2019 J.P. Morgan Global Payment Trends

2019 Global Payments Trends Report - Japan Country Insights

JAPAN INSIGHTS REPORT


Japan presents an opportunity for international merchants to court an audience with money to spend and an appetite for consumer electronics and fashion. However, those entering the market must master the challenges of a single-language culture and ongoing cash use. To help our clients locate, attract and keep their customers, we have tracked and assessed e-commerce developments in 34 mature and emerging markets around the globe.

Introduction

 

The Japanese e-commerce market is expected to grow at a compound annual growth rate of 6.2 percent to 2021.1 Although modest by the standards of many international markets, the e-commerce sector is being held back by slow economic growth. Overall, Japan’s economy is likely to grow at a 0.7% pace between 2018 and 2020.2 While capital expenditure is expected to continue growing in 2019, backed up by the domestic labor substitution demand, the overall risks skew to the downside, which concentrates on the various global political and geopolitical risks. 3

This document is based on projected figures and is subject to change at any time.

Modest growth in a largely single-language nation

 

Japan’s business to consumer e-commerce market is worth $150.1 billion14 having increased at a single-digit rate since 2015.15 The market is expected to follow a similar growth trajectory to 2021, expanding at a compound annual growth rate of 6.2 percent.16

Despite a reputation for embracing technology and being at the forefront of digital innovation, Japan’s e-commerce growth has been slowed by an ageing population. Home to 126.8 million citizens,17 with an average age of 47.7 years,18 Japan is actually the most aged nation in the world19 – 28.8 percent of its population is aged 65 or older.20

Looking ahead, growth should be supported by high internet penetration, which already stands at 90.9 percent.21 For domestic merchants, as a single-language nation – an estimated 99 percent of the Japanese population only speak their native language – there are competitive benefits derived from being able to develop sites that are easy for citizens to access and navigate.22,23 For international merchants, however, this presents a significant challenge. Investing in and offering Japanese language-enabled e-commerce platforms is essential in order to reach Japanese consumers.24 International merchants should also be aware that e-commerce web page layout and design for Japanese sites can look different to ecommerce site designs preferred in the U.S. and Europe. Web pages are often dense in images and text, with high levels of product information favored over white space.25

 

Unique online shopping events linked to bonus culture

 

Japan is home to a number of sales events that are unique to the country. The summer months mark a spike in sales, when employees in Japan typically receive bonuses.26 During this period, luxury products, travel, and leisure items represent popular purchases.27 Other popular shopping days include White Day on March 14 and the Christmas holiday period.28 Black Friday is also gradually growing in prominence in Japan, with major domestic brands offering deals since 2016.29

Across the year, key shopping categories include travel, which takes a 37 percent share of total e-commerce spending, consumer electronics (20.7 percent) and furniture and household goods (12.8 percent).30 Cross-border spending accounts for 18 percent of total e-commerce,31 with China, the U.S. and Australia ranked as the top three overseas shopping destinations.32

The most popular e-commerce sites in Japan are domestic player Rakuten, and international giants Yahoo! Shopping and Amazon Japan.33,34 Amazon Japan has had a major disruptive effect on the domestic e-commerce market, with the U.S. giant investing heavily in infrastructure in the country. It now has 12 distribution centers and four Amazon Prime centers.35

Delivery in Japan is aided by the nation’s relatively small size, and well-developed logistics infrastructure.36 Drone delivery for e-commerce orders is being trialed by China’s JD.com and Japan’s Rakuten in a partnership.37

Double-digit mobile commerce prediction

 

Mobile commerce in Japan is expected to expand at a compound annual growth rate of 13.6 percent to 2021,38 by which point it will be a $60.8 billion industry.39 Despite the country’s typically rapid adoption of new technologies, mobile commerce uptake remains relatively low, accounting for just under a quarter of completed e-commerce sales.40 This can be explained by an ongoing preference for desktops and also a large ageing population, which is more reluctant than younger generations to adopt smartphones.41

Smartphone penetration stands at 46.8 percent,42 a far lower rate than mobile commerce leaders such as the UK and China. Japanese e-commerce giants are attempting to drive mobile uptake by investing in mobile infrastructure. Rakuten, for example, which has at least 95 million registered users in Japan,43 is launching its own mobile network in 2019. It plans to partner with Nokia to roll out ultra-fast 5G services in 2020.44

