A small island in East Asia holding one of the highest purchasing power of the planet: Welcome to Japan, the world’s third-largest economy. With more than 5% of the world GDP and well-advanced technology and manufacturing-related industries, the country plays a leading role in the global economy. Foreign investors in Japan benefit from a cost-competitive and business-friendly environment with a large and sophisticated consumer economy.
In 2011, Japan was hit by a devastating earthquake and a tsunami, causing a lot of concerns related to the damaged to the Fukushima Daiichi nuclear power plant. This series of events greatly affected future foreign investments, but the reconstruction did not impact the economy as much as expected thanks to surplus of savings. Japan still presents some challenges for foreign investors, such as language barriers, difficult labour practices, and over regulation in some sectors. But its appeal is still very strong, and for good reasons. The country is stable, with a strong intellectual property protection, and a strategic location for investors interested in the Asian market.
Japan is the perfect market for investors looking for long-term benefits. In this guide, we will guide you through the process of reaching Japan’s consumers, successfully making sales on ecommerce channels, and getting your products to reach the desired consumers.
Japan continues to experience a trend of population decline and a rapidly aging society. Some researchers project a population decrease by as much as one third by 2060, from 127 million to 87 million, and the share of individuals over the age of 65 projected to rise from 27% today to 40% by 2060. The Japanese government, healthcare industry, and business community are actively engaged in seeking to ameliorate negative consequences of this population decline, and are taking measures to offset its impacts on macroeconomic growth. 
Although an aging population is often seen as a drag on the economy, it also presents business opportunities in various segments :
There many local holidays and traditions that can be used for a themed seasonal sales push (New Year, Hanami season, “ochûgen” – mid-summer presents, etc.). Adding to that Japan has happily adapted various western (Christian) holidays for marketing purposes. Although only 2% of Japanese are Christian, big marketing campaigns are run every year in time for Christmas, Halloween or Valentine’s Day. Easter is not (yet?) widely known in Japan, though.
Japan consistently has higher online spending in the summer months when Japanese firms are known to give yearly summer bonuses. In 2015, the average bonus was approximately $2,900 and spending primarily focused on luxury goods, leisure, and travel. 
An appreciation of Japanese business culture and social practices is also useful, if not required, in establishing and maintaining successful business relationships in Japan. Indifference to local business customs can indicate a lack of commitment on the part of the exporter, and may lead to misunderstanding, bad feelings, and lost opportunities. Finally, understanding the demanding expectations of the Japanese consumer in terms of product quality, appearance, packaging and display, delivery timing, as well as after-sales service, is crucial. Additional business culture concepts to keep in mind :
Japan is the world’s third largest—and one of the fastest growing—e-commerce markets in the world. The growth rate has become stable over the past few years, with annual growth estimated at 8.7% in 2016. With Internet penetration estimated at 91% of the population, Japan represents a significant market opportunity. According to the Ecommerce Foundation’s Japan 2016 report, ecommerce accounted for 2.8% of the total GDP of $4.123.3 billion, with over 76.9 million people (70%) shopping online. Japan’s developed economy, highly urban population, and single language make the market attractive to online retailers. Highly developed distribution infrastructure and small country size make delivery easy and convenient. Market growth is expected to be steady for the foreseeable future. 
Currently, the most popular ecommerce trend in Japan involves travel. 91% of leisure flights and 86% of hotel stays were booked online in 2015. Music and car insurance purchases were third and fourth, respectively, with 79% and 67% of sales in these categories being conducted online. Clothing is the most popular item purchased online. Fashion e-commerce is a growing sector, and niche specialty players dominate the space. Food and beverage sales also continue to grow. Overall, high quality items, including well known global name brands are in high demand.
One notable trend is that although a large percentage of purchases are conducted online, only 12% of Japanese shoppers purchased from abroad in 2015. This is one of the lowest levels of foreign buying activity in the Asia-Pacific region. This could be attributed to a lack of trust in foreign suppliers and a reluctance to wait for longer international shipping. Japanese shoppers are risk averse and seek brands they know they can trust. Return rates are low and excellent customer service in Japanese is expected. 
70% Credit/Debit Cards 11% Cash 10% Online Banking 5% eWallets 3% Mobile 1% Prepaid
About 85% of Japanese population have one or more creditcards. About half of the cardholding population have a JCB card, followed by Visa, MasterCard and Diners and American Express. Japanese payment methods for online use include credit cards, prepaid cards and wallets (Edy) as well as offline methods such as cash on delivery and bank transfers. Payment at convenience stores, called Konbini, is one of the more popular bash-based payment methods for online shopping. 
While Japan boasts one of the world’s most advanced mobile broadband infrastructures, smartphone and tablet device ownership is generally low. Just 23% of respondents own a smartphone, 9% a tablet. Spending is comparably tiny on these devices, with just 1% of total online spend made via mobile.
There is a large scale penetration rate of smartphones in Japan and, although mobile fraud levels are low today, this may be expected to change as mobile commerce increases. A recent survey has found that, in line with other Asia Paci c consumers, improved personal data security is a key driver for increasing the adoption of transactions and communications over mobile in Japan. International online merchants looking to expand across borders into Japan will bene t from robust online security and fraud prevention capabilities, ensuring they are well placed to attract and retain consumers as the ecommerce market grows. 
For Japanese consumers it is most important to have free delivery of orders. An average transit time of 6.3 days is being accepted (global average). Comfortable home delivery, flexible opening hours, and complete price transparency are the central drivers for distance selling in Japan. When ordering from abroad, the fear of fraudulent intentions is the major barrier for Japanese distance selling clients. With more than 50% agreement, this value is significantly above the global average. Lack of product availability and lower prices are the main drivers for cross-border shopping. 
Japan‘s society is very much concentrated in urban areas. Accordingly, the majority of eCommerce customers lives in urban centers. The group of heavy users can be increasingly found in the group of older consumers, who do not work anymore. Within this group only 46.4% are using mobile devices, which is significantly below the global average. 
To return a product seems to be a sign of discourtesy in the opinion of Japanese distance selling customers. Barely every seventh consumer returned products in the past. The rate of returns is with 2% respectively low and significantly below the global average. A return is mainly caused by a faulty product. It almost never happens in Japan that a product is returned because the consumer is generally unsatisified with it. So far, it has been unthinkable in Japan to purposefully order several variants for selection.