Bargain AmericaBargain America

How to sell direct to Japanese consHow to sell direct to Japanese consumers on the Netumers on the Net

Bargain America Corp.Bargain America Corp.

President & CEOPresident & CEO

Tom SatoTom Sato

tomsato@bamerica.comtomsato@bamerica.com

www.bamerica.comwww.bamerica.com

Facts About Facts About JapanJapan

Second Largest economy in the World Second Largest economy in the World 10 Million Internet users10 Million Internet users 5 million Mobile Internet Users5 million Mobile Internet Users Millions travel to US for vacationMillions travel to US for vacation An average Japanese tourist spends An average Japanese tourist spends

$3,000 on shopping$3,000 on shopping

Odds Against Odds Against JapanJapan

Trade Figures show that US is lagging behind in Trade Figures show that US is lagging behind in International Trade International Trade

2000 expected to be over $80 B

-$80,000

-$70,000

-$60,000

-$50,000

-$40,000

-$30,000

-$20,000

-$10,000

$0

1996 1997 1998 1999 2000

2000 Jan-Aug

Trade Deficit against Japan ($M)

ChallengingChallenging

Most Trade barriers are all but extinct Most Trade barriers are all but extinct but…..but…..

Cultural DifferencesCultural Differences Language BarrierLanguage Barrier Japanese are accustomed to premium Japanese are accustomed to premium

quality servicequality service Trade regulations Trade regulations

OpportunityOpportunity

Growing Marketplace without any Growing Marketplace without any dominant playerdominant player

Most online shops do not have Most online shops do not have strong infrastructurestrong infrastructure

There are no crazy guys selling at There are no crazy guys selling at costcost

Likelihood of repeat business Likelihood of repeat business

Japanese Home Japanese Home PagePage

When taking When taking orders online from orders online from Japanese Japanese customers, the customers, the home pages must home pages must be in Japanesebe in Japanese

Japanese Home PageJapanese Home Page

Follow the Japanese online commerce Follow the Japanese online commerce guideline set by MITIguideline set by MITI

Order form must be formatted for Order form must be formatted for Japanese addressesJapanese addresses

Shipping cost must be clearly statedShipping cost must be clearly stated Confirmation Email must be in Confirmation Email must be in

Japanese Japanese

Processing Processing Orders Orders

Around 10% of orders have wrong Around 10% of orders have wrong addresses- as entered by recipientaddresses- as entered by recipient

Very low percentage of credit card fraudVery low percentage of credit card fraud Higher percentage of credit card input Higher percentage of credit card input

errorserrors Higher instance of double entryHigher instance of double entry All orders are checked by customer All orders are checked by customer

service service

Wrong Wrong addressaddress

Japanese addresses are the most Japanese addresses are the most complicated complicated

There are addresses that ends with There are addresses that ends with ““No Number”No Number”““Up the Hill Around the Corner”Up the Hill Around the Corner”

Customer Service checks Customer Service checks addresses and uses database addresses and uses database system to correct errorssystem to correct errors

Shipping Shipping Products to Products to

JapanJapan Customs law is different from Customs law is different from

courier service to post officecourier service to post office USPS results in a greater realized USPS results in a greater realized

tax advantage to Japanese tax advantage to Japanese consumersconsumers

Packaging and Packing must be Packaging and Packing must be within Post office guidelines within Post office guidelines

Personal Import Personal Import RegulationRegulation

Import duty and consumption tax is Import duty and consumption tax is waived for small personal importwaived for small personal import

Regulation was created in 1990 to Regulation was created in 1990 to support US-to-Japan catalog commercesupport US-to-Japan catalog commerce

Most packages valued below $200 get Most packages valued below $200 get through without being taxedthrough without being taxed

Regulation is vague and enforcement Regulation is vague and enforcement arbitrary; some higher value packages arbitrary; some higher value packages may get through without taxationmay get through without taxation

Government Government RegulationsRegulations

Japanese Health RegulationJapanese Health Regulation Japanese Import RegulationJapanese Import Regulation FDA RegulationFDA Regulation Export RegulationExport Regulation Anti-Terrorist RegulationAnti-Terrorist Regulation

Global Custom Global Custom DesignDesign

US Post Office bulk shipping system for US Post Office bulk shipping system for International parcelsInternational parcels

Automatically prints customs forms & address Automatically prints customs forms & address labelslabels

