Japan’s E-Commerce Market Holding Firm (For Now)

A study undertaken by the Japan Development Bank has found that
although the overall scope of electronic commerce is healthy in Japan, there is still a great
deal of improvement necessary for further growth.

In the business to consumer sector, it documented–in conjunction
with the Ministry of Posts and Telecommunications–that Japan had rung-up a
total of 82 billion yen ($695 million) in online sales for fiscal 1997. This represents 4 percent of all mail-order sales, but only a meager 0.1 percent of all sales. Sales primarily
concentrated in the areas of computer products and software, books, and
airline tickets.

Two of the major online players are Japan is Two Top, an online computer sales business generating annual sales of 40 billion yen ($330 million) and Kinokuniya Book Web, an online Japanese bookseller that maintains annual sales of 700 million yen ($6 million). Their success is in part
due to assuming control of distribution and lowering costs.

But while these two companies have firmly secured their positions in the
world of Japanese e-commerce, there are still a number of issues to be
resolved before e-commerce becomes an everyday experience for the
Japanese consumer.

In a separate study by Fujii Akimitsu, deputy director of the
Hiroshima branch of the Japan Development Bank, he noted that consumer
confidence of the Internet is low, security is still not guaranteed,
shipping costs in Japan are too high, and data transmission speeds are too slow.

“Consumers are not confident because the product they see online is not
what it seems when it is delivered to them,” said Akimitsu. “For example
when buying clothes online, because the images are transferred so
slowly, consumers are unsure of colors which leaves them disappointed when it
arrives. And then of course by then, they have paid the high cost of

In response to some of these outstanding issues, Nippon Telegraph and Telephone Corp. (NTT) is approaching Microsoft about implementing Microsoft Site Server 3.0, Commerce Edition
software, at an estimated cost per business of 2-3 million yen. Another option is electronic money–VISA cash–already in place at 800 shops in Shibuya, Tokyo and NTT super cash, with
100,000 cards to be distributed in Shinjuku, Tokyo, in April of 1999.

Micro payment is also being considered. Yen payments of 0.3-0.5 yen would be made each time a Web screen is viewed.

“This is all talk for the future, but is hoped that this will be
advantageous for users,” added Akimitsu.

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