More than anywhere elsie, finding good partners in Japan is key to success. There are many possible Entry Scenarios, lile for example:
– Export through Distributors before opening later a Liaison Office and/or a Subsidiary
– Export through a Trading Company
– Approach by Japanese Department Stores or Supermarkets
– Approach by a Japanese Distributor or Manufacturer
– Interest from Japanese customers or distributors at International fairs or events.
– Awards winning in Japan
– First Sales in Japan by Referrals and so on …..
In this post, I would like to focus on Indirect Sales Entry Strategies in Japan.
Exporting is one of the most traditional, well-established and straightforward form of operating in foreign markets. It requires a significant involvement and investment in marketing strategies, working together with the local partner.
Exporting is however fairly simple with low costs & low risks. Consequently, it is usually the first Entry Strategy used by most small companies in order to approach the Japanese market.
On the other hand, disadvantages include high transportation costs, trade barriers, tariffs, exchange rate fluctuations, lower control of distribution and difficult communication with local representatives.
Agents and Distributors
Companies export usually through agents or distributors who have local knowledge essential for conducting locally the business: they speak the language, they understand the local business, they know who the customers are and how to reach them. It is however important to understand the difference between an agent and a distributor.
An agent works on the foreign company’s behalf to sell the products into the Japanese market, for a commission. Japan Business consultants/consulting firms sometimes play the role of agent or sole representative in the initial phases.
A distributor buys the products and resells them in the same market at a mark-up. Therefore, an agent is a sales representative, while a distributor is a Customer.
Exclusive or non-exclusive Distributors ?
Careful partner selection is especially recommended when choosing a sole distributor, as the number of sales channel is reduced to one. The need for exclusivity might be justified by the requirements of the business, especially when a lot of localization/customization work and investment is expected from the Japanese partner over the long-term.
(+): local partners have the needed local knowledge.
(-): the final price in the market will be higher than if sold directly.
(-): as the firm makes few marketing investments, the market share will probably be below potential.
EXAMPLE 1:Belgian company Frisk (confectionery):
After partnering with exclusive importer and distributor Kanebo Foods, its product became the top selling candy in Japan. The strong brand building (positioning as a high quality import product “made in Belgium”) was supported by a strong advertising campaign (TV program sponsoring, TV commercials, ads in magazines, billboards in train stations, samplings ….), which is a big investment in Japan. (Source: Export to Japan: 20 Belgian success stories, BJA, 2003)
When different product lines are being introduced on the Japanese market, a multichannel approach might suit better.
EXAMPLE 2:Belgian company Coris (biotechnology/biomedical)
The Company produces 2 different ranges of products (enteric & respiratory) sold through 2 distinct sales channels in Japan: 2 Japanese distributors Sumitomo Seiyaku Biomedical (Osaka) and JLL (Tokyo). (Source: Export to Japan: 20 Belgian success stories, BJA, 2003)
TRADING HOUSES OR “ SOGO / SENMON SHOSHA“
Japanese Trading Companies, at the centre of the country’s huge Conglomerates (or “Keiretsu” in Japanese), are among the biggest in the world. The “Shosha” usually gathers a lot of information about Industry trends (domestic and overseas), about their clients, about their suppliers and about their business partners, among others.
It is an ideal business match maker and is well positioned for making formal introductions in Japan. Major Japanese Trading Companies are also shareholders of major supermarkets, department stores, specialty retail chains & convenience store chains in Japan !!!!!
(+): the foreign company does not need much international expertise and can rely upon these trading companies’ knowledge & contacts. Time-consuming activities like customs clearance, logistics, invoicing & collection are dealt with.
(-): trading houses operate on the basis of economies of scope, seeking to act as intermediaries for as many vendors as possible. So, the vendor may end up feeling underserved.
(-): as it is commission based business, there is a credit and cash flow risk, not present in distributor agreements
Case Study – Rombouts (coffee roasting)
- Following contacts with leading English merchant firm Dodwell, the Rombouts one-cup coffee filters were introduced in Japan in 1981, at a time when Japanese consumers were not used to making coffee. For cost reasons, it was decided to set up local production in Japan under licence.
- About 10 years later, both partners went separate ways and Rombouts was introduced to the major Japanese Trading Company Mitsubishi Shoji.
- By chance, at that very moment, an affiliate company of the Mitsubishi Group, Japan Black Tea Co, was looking for a new partner in order to diversify its product range. A distribution agreement was signed in 1994. Local production was ended in favour of direct exports.
- The right introduction at the right time by the right (well connected) Trading Company
- Especially in the early days, the intermediate function of a Trading Company helps in overwinning any possible uneasiness caused by cultural differences and lack of knowledge of Japan.
(Source: Export to Japan: 20 Belgian success stories, BJA, 1997 & 2003)
Hoping this post has been helpful, I wish you the best in your “Japan Export process”. For questions, advice or enquiries, please feel free to contact me.