Consumer Products – Market Characteristics
Consumer Products – Market Characteristics
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You can find descriptions of Japanese products or Japanese consumer behavior on social networking sites or blogs written by visitors. You may have encountered comments made regarding anything from the small food portions to the elaborate functionality of household consumer electronics.
Such seeming quirkiness aside, in reality, your products would most likely need to make some adjustments to the Japanese market. Even if the concept of the product is well accepted, improvements on specifications will be required mainly in terms of quality. For example, even if you designed fashionable clothes, the choice of zipper manufacturer not being YKK could easily discourage Japanese consumers. This type of problems regarding details happens so often. In addition, consumers, retailers, and distributors often show strong concerns about product safety of imported goods. For example, if you sell items, such as food or health care products that may affect consumer health, distributors or retailers will require you to do tests in Japan even though you have already done the same tests in your home country. They are extremely cautious and expect perfect quality. These kinds of customer needs drive up the prices of goods in Japan. In other words, if you prove the quality of your products, it can be sold at a high price. This can be interpreted that the entry barriers of this market are very high, but the profit can also be large. |
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Issue of Distribution Channel in Consumer Goods Market in Japan
You may suppose that distributors are always searching for new products all over the world in order to expand their businesses. However, that expectation does not fit Japanese distributors. In most of cases, they actually do not have enough power to sell new products to major retailers.
Here is a schematic of a typical distribution channel in the Japanese consumer industries. The winner of the game in which manufacturers compete to take a larger share on retailers’ shelves is determined by sales activities of the manufacturers, not distributors.
The main functions that distributors undertake are settlement of accounts and logistics. After a basic agreement to adopt new products is reached between manufacturers and retailers, distributors adjust the details of the transactions such as delivery and payment. The reason for this division of labor is thought to be the number of products that distributors sell, which is very large.
The another reason comes from the geographical characteristics of Japan; its limited territory and high population density allow manufacturers to have at least several sales offices in cities such as Tokyo, Osaka, Nagoya, Sapporo, Sendai, Hiroshima and Hakata. Therefore, they do not need to rely on distributors for sales; as a result, distributors have been gradually reducing the number of sales staff.
Furthermore, most distributors do not have an importing function, which means you need to find an importer. The reason distributors do not import goods directly is that they have not needed to do so. There are so many Japanese manufacturers with some outsourcing production to other Asian countries, and they have been enough. Through this additional layer of distribution, your product may lose the competitive edge in pricing.
Of course, we can support your distributor search in Japan, but we highly recommend you to have your Japanese office run by us. This will also give you peace of mind that you hired highly experienced sales representatives for a reasonable price.