Particularities of the Japanese Distribution System

Selling in Japan is different from selling in Europe or America. The distribution circuit is characteristic, with some barriers for imported products. Because of its sorts of tangled model, distribution in Japan has been misunderstood by other countries, leading to some trade problems and disputes. The model is changing, but the number of ‘mom-and-pop’ (speciality or semi-speciality) stores remains bigger than elsewhere, with around 373 thousand stores according to Statista (in 2014). So what does the distribution look like in Japan now?

Stores in Japan

There are three main types of stores, if we except the (semi-)speciality ones.

Merchandise Stores (GMS) マーチャンダイズストアmaachandaizu stoa

They specialize in ‘groceries, perishables, clothing, household goods, furniture, and electrical goods’ (Nordea). They usually sell imported goods too and are held by major national chains.

Supermarkets (SM) スーパー suupaa

They especially sell groceries and household goods, with products of their own brand in order to differentiate them and stay competitive. However, its number has been declining. According to MATCHA, the three main chains are Ito Yokado, AEON, and the Tokyu Store.

Convenience Stores コンビニ konbini

They are widespread in Japan, especially in Tokyo where you can find several of them on one street. The most famous chains are 7-Eleven, FamilyMart and Lawson (with Original Lawson, Natural Lawson, Lawson Store 100 and Lawson Fresh, an online store – check out All About Japan for more details). You can find more than 50,000 convenience stores, offering a great variety of goods (with a high turnover) and services (usually ATM, Wi-Fi, multi-purpose terminals, printer/scanner, several kinds of bill payments possible and delivery). They floor space is limited, around 100 m² on average.

Growth of Online Shopping

The Ministry of Economy, Trade and Industry estimated the growth of online shopping at an annual rate of almost 10%, and the size of the market is likely to double. 

According to Statista, the B2B online retail market value in Japan was around 265 trillion JPY in 2013 and 344 trillion JPY in 2018 (30%). Concerning the B2C online retail market value in Japan, it was at around 7.8 trillion JPY in 2010 and 18 trillion Japanese JPY in 2018 (6.2%).

Advantages for Customers

Customers prefer shopping online for several reasons: 

  • Price (usually cheaper and with many discounts, all year).
  • Time of delivery (with Amazon Japan, for example, Prime members can receive their parcel in one day).
  • Credit card payment available (without any additional cost – and it is a good opportunity for the government, who wants more cashless transactions).
  • Variety of stores, goods and services.
  • Easy: customers can buy on their smartphones, computers, etc. and in a few clicks.

Advantages for Sellers

  • Less physical stores (if none), reducing costs (rent, workers) and avoiding the problem of a stock or store too small – especially after the Law Concerning Adjustment of Retail Business Activities by Large Scale Retail Stores (Large Stores Law) of March 1974.
  • Digital marketing: data analysis to better know customers, exclusive discounts, best-seller list, etc.
  • Growth of e-Commerce, a promise for more customers.

Wholesale in Japan

Source: Roland Berger.

According to a Keio University professor, large purchases of stock are not a common thing in Japan. The importance of customer service is strong, and before the 80s, retailers who changed their prices could not build a strong relationship with wholesalers. Distributors were relying on one wholesalers only and the majority was small retailers, protected by the government. After the 90s, however, their number decreased and bigger wholesalers became more popular, with many imported goods. The importance of the development of a strong relationship lowered too, and wholesalers stopped accepting returns, taking fewer risks. But what did not change is the complexity of the distribution system, since a product can pass through 2 to 5 wholesalers.

Changes in Import Management – Source: Keio University.

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