E-commerce Payments Trends

E-commerce Payments Trends: Japan

Japan e-commerce insights


The e-commerce market in 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 Japan’s e-commerce 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.

Japan’s e-commerce market trends: Modest growth in 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 e-commerce 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,18Japan is actually the most aged nation in the world19 – 28.8 percent of its population is aged 65 or older.20

Looking ahead, e-commerce 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 online shoppers.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

Japan’s unique online shopping events boost e-commerce growth

 

Japan is home to a number of online shopping 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 online shopping categories in Japan 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 prediction for e-commerce growth in Japan

 

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 Japan’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

Domestic merchants challenge Amazon 

 

Of the citizens that do use their smartphones to shop online in Japan, 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 online shoppers in Japan 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 Japan’s online shoppers about security measures. At present, only 37 percent of Japanese online shoppers are happy for apps to store their payment information.49

 

 

Cards dominate payments trends, but cash persists

 

Cards are Japan’s primary way to pay for online shopping, 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 in Japan, with brands including BitCash and Mint.52 Credit cards are more likely to be used than debit cards to complete an online shopping 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 in Japan, accounting for 14 percent of sales.55PayEasy, 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 Japan’s ongoing cash payment trend

 

Cash use in Japan 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 as a payment method also carries a cultural perception of offering security and anonymity when making payments in Japan,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

Is fraud affecting Japan’s e-commerce growth?

 

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 Japan’s online shoppers. Cross-border spending accounts for 18 percent of total e-commerce in Japan, 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 Japan’s most popular payment method.

 

To learn more about payment trends in the world’s leading e-commerce markets, contact your J.P. Morgan representative or call us on:

US: 1-800-708-3739

UK: 0845-399-1130

Europe: +353-1-726-2909

E-commerce Payments Trends

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

1 IMF.com. Japan's Strong Economy Continues to Lead Global Growth, August 2018. Accessed March 2019

2 The World Bank. Japan profile, October 2018. Accessed March 2019.

3 Reuters.com, January 2019. ‘U.S. voices concern as Japan's e-commerce restrictions hit Amazon, Walmart – sources.’ Accessed 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, 2018.

6 World Bank Open Data. ‘Japan.’ Accessed December 2018.

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 eMarketer, 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, 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 eMarketer, 2017.

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 and Statista.

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 Statista.

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 Reserve Bank of Japan.

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, 2018.

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 eMarketer, 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, 2018.

17 Ibef.org, December 2018. ‘E-commerce Industry in Japan.’ Accessed February 2019.

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 Ecommerce Foundation, 2018.

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

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, 2018.

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 Export.gov, October 2018. ‘Japan – eCommerce.’ Accessed February 2019.

23 Ibef.org, December 2018. ‘E-commerce Industry in Japan.’ Accessed February 2019.

24 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.

25 Export.gov, October 2018. ‘Japan – eCommerce.’ Accessed February 2019.

26 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.

27 Inc42.com, February 2019. ‘Data Protection, Privacy to Form Core Of Draft Ecommerce Policy: Report.’ Accessed February 2019.

28 Inc42.com, February 2019. ‘Data Protection, Privacy to Form Core Of Draft Ecommerce Policy: Report.’ Accessed February 2019.

29 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.

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 eMarketer, 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, 2018.

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 Statista.

33 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.

34 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.

35 Exchange4media.com, September 2017. ‘Shift from e-commerce to m-commerce accelerating in Japan.’ Accessed February 2019.

36 AppAnnie.com, 2019. ‘The State of Mobile 2019.’ Accessed February 2019.

37 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 Grant Thornton.

38 SimilarWeb.com, February 2019. ‘Top App Store apps in Japan – Shopping.’ Accessed February 2019.

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, 2018.

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 data obtained from National Sources.

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

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, 2018.

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

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

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, 2018.

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

47 PracticalEcommerce.com, July 2018. ‘Cash on Delivery Dominates Japann Ecommerce.’ Accessed February 2019.

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

49 TheHinduBusinessLine.com, January 2018. ‘E-commerce players stop cash-on-delivery payment option temporarily.’ Accessed February 2019.

50 TheHinduBusinessLine.com, January 2018. ‘E-commerce players stop cash-on-delivery payment option temporarily.’ Accessed February 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, 2018.

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

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 The Wire, ‘The Economics and Future of E-commerce Fraud in Japan.’

 

About J.P. Morgan

 

J.P. Morgan offers a full suite of payments services to enable a seamless connection across the payments continuum for clients. We bring our consultative expertise, data-driven insights, and local service around the globe to provide a more unified view of payables, receivables and cash management. Merchant Services is the payment acceptance and merchant acquiring business of JPMorgan Chase & Co. (NYSE: JPM) – a global financial services firm with assets of $2.6 trillion and operations worldwide.i According to The Nilson Report, it is also the top merchant acquirer of e-commerce transactions in Europe.ii

 

JPMorgan Chase & Co. Q4 2018 Earnings Report 2018.

ii The Nilson Report, #1132 May 2018.

This document is based on projected figures and is subject to change at any time. Data may vary from historical figures, due to certain categories being re-stated as new information sources have become available.

Information contained in this document has been prepared by third parties or obtained from sources which are believed to be reliable; but neither Chase Paymentech Europe Limited nor any of its affiliates warrant the completeness or accuracy of the information contained herein. Chase Paymentech Europe Limited and any of its affiliates shall have no liability to the user or to third parties, for the quality, accuracy, timeliness, or for any special, indirect, incidental or consequential damages which may be experienced because of the use of or reliance on the data or statements made available herein. Third party trademarks, brand names, products and services are only referential and Chase Paymentech Europe Limited and its affiliates disclaims any sponsorship, affiliation or endorsement of or by any such third party.

 

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