Read all about it
industry just got a powerful new player. As the competition to deliver better books faster
and cheaper via the Internet heats up, readers reap the rewards. Barry Brophy reports.
Japan's great obsession-book buying-has gone online. The country's publishing giants are
in a flap over the Internet book industry, with Web browsers vying to replace the tangible
variety that fill the aisles of the nation's bookstores. As the gap between technological
innovation and the new economy begins to close, the world's leading online booksellers
have inevitably attempted to consolidate their market share in this book-loving nation.
Indeed, the prospect of a slice of this multi-billion-yen cyber-pie has attracted some big
names both within and beyond Japan.
Owing to a dramatic jump in demand for home PCs and Net-ready mobile phones-PC sales rose
by 85 percent last year, boosting Net penetration to 28.5 percent of all Japanese
homes-it's close to boom time for the Internet in Japan. Recognizing the market potential,
amazon launched their Japanese e-tailing business (www.amazon.co.jp) last Nov.
But the competition will be tough. Japan supports over 25,000 bookshops and while the
recent proliferation of mega-bookshops has weakened smaller retailers, the larger
retailers are zealously competing to shore up their tenuous market dominance through
Amazon is aiming to take a significant portion of an e-commerce market that is expected to
top $3.2 billion-Japanese sales have been pitched at between $75 million and $100 million
in 2001. Around 190,000 customers in Japan have purchased products on Amazon's US site,
generating sales of $34 million (out of $1.9 billion worldwide) in 1999.
According to Tokyo-based research firm e-Research, this remains an impressive figure
considering that amazon is shipping products from abroad and that the total Japanese
online book market was worth only $46 million last year. But e-Research predicts that
online book sales could reach $1.8 billion by 2004. Amazon CEO Jeff Bezos is well aware of
this potential. "Japan has been an important market for amazon.com right from the
beginning. It has been our largest export market. Imagine what we might do with the local
In a recent survey of Japan's Internet users, nearly half said they want to buy books or
magazines online. "The book market is huge here (it's recognized as the world's
second largest). Our site is customized for Japanese speakers. Later on we'll probably add
CDs and videos to our catalogue," says amazon's Japanese head, Junichi Hasegawa.
"Our company has the same system and interface as the amazon.com website with its
proven reputation, but our service is localized into Japanese."
But amazon will have its work cut out to even share in that segment. For a start, one of
Amazon's biggest strengths - discounted titles - will be hard to offer in Japan, where a
50-year-old regulatory structure designed to protect merchants against price competition
prohibits large discounts. Luckily for foreign book buyers, however, these protections do
not apply to foreign publications, and amazon is still able to extend significant
discounts on English language titles.
The test of amazon's successful entry into the Japanese book market will be its ability to
overcome some formidable competition. Kinokuniya is an 87-store retail chain that does
about $3.3 million of business a month on its Internet site--covering some 1.2 million
Japanese and 1.8 million foreign titles (www.bookweb.kinokuniya.co.jp).
Additionally, and unlike amazon, Kinokuniya has branched from hardcopy to virtual book
distribution. Not surprisingly then, the day that amazon.com launched in Japan, Kinokuniya
announced it's teaming with Microsoft to sell e-books.
Such alliances are a common feature of the burgeoning online book market in Japan. German
media giant Bertelsmann AG, for example, who already has a significant online presence
through www.BOL.com, are operating their BOL Japan store
as a joint venture with Japanese publishing house Kadokawa Shoten. "Japan is clearly
one of the fastest growing Internet markets, according to BOL.com CEO Heinz Wermelinger.
"The potential for e-commerce is impressive."
Contributing to the mix is Japan's largest convenience store chain, Seven-Eleven Japan,
which launched an online bookstore with ubiquitous Japanese Internet investor Softbank in
Nov. Yahoo! Japan also has a hand in that venture. Seven-Eleven Japan is expanding its
e-commerce offerings with its 7dream website. www.7dream.com
shoppers can browse through over 100,000 items, including music, flowers, and photo
supplies, place their orders online, and then go to their local 7-Eleven stores to pay for
and collect their purchases. As an antidote to consumer fears over credit card security,
Japanese e-commerce ventures have established a system that allows customers to purchase
items over the Internet and make payments in cash at convenience stores.
Distribution, critical for foreign companies venturing into Japan, is another potential
weakness for amazon. In late Sept, one of Japan's most popular online shopping sites,
Rakuten, unveiled a plan to sell books online next year in partnership with one of Japan's
top wholesalers, Nippon Shuppan Hanbai. Nippon and another wholesaler, Tohan, collectively
control about 70 percent of Japan's book distribution.
Amazon, apparently locked out by the top two, has partnered with a second-tier firm,
Osakaya. But Hasegawa rejects claims by skeptics that the company's entry into the
Japanese market at this time is ill conceived. "Its been said that we've come into
the market too late and have entered the fray in haste, but we believe we opened with
immaculate timing...The best time is right now because of the overall know-how that amazon
has built up and we can localize that for Japan, and because of the growing awareness of
online bookstores and the expanding market."
As evidenced by the substantial discounts already offered on English language titles-these
savings are in part linked to an offer for free shipping and handling that will end on Jan
31-amazon is intent on tapping the significant foreign book market in Japan. Indeed, the
online giant has not ruled out providing an English version of the order form on its
Japanese site to allow Japan's foreign community to more easily capitalize on the savings.
However, while neither amazon nor competing local book e-tailers currently offer English
versions of their Japan sites, it is, for those with some Japanese reading ability, well
worth trying to navigate the order form.
With amazon.co.jp planning to expand its product line beyond its 1.1 million Japanese and
600,000 English titles some time next year, it could be argued that this represents a big
threat to smaller bricks-and-mortar retailers. Hasegawa does not, however, believe that
the latter will be left out in the cold. "All we're doing is creating another segment
of the market," he says.
Local publishers agree that diversity might be a good thing. "As people have
different needs it stands to reason that there should be diversity in the way they choose
and purchase books," says Kimiko Mitani, publicist for Tuttle Publishing.
"Amazon.com has done a great job making Japanese people aware that foreign books are
much more accessible than they may seem to be otherwise." Still, she remains
cautious. "Japanese online retailers are also prominent, but with the launch of
amazon.co.jp, their growth might be set back, particularly since amazon is already a
household name among foreign books readers in Japan."
Mitani is confident, however, that the subtle art of bookstore browsing will survive the
online boom. "The need for traditional book-selling media, namely bookshops, will
never be diminished by the expansion of online book retailers. People must go there, look
and compare actual copies." Nevertheless, while predicting "peaceful
co-existence" between online retailers and traditional publishers/distributors,
Mitani notes that the practice of online discounting, which is less possible at regular
bookstores due to higher overheads, might give the online distributors an unfair
Such fears are justified in the context of amazon's aggressive entry, especially in terms
of heavily discounted foreign titles, into the Japanese market. Indeed, the company
expects its Japanese site to prosper in a shorter time than its US counterpart. "We
make a decision on whether to invest in a new market from a long-term point of view,"
says Jeff Bezos. "The business may become profitable in Japan faster than it did in
the US. That's because we will mobilize all the experiences and technologies accumulated
in the past in Japan, and because we don't need to build up the business from
The ever-fluctuating fortunes and durability of the company worldwide suggest that amazon
is perfectly capable of digging its heels in--but it will have to work extra hard to win
top-dog status in the face of fierce local competition.