Despite what you may be reading in the newspapers about
improving GDP figures, don't be misled. Everything is not
alright in the world of Japanese business.
Sure, most exporter-manufacturers are doing fine, largely thanks to
stimulus spending in China, but at about 16% of Japan's
GDP they do not represent the bulk of the economy.
you need to look at the 58% of GDP which is domestic
consumption to see that things are not nearly as rosy.
Domestic growth is flat, and that is AFTER record government
stimulus measures to increase spending -- which is counted
into GDP despite the fact that it represents debt for future
Take away the stimulus, as the U.S. is getting
ready to do, and it's easy to imagine the economy taking
Rather than GDP, we would look at consumer spending and the
Consumer Price Index (CPI) as a better indication of what
is going on and providing an indication of trends,
particularly deflation. The Nikkei ran a story today
stating that excluding food and energy, in 2009 the CPI
fell 0.7% to 98.6, the lowest level since 1992. For some
items such as furniture and kitchenware the CPI was just
93.9, the lowest since 1973!
So while this rampant level of deflation may look good for
consumers, if it guts the earnings of domestic firms they
will have no choice but to lay off more staff, shutter
stores, cut suppliers, and thus the economic outlook won't
be rosy for long.
Of course there are some winners, and turning saving money
into a fun exercise for consumers has paid off well for
smart players such as Fast Retailing, Nitori, and others.
Foreign retailers with this business model are also doing
really well. For example, despite losing money seven years
in a row, Seiyu/Walmart in the last quarter of last year
did notably better than their domestic competitors. Every
day low prices and global procurement are starting to make
Likewise, Ikea, H&M, and Zara are also
reportedly doing well.
It is only natural then, that foreign firms not yet arrived
in Japan are seeing all the market changes going on are
considering jumping in. We have heard of a number of
major foreign retailers seriously eying up a foray into the
Japan market and considering investments of many tens
of millions of dollars. Such investments are a huge risk,
so how are firms de-leveraging that risk?
One way which is a proven model is to start selling online
from abroad and just marketing the brand in Japan. This is
entirely legal, so long as the products are not actually
sold in Japan and the user imports the products in
themselves. This model has been a proven one for many firms
who have since established operations here. They typically
started their marketing campaigns in a low key online
manner, monitored their online audience take-up and shipping
volumes, then used those numbers to extrapolate how they
would do if they set up in Japan itself. Amongst the
product segments that have used this approach have been
apparel, food, nutriceuticals, cosmetics, kitchen products,
computer goods, home goods such as bedding and interior
decorations, and many others.
This offshore selling approach has been possible because so
long as the retailers are willing to smooth out the
international freight handling, support, and subsidize the
shipping costs, then Japan's Personal Import ("kojin
yunyu") system works really well. The Personal Import
system allows for the simple import of private consumption
mail order goods without complex and time consuming
paperwork and lots of tax. Just to repeat, the Personal
Import system cannot be used for resale, just for personal
consumption. It's been around for more than 15 years, and
it works great.
We've been watching the progress of one particular health
food company in California, which discovered the Japanese
market about two years ago. They started experiencing a big
pickup in orders after they made their website available in
Japanese and established a Japanese help desk. Their prices
are about 50% that of similar goods in Japan, and of course
there are a lot of things they stock that you can't even
get here. The website works well, offering buyers incentives,
and taking Japanese credit cards.
But the real kicker is that they have a deal with Yamato
that allows them to ship product to Japan in just two days
for just US$8/kilo! That price/time frame is favorably
competitive with online product deliveries made within
Japan, even though the goods have to come all the way from
the USA and have to go through customs.
Intrigued, we did some checking and found at that the firm
was probably getting a bulk rate of US$11/kilo from Yamato
(something Yamato wouldn't confirm) and that it was
subsidizing the other US$3/kilo. This is incredibly smart,
because now Japanese residents can order from this firm
just as easily and cheaply as if they were buying online
from someone down the road. And with orders averaging more
than US$60 (customer incentives kick in at this price), then
the extra US$3 is not a major burden.
If you are located in Japan and you want goods from abroad,
you should check out the Personal Import system, which you
can use to import almost anything other than controlled
substances, narcotics, firearms, etc. There are a few
simple rules that appear on the Customs site at:
Basically the system is set up for mail order purchases and
all shipping has to go through either the Post Office or
approved couriers, else you will need to engage someone
from the Personal Import Information Center to do the
paperwork for you at a cost of JPY4,500. There could be
other costs as well. You could also use a proper freight
forwarder, but since these firms are typically handling
large import volumes, they tend to be expensive for
For Personal Imports, so long as packages are valued at
less than JPY100,000, they are either uniformly taxed at
5% on their CIF value, or in many cases are not taxed at
all -- as seems to be the case with shipments via Yamato
from the USA. While this may seem to be a weird anomaly in
the Japanese bureaucracy, we think this hints at why the
Personal Import system even exists at all.
Some years ago we asked the CEO of a leading U.S.-Japan
Personal Import buying service company called Bargain
America, Mr. Tom Sato, what the most popular personal
import product was. He told us that Rogain, the hair
restorer tonic, was number one and couldn't be purchased in
Japan. So, we imagine that system was established as a kind
of "pressure relief valve" for citizens who insist on using
foreign products and to not make them criminals for doing
so. Just they have to restrict volumes to non-commercial
quantities and of course use those products at their own risk.
Actually, if you think about it, there are probably many
bureaucrats in their 50's who might be losing hair and
needing a bit of Rogain for themselves. Thus, they would
have a practical reason for wanting to retain the system,
despite occasional rumors that it will be discontinued...
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