Distribution in Japanese Markets
There are two basic approaches to the Japanese market. One is to use the existing distribution channels of a trading company or a wholesaler. The other is to set up one’s own distribution system. Whether an exporter relies on a trading company or decides to make a much lager commitment to the market and sets up his own distribution channels information on the way distribution operates in Japan is essential.
The issue of distribution is important because whether a company’s distribution is adequate or inadequate will determine how much of the product actually reaches the consumer or the end-user. Distribution in Japan has often been described as complex because of the large number of fragmented retail outlets and the number of intermediaries needed to service these outlets. While distribution channels for many products are complex, the tasks of reorganizing these channels and re-molding the existing distribution system into a more efficient one is a task that domestic producers and exporters face to an equal degree.
Some of the most important points that companies planning for distribution in Japan should bear in mind are:
1. The role of the wholesaler is an important one for many products. This is particularly true when end users or rattlers are small business entities. In these cases it may be more efficient to use existing distribution channels than try to go direct.
2. For a widening range of products, particularly those which need to be purchased everyday and which can be easily standardized relations between makers and end users or retailers are becoming closer with the middlemen playing a smaller and smaller role.
3. Joint entry by several overseas companies into the Japanese market is one way of reducing the cost per company of set up and maintaining distribution channels. This approach is particularly applicable to foodstuffs and industrial parts, but thus far has rarely been used.
4. Trading companies, both general and specialized can be very helpful to exporters in providing distribution through their existing channels or in helping the exporter to organize new channels, provided the proper incentives are provided for the trading company.
5. The institutional segment for many products is often much easier to gain access to, because of the smaller umber of end users and their greater size.
6. The following ways of shortening and rationalizing distribution channels are available for some products: (I) Direct tie-ups: Some department stores and supermarket chains have begun to make direct tie-ups with domestic makers. For suitable products this possibility is open for exporters as well. Direct tie-ups should be particularly attractive to chain supermarket and others groups, which are seeking to rationalize distribution. Supplying voluntary chains, which are increasing in importance, is another way to gain more access to end users d retailers. (2) Retail outlets or users segmentation; Select certain types of retail outlets or users that are small in number and contact to supply them trust.
One of the basic determinants of the length of distribution channels in Japan is the size and influence of the maker on the hand and the user or retailer on the other. Small producers disturbing to small retail outlets in various parts of the country are dependent on a network of wholesalers. At the other extreme, in industries where production is concentrated in the hands of a few firms, sales are made either directly or through only one intermediary to large retail outlets, such as supermarket chains, or to large end-user. For the potential exporter this means that a set up with the most efficient distribution system is possible, he may often have (1) to borrow the influence of a trading company or distributor who has control over distribution or (2) be prepared to invest in setting up distribution channels in the segment that he has an interest in. Many overseas firms have successfully used rebates and other incentives to motivate trading companies to sell their products for them. Other companies have also been successful in making a larger commitment to the market and setting up their own channels. Two of the main characteristics of firms that have been successful in distribution in Japan appear to be (1) skilful borrowing of the influence and knowledge of trading companies and wholesalers and (2) a long term commitment to the market.