As well as being home to the fourth largest ecommerce market globally, Japan is the world’s fourth largest importer of goods. However, despite its attractiveness on paper, many businesses are tripped up by some very real barriers to entry.
We explore what these are as well as offer some on-the-ground insights into where some major opportunities lie for Western brands considering an entry into the market.
Getting to Know the Japanese Ecommerce Market?
Japan Market Analysis — 2023 Summary
- Japan is still the third largest economy in the world after the United States and China, as well as the fourth largest ecommerce market globally.
- Japan is the world’s fifth largest exporter and fourth largest importer of goods with foreign trade accounting for 37% of the country’s GDP (World Bank, 2023). Its main partners are China, the United States, South Korea, Hong Kong, and Thailand.
- The Japanese population is large and sophisticated with a high income per capita—yet consumer groups can be extremely demanding with high expectations for quality and customer service.
- A rapidly aging and declining population continues to present both market challenges and opportunities, shaping consumer needs and demands in fields such as healthcare, leisure, technology, pharmaceuticals, and real estate.
- The nation has a robust network of strong local companies who tend to rally against new competitors. Foreign businesses must be prepared for such competition.
- Various import regulations, permissions, certifications, procedures, non-tariff barriers and local government authorities make Japan extremely bureaucratic.
Foreign businesses must be prepared for such competition through careful positioning and an understanding of both threats and opportunities.
Japan’s Re-Opening to Boost Outlook in 2023
Japan’s now open doors to visitors, after more than two years of pandemic isolation, mark a new period for the nation.
Among other things, high hopes for a tourism boom, the increased availability of seasonal workers (especially in the hospitality sector) and increased investment opportunities for foreign businesses and investors contribute to a favorable outlook for the economy at a time when many predict a global recession.
Businesses are predicted to benefit from increased consumer spending, with many tapping tino savings accumulated during the pandemic as well as higher levels of spending from foreigner visit for both business and pleasure, especially in the nation’s major tourist hubs like Tokyo, Kyoto and Osaka.
That said, external downside risks include:
- Geo-economic fragmentation and geopolitical tensions
- A slowdown of the global economy
- Supply-side constraints
- Natural disasters
- National debt sustainability
- Cyberthreats
- New COVID-19 variants
Understanding Japanese Consumers in 2023
At first glance, Japanese consumer trends can seem puzzling for brands and marketers familiar with Western preferences and behaviors.
For instance, the adoption of certain trends and foreign brands can seem quite unpredictable, with certain less-known foreign brands performing incredibly well here, and other big-name global brands failing to build any traction at all.
Ultimately, the Japanese consumer market must be treated as different in that new research and testing should always be done before any large scale launch of products or services is carried out. Businesses must also avoid relying on outdated models or assumptions about Japanese demographics.
However, there are a few concepts that can help you understand some of the major differences that exist between Western and Japanese consumers.
Japanese Consumer Trends in 2023
- In Japan, where collectivist thinking is prevalent, consumers are less concerned with being different than being accepted by their peers. By presenting your product or brand as too unique or unusual, you could be deterring potential customers.
- Quality and durability is incredibly important. There is a tendency to buy fewer items overall that are much higher in quality (and often more expensive). Reasons for this may be cultural or simply due to the lack of storage space that exists in most Japanese households.
- Japanese consumers are highly risk averse and distrustful of organizations, according to indicators like the Edelman Trust Barometer. This means that establishing that initial connection with them is even more important, building a strong sense of your trust and reliability early on.
- Consumers often prefer more information than less, to the extent that displaying minimal amounts of information in product descriptions, advertisements or on packaging can seem too “mysterious” or untrustworthy.
HB Pro Tip: Just remember that nothing beats targeted Japan market analysis focused on your niche or core customer groups.
Key Sectors in Japan
Japan is a leader in several sectors, including consumer electronics; engineering; aviation; advanced technology; research and development; and car manufacturing.
Investors are also paying close attention to specific markets that are likely to benefit from the nation’s rapidly aging population, such as healthcare and life sciences.
