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TECH | MARKET ENTRY

OCTOBER 2014

What Do eBay, WhatsApp, and Amazon Have to Fear?
Japanese online services seek success abroad

By Richard Jolley

Competition in the US personal tech and e-commerce markets could soon be heating up. While firms such as Facebook, Amazon, and eBay still dominate the domestic market, some new, Japanese faces are set to make an appearance.

The fields of personal tech and e-commerce are continually growing in Japan. The country is currently fourth in the top five for business-to-consumer (B2C) ecommerce sales, according to the eMarketeer online marketing platform.

B2C sales in Japan were estimated at $140.35 billion for 2013, just behind the UK with $141.35 billion—and way ahead of Germany with $53 billion.

In the case of personal tech, specifically apps, Japan is a high-growth market. According to research by the IHS and App Annie, the app market is seeing a 4.4-fold year-on-year expansion.

Whereas last year, Americans spent about one-third more on apps from Google Play and Apple’s App Store than the Japanese, by this year, Japan’s 127 million people were outspending America’s population of 310 million by some 10 percent.

A main reason for this is the rise in popularity of smartphone gaming. In the past year, Japanese spending on gaming apps spiked 400 percent, outpacing spending on all other apps by a factor of 15. The rest of the world spends only twice as much on games as other apps.

It may have taken a while, compared with much of the rest of the world, but Japan is officially in love with smartphone technology. eMarketeer predicts there are about 76.5 million smartphone users in 2014, accounting for some 70 percent of mobile phone owners—a level of penetration similar to that of the US market.

It is fair to say the rise of ecommerce and the take-up of these new handsets are driving a boom for online retailers and app developers. Of the two, app developers are the most forthright about their plans to export their success to the rest of the world, particularly the United States.

Smart shopping
Take Mercari, which has created a thriving business around its re-sale shopping app for people to buy and sell their items on smartphones. The company has announced its US launch, and Ryo Ishizuka, co-founder of Mercari and president of US operations, is confident that the firm can bring something new to the US market.

“We are the only consumer-to-consumer re-sale shopping app, selling a variety of items and focusing on the mobile platform, right now. Though Craigslist and eBay are great services, they were founded during the desktop computing era. Our app is specifically designed for smartphones—it’s portable, fast, and fun,” Ishizuka said.

“We want to be a global company and introduce our app all over the world. We believe that we can help create a better, more efficient society where it’s easy for everyone to buy or sell items they no longer need. Entering the US market is the first step to achieving that goal.”

On Line
Mercari is not the only app developer with its eye on foreign markets. Line, the app-based messaging service, is also reportedly preparing to launch in the States after winning over consumers in Japan and other parts of the world.

The company reportedly has some 175 million active monthly users; compare this to WhatsApp, a leading global messaging platform, which has around 465 million active monthly users (according to figures from BNP Paribas).

But Line is hoping to narrow the gap through penetration of new markets, especially the United States.

As reported in The Wall Street Journal, Takeshi Idezawa, Line’s chief operating officer, has said that countries such as the United States are priorities for the company’s growth.

At its core, Line is a mobile messaging app with lots of great features. There are things you would expect, such as free voice and video calls, photo sharing, and messaging. But add to that the 10,000-plus emoticons and stickers—a key revenue driver for the service—that users have downloaded in record numbers.

Most people in Japan are familiar with two of Line’s main characters—Brown, the laid-back bear, and Cony the bunny—if not because of the app, then due to the company’s keen merchandising using them. It is hoped that US consumers develop the same level of affection for these characters as have the Japanese.

Time will tell if people in the United States take to Line and its offerings but, so far, the signs are positive. Line is attracting consumers in Central and South America, having successfully launched in Brazil and reporting 10 million registered users in Mexico.

With the expanding Hispanic community in the United States, there’s reason to believe Line will have already established a following there by the time of its official launch. Even at this early stage, the company has debuted advertising campaigns on Hispanic networks Telemundo and Univision, in what seems to be a clear statement of intent.

Appetite for expansion
Thus, it appears that Japanese app developers have a well-defined vision of where the future lies. But it would be amiss not to mention Tokyo’s online retailers, specifically Rakuten.

This vendor has given a strong indication of its plans for expansion, not least with the $1 billion acquisition of Ebates, a US-based cash-back site.

The deal, which Rakuten says will enhance its own offering, has quickly followed another US acquisition in the shape of e-commerce app Slice.

While Ebates pays its members cash every time they shop online, Slice consolidates users’ purchase history. It tracks shipments and allows consumers to instantaneously retrieve their buying history.

It is easy to see where both companies can extend Rakuten’s international presence, and consumers won’t have to wait long for further deals, since senior executives have talked about finding additional missing pieces for the online company.

Considering the recent moves of these three companies—Mercari, Line, and Rakuten—Japan seems set to challenge the dominance of many of the US enterprises that first seized upon the Internet’s possibilities.

Entering a new era of mobile Internet, Japan hopes to bring a different perspective to the marketplace—one that US consumers will appreciate.

“I think Japanese users are some of the most advanced when it comes to mobile,” said Mercari’s Ishizuka, adding that, “This makes the Japanese mobile space very competitive, and I believe that we can offer our experience to the rest of the world.”

RichardJolleyDivider

Richard Jolley is an IT and business writer living and working in Tokyo.

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