WHY YOU CAN SELL TO JAPAN BY MAIL ORDER

You can sell to Japan by mail order because:

1. Japan continues to be the world's second largest market (see FURTHER DISCUSSION below)
2. Mail order sales in Japan are rising even as overall retail sales are falling (see FURTHER DISCUSSION below)
3. Even the most upscale US mail order companies are price competitive compared to their Japanese competitors. Low-cost suppliers experience rising sales in down markets. Therefore, US catalogers will increase their market share.
4. Dramatic declines in the costs of: long distance telephony, Japanese-language telemarketing/customer service, and international shipping from the US to Japan have made selling to Japan easy and inexpensive. You can sell to Japan out of your current US facility without installing new business systems.
5. Japanese governmental regulations regarding "personal import" are lenient.
6. The trends which have benefitted the mail order channel in Japan shall continue for some time.

These topics are illustrated further below.

---

FURTHER DISCUSSION

---

1. JAPAN IS STILL THE WORLD'S SECOND LARGEST/RICHEST MARKET (DESPITE THE RECESSION)

By some measures it is a larger market than the USA...

General Statistics

	USA	JAPAN	JAPAN AS SHARE OF USA
Population (million)	265.2	125.0	47%
Per capita GDP (US$)	33,213	37,435	113%
Retail sales (US$ billion)	2,457.8	1,349.7	55%
Retail sales per capita (US$)	9,275	10,797	116%
Mail order sales (US$ billion)	110.2	26.1	24%
As % of total retail	4.5%	1.9%	42%
Mail order sales per capita (US$)	415.20	205.55	50%

• Japan is the No. 2 retail market in the world (after US).
• Japan is the No. 3 mail order market in the world (after US and Germany).
• Per capita, the Japanese are the world's best customers: they earn more and spend more than anyone else on earth.

   

2. EVEN AMID SERIOUS ECONOMIC RECESSION, MAIL ORDER SALES IN JAPAN ARE GROWING RAPIDLY

Spot the difference between mainstream and mail order retail sales!

YEAR	TOTAL RETAIL SALES (billion JPY)	MAIL ORDER SALES (billion JPY)	MAIL ORDER SALES AS % OF TOTAL RETAIL SALES (%)	ANNUAL GROWTH IN MAIL ORDER SALES (%)
1991	141,610	2,160	1.52%	-
1992	140,505	2,230	1.58%	+3.2%
1993	135,771	2,270	1.67%	+1.7%
1994	134,971	2,450	1.82%	+7.9%
1995	134,026	2,507	1.87%	+2.3%
1996	135,299	2,554	1.88%	+1.8%
1997 (est)	143,688	2,773	1.92%	+8.6%

Since 1991, mainstream retail has been hell in Japan (total retail sales up only 1.5%). Yet mail order sales grew 31% in absolute terms, from 1.5% to 1.9% of total retail. Mail order is successful because mainstream retail is inefficient, overregulated, and uncompetitive. Catalogs can offer better prices, better service, and larger selection than regular retail.

3. FOREIGNERS HAVE DONE VERY WELL IN JAPAN IN THE LAST 5 YEARS

YEAR	TOTAL MAIL ORDER SALES (billion JPY)	MAIL ORDER SALES BY FOREIGN CATALOGS (billion JPY)	FOREIGN CATALOG SALES AS % TOTAL MAIL ORDER SALES	FOREIGN CATALOG SALES: GROWTH RATE (ANNUAL)
1191	2,160	3	0.1%	-
1992	2,230	4	0.2%	+25%
1993	2,270	7	0.3%	+75%
1994	2,450	18	0.7%	+ 157%
1995	2,507	32	1.2%	+ 78%
1996	2,554	66	2.6%	+ 106%
1997 (est)	2,773	105	3.5%	+ 69%

Foreign catalogs (mainly US) have been the most successful segment of the mail order business:

• more attractive image (Japanese catalogers have not learned how to build brand image)
• better price offer (strong advantage in a recession)
• greater niche focus (Japanese catalogs are mostly general retailers)
• better service (notoriously bad in Japanese mail order)

4. WHY "PERSONAL IMPORT" (BUYING VIA MAIL ORDER FROM OVERSEAS) WILL CONTINUE TO GROW

Mail order sales in Japan account for only 1.9% of retail sales (as opposed to 4.5% in the US); this share is rapidly growing because:

• Traditional retail distribution in Japan is inefficient, overregulated, and resistant to change (laws constrain competition). There are 4.3 middlemen between producer and consumer (vs 1.7 in the US). This raises prices and limits selection.
• Retail space is limited and very expensive. This also raises prices and limits selection.

PRODUCT	Price in the US (US$)	Same product's price in Japan (US$)*
Brand name cooking pot 16"	$22.00	$87.00
Brand name herbal tea (20 tea-bags)	$2.75	$9.50
Brand name jeans (man's)	$65.00	$220.00
Brand name fashion wig	$29.00	$350.00
Best-seling how-to book (paper back)	$9.99	$24.00

*As JPY/USD exchange rate fluctuates, so do the exact translations of these domestic prices. Note, however, that in order for the Japanese prices to be brought in line with the US prices, the USD would have to rise 400% agaist the JPY. Consequently, the recent fluctuations in the JPY/USD exchange rate (in the 50% range over the last 7 years) will NOT change the fact that Japan remains extremly expensive.

5. FOREIGNERS ARE POISED TO GRAB MAJORITY OF THE GROWTH IN MAIL ORDER IN JAPAN

90% of the catalog sales growth in the last 3 years has been due to the phenomenal growth of foreign, mainly US, catalogers. This will continue:

• Continuing recession will favor low cost providers (even premium-price US catalogers are cost competitive in Japan).
• Shopping by mail order from overseas catalogers has been widely publicized in Japanese media as cheap, fast, convenient, and more hip.
• Rapid decline in prices of international telephony and shipping continues.
• Domestic mail order companies are not competitive (poor image, outdated marketing techniques, inefficient organizations, pricing pressures, massive debt problems, shortage of capital).

	1990	1992	1994	1996
Consumers who experienced overseas catalog shopping	5.50%	7.00%	7.00%	7.01%
Consumers who have not	94.50%	94.50%	93.00%	92.99%
TOTAL CONSUMERS	100.00%	100.00%	100.00%	100.00%

To most foreign catalogers Japan is an afterthought. Their efforts in Japan have been lukewarm: they do not target the general consumer. Instead limit themselves to the small segment of current users of foreign catalogs.