Bag it online

While the Internet has been slow to take off in Japan the locals are launching into cyberspace with renewed vigor. Barry Brophy checks out the implications for Japan's burgeoning e-commerce market.

The massive increase in PC sales and the successful introduction of i-mode mobile phones over the last year have been a shot in the arm for online retailing in Japan-PC sales are up by 85 percent and at last count there were more than 10 million i-mode phone users. These new users have rung in a substantial change in online sales trends. According to market researcher International Data Corp. Japan (IDC), Japanese online consumer sales jumped from $500 million in 1998 to more than $1.8 billion in 1999 and topped $4.5 billion last year. The group has projected that that figure will have spiralled to $16.8 billion by 2003.

The rate of growth in online commerce has taken many analysts by surprise. Of Japan's approximately 20 million wired citizens, around 45 percent of users have either made a purchase online or subscribed to a service within the past six months. A report issued by MITI's Electronic Commerce Promotion Council and Andersen Consulting concluded that online spending in 1999 reached 248 billion, 31 percent higher than its last report estimated, and 380 percent higher than the 1998 figure.

The enabling of secure transactions via the widespread introduction of Java to cell phones is likely to further confound pundits. Additionally, and maybe less surprisingly, Japanese women, while far behind men in terms of high-tech education, are more than making up for it in terms of high-tech shopping.

According to web measurement firm Media Metrix and its European affiliate Jupiter MMXI, while men are spending more time online than women in Japan, female users comprise the majority of visitors to retail sites. Female online shoppers buy clothes (30.5 percent), food (28.2 percent), or games/toys (18.9 percent), while men go for computer hardware (24.5 percent), books (23.3 percent) and software (22.9 percent).

However, the fear factor, linked to technological and cost issues, is discouraging potential Japanese customers from purchasing online and is putting the brakes on a full-scale takeoff. According to IDC, Japanese shoppers remain unconvinced of network security and are wary of providing credit card information online. In response, many retailers have now established a system of payment and delivery at convenience stores. Such an ameliorative will not, however, make up for the fact that Japanese credit card ownership remains relatively low in what is still a predominantly cash society.

Furthermore, Japanese buying patterns are heavily influenced by financial considerations, especially prohibitive per-minute phone charges. Not only do high connection costs discourage flashy content, but they also curtail surf time substantially. Japanese e-shoppers are unlikely, therefore, to simply stumble across online retail sites.

These limitations aside, the fact that Japan is leading the world in wireless Internet applications, and that many people can simply go shopping on their phone, points to continuing exponential growth in the e-commerce market.

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