably, that’s always a bit late. Others would view this as a second opportunity – the better distributors would tend not to take you on unless you have a new product and a strong brand, or there is some mileage to be had.” Iizuka, however, advocates use of a Japanese distributor with industry experience and distribution channel knowledge
Getting traction for a deal in Japan is also about who you know or who you can leverage off, says Jon Doherty, who spent five years in the country, helping set up a New Zealand-themed café in Tokyo. He recently returned home and is director of sales and marketing for
Terrace Downs. “Don’t expect to make money in the first year in Japan but it can be a very successful market once you have invested time and money there. A lot of it is about who you know in Japan.
“If you can, leverage off people who have succeeded in Japan, who are familiar with how to do business in Japan; leverage off their contacts.”
Knowing the right people can help you fast-track decision-making. “If you take the bottom-up approach, it might take forever. The higher you get up the ladder, the faster you can get results. However, this hierarchical society is breaking down.”
Kington is learning about expectations. The Japanese, he says, are conservative so the targets set may be lower than what a Kiwi company is used to. “Our wish is always to aim high and put in plans to achieve the target. But for them, it may be a case of aiming low so they can exceed it.”
While distributors may err on the side of caution in setting sales targets consumers have very high expectations from stores. Big retailers such as Wal-Mart and Carrefour have tried to break into the Japanese market, but find it hard to succeed. Iizuka says one of the reasons is a lack of understanding of Japanese consumer behaviour. Consumers are whimsical and always looking for change.
“For example, global Japanese brand UNIQLO [a speciality retailer in the apparel market] has been growing even during this deflationary period. But even UNIQLO cannot display its products longer than a month, except for its signature product.”
Consumers in big Japanese cities, he says, are looking for something different from the crowd. “In this market, you could be a big hit instantly if you splurge on a big PR or marketing campaign but, at the same time, you could be gone quickly. This is typical in Japan,” Iizuka adds.
For that reason Ian Mellsop, whose company Marinescape has built aquariums in over 20 locations around the world, has not bothered with Japan. Japan’s large trading houses have a huge hold on the market and that has proven too hard for the company, he says. [END]