All parcels are Prioritized and InsuredAll parcels are Prioritized and Insured Customs information is sent digitallyCustoms information is sent digitally All parcels are traceable via InternetAll parcels are traceable via Internet System is connected to our E-commerce System is connected to our E-commerce

server server

Shipping Shipping ProblemsProblems

If you don’t have a Japanese If you don’t have a Japanese specific shipping system…specific shipping system…

– Expect high # of package losses at SFO AirportExpect high # of package losses at SFO Airport– Packages with wrong address will be returned to Packages with wrong address will be returned to

you two months lateryou two months later– Your customers may be charged a high customs Your customers may be charged a high customs

duty, consumption tax and collection feeduty, consumption tax and collection fee– Tracking packages will be problematic at bestTracking packages will be problematic at best

Shipping Shipping CenterCenter

In-house shipping center with In-house shipping center with proprietary systemproprietary system

Modular workstation based system that Modular workstation based system that is scalable according to needsis scalable according to needs

More than 90% of orders are shipped More than 90% of orders are shipped on the same dayon the same day

QA System that checks before shipping QA System that checks before shipping

Inventory Inventory ControlControl

Japanese HATE Japanese HATE back ordersback orders E-Commerce system that is connected E-Commerce system that is connected

to inventory controlto inventory control Products at Zero inventory level are Products at Zero inventory level are

removed from presentation by systemremoved from presentation by system Low level of Inventory (Less than a Low level of Inventory (Less than a

week’s worth of goods) triggers reorderweek’s worth of goods) triggers reorder Small volume “just in time” procurement Small volume “just in time” procurement

Customer Customer SupportSupport

Must be done in Must be done in JapaneseJapanese

Email and telephoneEmail and telephone Almost all emails are Almost all emails are

answered within 24 answered within 24 hourshours

Net-ready Japanese Net-ready Japanese customer supportcustomer support is is rarerare

Trouble Trouble ShootingShooting

Refund: Via credit cardRefund: Via credit card Return of merchandise: to Japanese Return of merchandise: to Japanese

address via subcontractor – cost $6address via subcontractor – cost $6 On average only one package a week is On average only one package a week is

returnedreturned Reship: If it’s broken in transit, we will Reship: If it’s broken in transit, we will

send another send another

MarketingMarketing

Email Magazine: Bargain America Email Magazine: Bargain America MagazineMagazine

Email Magazine : 13 titlesEmail Magazine : 13 titles Japanese Editorial Team Japanese Editorial Team Japanese ContentJapanese Content No SpammingNo Spamming

Email MagazineEmail Magazine

Most Japanese Internet users read Most Japanese Internet users read email magazinesemail magazines

Good content is requiredGood content is required Cost of Marketing is lowCost of Marketing is low Issued WeeklyIssued Weekly Opt-in and free subscriptionOpt-in and free subscription

Email MagazineEmail Magazine

MarketingMarketing PartnershipsPartnerships

MSNMSN NTT-X GooNTT-X Goo Gateway Japan Gateway Japan Usen BroadcastingUsen Broadcasting Yahoo Japan Yahoo Japan

Database Database MarketingMarketing

Existing customer base : Existing customer base : 40% return rate!!!40% return rate!!!

Targeted Email-based discount Targeted Email-based discount coupon systemcoupon system

Online competition (contest) systemOnline competition (contest) system Marketing performance Marketing performance

measurement system measurement system

Email Coupon Email Coupon SystemSystem

Coupons are sent Coupons are sent according to past according to past purchasing history purchasing history and other dataand other data

Coupons work well Coupons work well to bring back past to bring back past customerscustomers

Online Competition Online Competition SystemSystem Competition works Competition works

well to win new well to win new customers and customers and attract attention attract attention from the Japanese from the Japanese presspress

All entrants are All entrants are sent discount sent discount email couponsemail coupons

MerchandisinMerchandisingg

Product selection according to Product selection according to Japanese needs and tasteJapanese needs and taste

All products are tested in small volumesAll products are tested in small volumes Promoted in Email MagazinesPromoted in Email Magazines Product description in detailProduct description in detail Wide coverage but narrow selection : Wide coverage but narrow selection :

850 SKUs 850 SKUs

Merchandising Merchandising ResearchResearch

Product selections are done by Product selections are done by Japanese staffJapanese staff

Japanese fashion trends are followed Japanese fashion trends are followed by Japanese staffby Japanese staff

Some products have such a premium Some products have such a premium in Japan than you can sell above in Japan than you can sell above domestic retail pricedomestic retail price

Understanding Japanese regulationsUnderstanding Japanese regulations