| Tourism | Japan was one of the most visited destinations on the planet by tourists before Covid-19. With borders now open, several industries are set to benefit from a regular influx of visitors to the nation’s major tourist hubs. |
| Retail | Japan is one of the most exciting places in the world for online sellers. As well as being the third largest ecommerce market in the world with excellent logistics infrastructure and a domestic population that has significant purchasing power, consumers have a strong appetite for Western products. |
| Gaming | Japan has the third largest games market globally. Revenue is expected to show an annual growth rate of 6.88%, resulting in a projected market volume of US$93.64bn by 2027. Meanwhile, users are expected to amount to 82.6m users by 2027. |
| Automotive | Japan is a major producer and exporter of motor vehicles, accounting for 18% of all exports. It is also a hub for parts manufacturing, technology and expertise. |
| Biotechnology and healthcare | In line with its aging population and the maturity of its technology sector, Japan has invested heavily in healthcare-related technologies in recent years. Medical equipment, pharmaceutical products, biotechnology, safety equipment, and dietary supplements are among the key areas of opportunity within the national economy. |
| Information Technology | Modern and sophisticated technology infrastructure, widespread internet penetration, a formidable gaming sector, and a love for digital media contribute to Japan’s robust IT sector. |
| Advanced Manufacturing & Robotics | Japan has long been a strong global player in robotics and advanced manufacturing. |
| Electronics | A huge proportion of the world’s high-tech products are made in Japan, which is home to many of the world’s largest tech companies. |
| Renewable Energy & Climate Tech | Japan has set ambitious sustainability targets, such as achieving a net-zero society by 2050 and doubling the proportion of renewable energy by 2030. This has resulted in significant investments in the Environment, Social and Governance (ESG) sector as well as Green Tech. |
Japanese Ecommerce Market Key Takeaways for 2023
- Revenue is expected to show an annual growth rate (CAGR 2023-2027) of 10.29%, resulting in a projected market volume of US$267.40bn by 2027, according to Statista.
- Ecommerce sellers benefit from high urban density, high internet penetration, technically savvy customers, a stable economy and high individual purchasing power among the domestic consumer population.
- Digital advertising in Japan is driving user traffic and sales for many brands with search and display ads playing a major role in revenue generation, especially for foreign brands with lower brand credibility and awareness domestically.
- Amazon, Rakuten and Yahoo! Shopping are the nation’s biggest ecommerce platform, yet the C2C market has readily grown in recent years as evidenced by the popularity of platforms like Mercari.
- Consumers are often less inclined to buy from foreign brands if there is already a popular alternative offered by a domestic company.
- Japanese consumers value customer service as a top indicator of credibility and a determining factor in whether they will shop from a company again.
Need help breaking into the Japanese eCommerce market?
What Do Japanese Consumers Like Buying Online?
| Product Type | % of Shoppers |
| Groceries | 31 |
| Electronics | 24 |
| Beauty & personal care | 19 |
| Clothing/shoes | 18 |
| Household products | 14 |
| Luxury | 12 |
| Alcohol | 10 |
| Home & furniture | 10 |
| Medicine & healthcare | 9 |
| Financial products | 9 |
Source: GWI
The Start-Up Landscape In 2023
For several years, Japan has been actively encouraging foreign investment and the development of a new start-up ecosystem.
Several government policies have been specifically designed to attract foreign business and many once-complicated administrative processes have been purposefully streamlined to make it easier for non-Japanese speakers.
A number of policies have been developed by Prime Minister Fumio Kishida’s administration, with the prime minister making the development of a startup ecosystem a key part of his economic agenda. These efforts can be best evidenced in the government’s five-year plan for boosting the start-up economy between 2022 and 2027:
- Increase investment in startups by over tenfold to ¥10 trillion (¥77.7 billion) annually
- Increase the number of startups from 10,000 to 100,000
- Produce unicorn startups
- Turn Japan into the largest startup hub in Asia and one of the world’s leading clusters of startups
Together with incubators, loans, and newly recognized “start-up cities” like Fukouka that offer a more start-up friendly environment for new businesses, a healthy startup ecosystem has been developing.
That said, unique cultural differences and the extent of the language barrier for Western businesses do make getting started here fairly complicated. Any investment or market entry approach is no doubt strengthened with the support of a local partner, advisor or consultant who can offer local insight.
Final Considerations
| Brand and Product Localization | Localization is a necessity for any business hoping to build credibility in the Japanese market, and cater to the complex demands of local consumers. Understanding how your brand and products will be perceived by your new audience is the first step to adapting your messaging to better suit local preferences. |
| Timing | Consumers and corporations can be incredibly loyal to their existing brands and suppliers. This makes first-mover status incredibly important in many respects, but success is also possible as a late entrant as long as you adapt your entry strategy to match your strengths as a brand and learn from the success or failures of your competitors. |
| Bilingual Capabilities | If you’re interacting with Japanese consumers directly in any way, it’s necessary that your team has good Japanese language abilities or you are able to rely on partners to help you in this area. Equally, completing various applications and registrations is infinitely easier with native speakers on your side. |
| High-Quality Expectations | Stringent regulations and bureaucratic practices combined with excessive quality expectations set by industry governing bodies make it important to refine your products and services so they’re 100% fit for the market. |
| A Preference for Japanese Products | Despite what you may have heard, consumers won’t love your brand just because it’s foreign or different. In fact, the opposite is often true. A love of Japanese products among consumers and an unwillingness to shop from brands they don’t know can make it harder than predicted for some companies to build a presence in Japan initially. |
High-quality Western products and appealing foreign brands still perform well in Japan when backed by the right market entry strategy and a clear understanding of current market threats and opportunities.
