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Japan’s online retail sector has been slow to take off due to resistance to digital technology among older consumers. However, the COVID-19 pandemic has brought about changes in consumption patterns, and the government’s policy support for digitalization has also played a role in increasing online sales. According to the Ministry of Economy, Trade, and Industry’s (METI) business-to-consumer e-commerce survey, the market size of online retail in Japan was ¥20.7 trillion in 2021, including ¥13.3 trillion in merchandise, ¥4.6 trillion in services, and ¥2.8 trillion in digital products such as online entertainment.
Data from various sources such as Edge by Ascential, Euromonitor and others suggest that sales of consumer goods was around 12 trillion yen (about 97 billion dollars) in 2022, representing an 8.3% penetration rate in total retail sales. It is expected that online sales will continue to grow strongly over the next few years, at a rate 7-10 times higher than that of total retail sales.
Rakuten and Amazon Japan are the largest online retailers in Japan, but smaller online marketplace operators such as Wowma, Mercari, PayPay Mall, and Qoo10 Japan are also competing in the market. Foreign players such as China’s Alibaba and the US-based South Korean online retailer, Coupang, are also present in the Japanese market.
E-commerce partnerships between large e-tailors and shipping carriers will continue to be important as supply-chain challenges arose following the pandemic. Examples include Z Holdings (which controls Yahoo! Japan) and Yamato Transport, and Rakuten and Japan Post. One of the major barriers to the growth of online shopping in Japan is the preference for cash over non-cash alternatives. The government’s digitization drive is expected to make inroads for digital technology usage in the retail sector in the long term, as the METI is promoting cashless payments under its 2018 Cashless Vision policy plan, which calls for going cashless for 40% of retail payments by 2025. The METI estimates that the ratio reached 32.5% in 2021, and the long-term target is 80% on a par with international levels.
The rise of mobile e-commerce: Mobile phones have emerged as the most hotly contested platform for cutting-edge e-commerce technology in Japan. This trend is driven by the increasing number of consumers using mobile devices for online shopping and the addition of new handset features by mobile-phone network operators to retain customers amid toughening competition. Since Japan is late to this game, the mobile commerce landscape are also advancing rapidly, skipping the testing-adoption-optimization stage many countries have gone through.
Government’s push for cashless transactions: The government has set a goal to increase the number of consumers utilizing cashless settlements from 18.4% in 2015 to 40% by 2025. This is part of their “Cashless Vision” which aims to promote the use of application programming interfaces (API) among credit-card companies. This trend is driven by the increasing demand for fintech-based financing services as a safer alternative to conventional in-person financial services.
M&A activities pacing up: Just like the recent merger of Z Holdings and Line, creating a $30 billion tech giant that can take on Rakuten and Amazon, we will expect more M&A activities throughout the next few years and shaping the competitive landscape of online retailing.
Growing presence of foreign players: The Japanese e-commerce market, being the 3rd largest online retail market, is attracting more foreign players and this has resulted in an acceleration of cross-border commerce activity. Similar to the rise of Alibaba and Coupang, as the market is expected to continue growing at a fast pace, we will see more foreign companies becoming more active in the market.
Online gaming and brokerage: With the rise of online tools and fintech, combined with the already matured financial and gaming market in Japan, we are seeing a strong growth in the online gaming market as well as brokerage for different financial services like equity, currency, and even gambling.
In Japan, There are about 68.4% of people use credit cards, and 87% of people use debit cards. While there are 45.9% of people purchase on the internet, there is only 33.3% of people with online banking accounts.
For E-Commerce Customers in JapanWhat are the major driving factors to purchasing online?
There is 94.43 million consumer goods e-commerce users in Japan, and they spend total of around 210.3 billion USD dollars in 2021. That makes a per capita spending on consumer goods e-commerce of around 2227 USD. Also, in those e-commerce users, about 46.8% of them purchase through their mobile phone.
Our consumer research practice tracks what customers spend and how they make decisions across major economies in the world.
