Japan’s online shoppers call time on spending spree

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Japan’s e-commerce market has lost momentum after growing more than 20 percent since 2019. Demand for online shopping rose as consumers huddled at home to avoid Covid-19, but the swift end to the spending spree dashed hopes that online retail would become a new engine of economic growth.

E-commerce grew by about 20% between 2019 and 2021, according to an index compiled by Japanese analytics firms Nowcast and JCB based on credit card spending. A survey conducted by the Ministry of the Interior and Communications for that period found an increase of nearly 30% in electronic commerce.

Tabe Choku, a farm-to-table delivery app with 650,000 users, saw its gross merchandise value jump roughly 130-fold between 2019 and 2021. Supermarket chain operator Aeon posted ¥75 billion ($551 million) in online sales in the year to the end of February, up 80 percent from two years earlier.

The trend in online shopping is also changing. Nikkei analyzed data collected by Tokyo-based research firm Nint on online platforms Amazon, Rakuten and Yahoo, and found that the average purchase price per unit on the sites rose 17% from January 2020 to ¥3,756 in April 2022. Purchase prices climbed in nearly 70 percent of categories, including apparel, Home appliances and furniture.

But online shopping is showing signs of slowing down. Nowcast’s e-commerce consumption index leveled off after a sharp rise until early 2021. The index fell for two consecutive months until the end of June this year. “The demand caused by Covid took a breather,” said an executive at an e-commerce company.

Japan is a laggard in terms of e-commerce. According to a 2022 survey conducted in 39 countries by the German research firm Statista, the Japanese go online for daily essentials about 40% less than average. Only 22 percent of Japanese surveyed booked restaurant tables online, while 24 percent bought shoes and 32 percent ordered food. All three categories rose five to nine percentage points from the previous survey in 2021, but ranked lowest among the 39 countries.

In Japan, online shopping is only a small part of personal consumption. A survey by the Ministry of Economy, Trade and Industry found that electronic commerce accounted for 8% of the goods sold in 2020.

A line chart of sales per customer on Japan's major EU sites

The key to reviving e-commerce is to integrate it with brick and mortar stores, which have seen higher sales after the easing of Covid restrictions.

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This article is from Nike Asia, a global publication with a unique Asian perspective on politics, economics, business and international affairs. Our reporters and external commentators from around the world share their views on Asia, while our Asia300 section provides in-depth coverage of 300 of the largest and fastest growing listed companies in more than 11 economies outside of Japan.

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“The role of physical stores will expand,” said Tomoyuki Mochizuki, vice president of e-commerce consultancy Itsumo. Suit maker Fabric Tokyo is adding more product display stores to meet customers’ demand to see merchandise before ordering. Fabric Tokyo has found that if it combines e-commerce and brick-and-mortar services, shoppers tend to spend twice as much as when ordering online.

Many consumers are apparently tired of shopping on smartphones. Onward Holdings’ new service allows customers to try on its clothes found online in physical stores before placing an order. The stores that introduced the service saw sales recover to pre-pandemic levels, a company official said.

The main e-commerce bottleneck is a shortage of delivery workers. Parcel delivery companies handled a record 4.8 billion units in fiscal year 2020 and the number was expected to reach 10 billion in the 1940s. The e-commerce sector will not be able to sustain growth if the shortage of delivery personnel becomes acute.

Amazon Japan and Eskool have set up their own delivery chains in partnership with small and medium-sized logistics companies, while Seiyu and Rakuten Group have started operating self-driving robots to deliver fresh food and boxed meals on a trial basis.

Innovation and better infrastructure are the keys to making e-commerce the engine of growth in the post-corona era.

version of this article First published by Nikkei Asia on July 30. ©2022 Nikkei Inc. All rights reserved.

  1. Amazon is building a logistics network in Japan to expand next-day service

  2. Alibaba is upgrading its Hong Kong listing to woo mainland Chinese

  3. India’s ultra-fast delivery apps are racing to grab market share

  4. Yahoo Japan, PayPay Mall merger with Amazon, Rakuten

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