Of the citizens that do use their smartphones to shop online, apps are used to complete 44.98 percent of all mobile commerce transactions.45 Domestic merchants are releasing sophisticated new offerings in an attempt to unseat Amazon Japan’s dominance.46 For example, Japanese online fashion retailer Zozotown has launched the Zozosuit app, which allows shoppers to order custom alterations to their clothes and have them delivered.47 Meanwhile, international clothing retailer Uniqlo is using its home market of Japan to test AI functionalities on its e-commerce app, enabling customers to receive product recommendations and voice-activated customer service.48

Another way to boost app use is to reassure shoppers about security measures. At present, only 37 percent of Japanese e-shoppers are happy for apps to store their payment information.49

Cards dominate, as cash persists as a payment option

 

Cards are Japan’s primary way to pay online, taking a 65 percent share of the market, or $97.6 billion in sales.50 Use of this method is expected to rise slightly, at a compound annual growth rate of three percent to 2021.51 Alongside debit and credit cards, prepaid cards are also popular, with brands including BitCash and Mint.52 Credit cards are more likely to be used than debit cards to complete an online transaction: the number of e-commerce enabled debit cards is low, at 0.07 per capita.53 In contrast, there are 2.19 such credit cards per capita in circulation.54

Bank transfers, known as furikomi, are the second-most utilized payment method, accounting for 14 percent of sales.55 PayEasy, a popular domestic bank transfer service, offers the ability for shoppers to pay at post offices, banks and automated teller machines.56

 

Konbini culture drives ongoing cash use

 

Cash is still significant, used in 13 percent of transactions.57 This can be explained by the country-wide proliferation of konbini, convenience stores that accept cash payments for online transactions. Payment must be made within six days of receiving the item and customers must present ID when making a payment.58 Japan’s 55,000-plus konbini are particularly popular with teenagers without bank accounts or access to credit.59 Cash also carries a cultural perception of offering security and anonymity when making payments,60 and is still available for cash-on-delivery options.

Digital wallets are used in just two percent of sales. The digital wallet brands that have made an impact in Japan are mostly offshoots from large e-commerce brands, like Yahoo! Wallet and Rakuten Wallet. Other significant brands include Suica and, inevitably, PayPal®.61 Although digital wallets will be the fastest-growing payment method out to 2021 in Japan, they will still only take a seven percent share of the market.62

 

Approval rate, chargebacks and fraud

 

E-commerce fraud in Japan is low, at 0.1 percent of transactions.63 However, it has been reported that the introduction of language translation sites such as Google Translate has made it easier for international hackers to access Japanese merchants’ sites and systems.64 A historical lack of prestige for chief information officer roles within Japanese business structures has also reportedly led to a lack of understanding of the potential future impact of e-commerce fraud.65

 

Key takeaways

 

In Japan, domestic brands have the advantage of serving a single-language nation. International merchants eyeing one of the largest e-commerce sectors in the world must consider investing in and offering Japanese language-enabled online shopping platforms. International merchants may therefore find it advantageous to collaborate with Japanese e-commerce platforms to reach the country’s consumers. Cross-border spending accounts for 18 percent of total e-commerce, with China, the U.S. and Australia ranked as the top three overseas shopping destinations.  The most popular e-commerce sites in Japan are domestic player Rakuten, and international giants Yahoo! Shopping and Amazon Japan.  Although the use of bank transfers and digital wallets is increasing, cards are well-established as the most popular payment method among Japanese consumers.

 

Data may vary from historical figures, due to certain categories being re-stated as new information sources have become available.

J.P. Morgan 2019 Payments Trends – Global Insights Report series includes the following countries: Australia, Brazil, Canada, China, Hong Kong, India, Indonesia, Japan, Malaysia, Mexico, New Zealand, Singapore, Thailand, Turkey, U.S., Vietnam.

 

 

Global Payments Trends Reports

International e-commerce success can hinge upon understanding the needs, nuances and growth patterns of individual nations. J.P. Morgan’s Global Payments Trends Reports aims to offer merchants the knowledge they need for global success through in-depth, country-by-country analysis.

For more information, please contact:

Your J.P. Morgan Relationship Manager or visit: https://www.jpmorgan.com/country/US/en/merchant-services/payment-insights

 

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© 2019 JPMorgan Chase & Co

 

1 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Info Cubic, 2018.

2 Economic Research, J.P. Morgan Chase Bank, March 2019.

3 Economic Research, J.P. Morgan Chase Bank, March 2019.

4 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via World Bank, 2017.

5 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via CIA World Factbook, 2017.

6 World Bank Open Data. ‘Japan.’ Accessed March 2019.

7 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Btrax Asian Trends: 2017 E-Commerce Trends in Japan, EDC analysis and export.gov, 2017.

8 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Statista, 2018.

9 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via EDC analysis, 2018.

10 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via World Bank, 2017.

11 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via eMarketer, 2018.

