How to Enter the Retail Market in Japan as a Brand – Everything You Need to Know
When looking to expand your retail business into Asia, the most developed country is Japan, which presents many options for retailers.
With an expected sales of US$125,121.6 million by the end of 2023, Japan surpasses Germany as the fifth largest market for e-commerce. Its growth reached 26% in 2020 alone. Brands across various industries can find promising chances in Japanese retail, a country with a GDP of $5.15 trillion, ideal for global expansion.
For those without prior experience, breaking into a new market is challenging compared to their local country. This is particularly true when you are in a foreign nation and do not know the language or culture!
One key point to remember before entering the local market is that trust, quality, reputation, and value are more important to Japanese consumers than price. You must remember them when designing your marketing or BPO plans for Japan.
Before launching your product or service into the Japanese retail market, familiarize yourself with all the important information discussed in the upcoming paragraphs!
Steps to Enter the Retail Market in Japan
1. Know Your Target Audience in Japan
Japanese consumers are known to be risk-averse and meticulous when it comes to buying anything, whether online or in a physical store. A quarter of Japan’s population is 65 and over, so we also have an aging population to deal with.
Regardless of your target market, the Japanese are quite picky about the quality of your goods and services, but if you win them over, they’ll be loyal customers for life. Researching your target audience and developing a thorough understanding of your audience personas is worthwhile due to the high return on investment (ROI) in Japan.
2. Learn the Local Country Language
Suppose you want to do business in Japan. You need a Japanese website and learn the language thoroughly. Rakuten Research surveyed 1,000 Japanese people in 2016, and the results showed that just 8.7% thought they were proficient in English, and 70% said they could have been better.
That is why using a native Japanese speaker to translate your website and content is crucial. It is important to find native Japanese speakers who are also knowledgeable in digital marketing and search engine optimization (SEO) so that they can transform the content into something new rather than just translating it.
3. Understand the Local Market Trends
Apart from inadequate localization, the lack of trend research has been the most significant blunder businesses have committed when venturing into the local market.
Did you know that the number of Japanese Facebook users is declining, with most of those users mostly engaged in professional networking on the platform?
Japan may be technologically ahead of the curve in digital transformation and marketing, but it lags somewhat behind Western nations. Before developing a marketing or BPO strategy, you must research the current retail trends in your Japanese sector.
4. Get Familiar with the Cultural Sensitivity
Brands must learn about local traditions and culture to serve customers more effectively. Consider these cultural sensitivity factors in the Japanese local market:
- Your brands should respect and honor their rich cultural past.
- Japanese consumers expect high-quality products, which include packaging and marketing materials. Your products should meet these standards.
- In Japan, honorific language is crucial for connecting with consumers, especially in marketing and advertising.
- Understanding and respecting societal practices like gift-giving helps create client relationships.
- Brands should respect local conventions like modesty in fashion and advertising to avoid offending people.
5. Familiarize Yourself with the Local Laws
Brands wishing to sell their products in Japan should research local rules thoroughly because these laws affect the product’s packaging, labeling, and advertising.
A brand must follow the rules if it wants to sell its goods in Japan. This guarantees the product’s success in the local market and helps keep costs and legal complications minimal. Some crucial considerations are as follows:
- Japan has strict standards on product labeling, so manufacturers should ensure their products comply.
- Brands must verify their products and production methods adhere to Japan’s stringent environmental requirements.
- Advertisements and promotional materials, among other marketing materials, must also adhere to local restrictions.
- Brands should ensure their packaging complies with local norms and regulations in Japan because of the country’s tight packaging restrictions.
- Food, drugs, and chemicals are just a few examples of things that may have import restrictions that brands need to be mindful of.
Challenges to Overcome Before Entering Retail Business in Japan
To break into the Japanese retail market, consider some of the biggest challenges first. When deciding how to make a market entry in a foreign local country, it is helpful to weigh these challenges against the brand’s and company’s overall objectives:
1. Increasing Risk Factors
Because of Japan’s size, brands need to make considerable investments, which increases the risks involved.
2. Navigating Competition
Domestic brands have a considerable presence in Japan’s highly competitive market. This makes competing with domestic Japanese businesses an extremely difficult task. Nevertheless, brands can conquer the obstacle of competing with local enterprises by conducting comprehensive market research before developing a market entry strategy.
3. Understanding Consumer Preferences
As mentioned above, the Japanese are picky shoppers, prioritizing quality and affordability. Furthermore, Western society and tastes are drastically different from Japan. Because of this, firms usually have to reevaluate and improve their products and services to suit local preferences.
4. Management and HR Considerations
Japanese management and human resources rules drastically differ from other countries’ rules. Any firm looking to make a market entry into the Japanese local market should research and adjust to the Japanese management style before setting foot in the local country.
5. Understanding Pricing Policies
Taxes and customs fees that sellers must pay can differ in kind and amount based on the country of manufacture.
The value-added tax, often known as consumption tax, is typically set at a flat rate of 10%. The 8% charge applies to food, drinks, and newspaper subscriptions. However, if you dine outside or consume alcoholic beverages, the 10% rate does apply.
For further information regarding the applicable import duties and rates in Japan, visit the Japanese Customs website.
6. Identify Japanese Sales and Distribution Networks
Depending on the goods, different distribution channels can be selected. Wholesalers often provide smaller quantities more frequently, while tiny retail outlets frequently stock restricted inventory due to space limits.
Japanese culture values face-to-face encounters and commercial partnerships. Products are priced higher due to this distribution process. The proliferation of online shopping and big-box businesses is overturning this established order.
About 2.24 million of Japan’s vending machines sold beverages in 2022, including coffee and cold drinks.
Tokyo, Kobe, Osaka, Yokohama, and Fukuoka are some of the main port cities in Japan, where distribution and logistics are mainly centered.
General Requirements and Documentation for Retail Market Entry in Japan
Here are some general requirements you must fulfill before entering the local country market:
- You must have a local bank account
- Initial investment
- Social Security and taxes
- Registration paperwork for a business
- Articles of incorporation notarized
- Obtain a Local Representative Director for the company
Important documentation to have:
- Parent-company registry certificate (granted within 3 months)
- Seal of the company, filed with the registry
- Each director or private investor must provide a seal certificate (Inkan shomeisho) within three months.
- The parent company’s representative’s notarized signature attestation
- The bank account and passbook of the Representative Director
- The parent company’s representative and each director’s signature (or seal)
Before entering the Japanese local market or the retail industry, it is essential to research the Japanese consumer and the cultural norms that are most important to your brand, goods, and marketing objectives. Brand recognition, expansion, and devotion in the Japanese market can be achieved through language proficiency and developing a tailored marketing or BPO plan.
It is wise to visit Japan multiple times before making a market entry, as the country’s business culture is unique. Doing so will help you better understand the culture and business environment in the local country.
Japan is a popular destination for investors from all over the globe due to its relatively stable economy. Understanding the culture and finding the proper partner to extend the provided brand in this unique marketplace full of potential are the important components of a successful market entry strategy in Japan.
All you need is to do thorough market research and follow our guidelines!
Executive with 25 years of proven success in call center management and revitalizing business units. Proven career record of producing multimillion-dollar profits through pinpointing operational inefficiencies and encouraging the revitalization of employee morale and corporate culture change.