12 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via World Bank, 2017.

13 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via BIS and EDC Analysis, 2018.

14 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Btrax Asian Trends: 2017 E-Commerce Trends in Japan, EDC analysis and export.gov, 2017.

15 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Btrax Asian Trends: 2017 E-Commerce Trends in Japan, EDC analysis and export.gov, 2017.

16 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Info Cubic, 2018.

17 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via World Bank, 2017.

18 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via CIA World Factbook, 2017.

19 WorldAtlas.com, 2019. ‘Countries With The Largest Aging Population In The World.’ Accessed March 2019.

20 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via CIA World Factbook, 2017.

21 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via World Bank, 2017.

22 InfoCubic.com, 2017. ‘E-Commerce in Japan.’ Accessed March 2019.

23 Export.gov, August 2018. ‘Japan – eCommerce.’ Accessed March 2019.

24 InfoCubic.com, 2017. ‘E-Commerce in Japan.’ Accessed March 2019.

25 InfoCubic.com, 2017. ‘E-Commerce in Japan.’ Accessed March 2019.

26 Export.gov, August 2018. ‘Japan – eCommerce.’ Accessed March 2019.

27 Export.gov, August 2018. ‘Japan – eCommerce.’ Accessed March 2019.

28 Export.gov, August 2018. ‘Japan – eCommerce.’ Accessed March 2019.

29 Asia.Nikkei.com, November 2017. ‘Japanese retailers thankful for Black Friday.’ Accessed March 2019.

30 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via E-Commerce foundation and EDC analysis, 2017.

31 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Statista, 2017.

32 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via eShopworld, 2017.

33 AppLovin.com, August 2018. ‘How Amazon is changing Japan’s ecommerce landscape.’ Accessed March 2019.

34 InfoCubic.com, 2017. ‘E-Commerce in Japan.’ Accessed March 2019.

35 AppLovin.com, August 2018. ‘How Amazon is changing Japan’s ecommerce landscape.’ Accessed March 2019.

36 Export.gov, August 2018. ‘Japan – eCommerce.’ Accessed March 2019.

37 JapanTimes, February 2019. ‘Rakuten and China's JD.com to tie up for unmanned delivery service in Japan.’ Accessed March 2019.

38 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via EDC analysis of Statista forecast, 2017.

39 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via EDC analysis, 2017.

40 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via EDC analysis, 2017.

41 Euromonitor.com, April 2017. ‘Three Reasons Why Japan Is Falling Behind in Mobile Commerce.’ Accessed March 2019.

42 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via eMarketer, 2017.

43 Economist.com, April 2018. ‘Japanese e-commerce giant Rakuten struggles to retake the lead from Amazon.’ Accessed March 2019.

44 SDXCentral, February 2019. ‘Rakuten Lines Up an Ambitious Virtualized Mobile Network Plan.’ Accessed March 2019.

45 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Ecommerce Foundation and EDC analysis, 2017.

46 AppLovin.com, August 2018. ‘How Amazon is changing Japan’s ecommerce landscape.’ Accessed March 2019.

47 AppLovin.com, August 2018. ‘How Amazon is changing Japan’s ecommerce landscape.’ Accessed March 2019.

48 Econsultacny.com, August 2018. ‘How Uniqlo is personalising the shopping experience with Google-powered app.’ Accessed March 2019.

49 MobileWorldLive, Janaury 2019. ‘Japan m-commerce hampered by security fears.’ Accessed March 2019.

50 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2019.

51 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2019.

52 PointofSale.com, February 2016. ‘Paymentwall opens Japanese digital market to international businesses.’ Accessed March 2019.

53 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via BIS and EDC Analysis, 2018.

54 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via BIS and EDC Analysis, 2018.

55 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2019.

56 ExportToJapan.com, 2019. ‘Preferred Methods Of Payment In Japan.’ Accessed March 2019.

57 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2019.

58 ThePaypers.com, February 2018. ‘Payment methods and practices in Japan.’ Accessed March 2019.

59 Export.gov, August 2018. ‘Japan – eCommerce.’ Accessed March 2019.

60 ThePaypers.com, February 2018. ‘Payment methods and practices in Japan.’ Accessed March 2019.

61 ThePaypers.com, February 2018. ‘Payment methods and practices in Japan.’ Accessed March 2019.

62 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2019.

63 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Statista, 2018.

64 TechInAsia, March 2018. ‘What Japan can do about its online fraud problem, according to this security expert.’ Accessed March 2019.

65 TechInAsia, March 2018. ‘What Japan can do about its online fraud problem, according to this security expert.’ Accessed March 2019.

 

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