Japan’s ecommerce market has lost momentum after growing more than 20 per cent since 2019. Demand for online shopping surged as consumers hunkered down at home to avoid Covid-19, but the quick end to the spending spree has dashed hopes that online retail will become a new engine of economic growth.
Ecommerce grew about 20 per cent between 2019 and 2021, according to an index compiled by Japanese analytics companies Nowcast and JCB based on credit card spending. A survey conducted by the Ministry of Internal Affairs and Communications for the same period found an increase of nearly 30 per cent in ecommerce.
Tabe Choku, a farm-to-table delivery app with 650,000 users, saw its gross merchandise value jump roughly 130 times between 2019 and 2021. Aeon, an operator of supermarket chains, logged ¥75bn ($551mn) in online sales in the year to the end of February, up 80 per cent from two years earlier.
The trend in online shopping is also changing. Nikkei analysed data collected by Tokyo-based research company Nint on online platforms Amazon, Rakuten and Yahoo, finding that the average unit purchase price on the sites rose 17 per cent from January 2020 to ¥3,756 in April 2022. Purchase prices climbed in nearly 70 per cent of categories, including clothing, home appliances and furniture.
But online shopping is showing signs of slowing. The ecommerce consumption index compiled by Nowcast has levelled off after rising sharply through early 2021. The index declined for two consecutive months to the end of June this year. “The Covid-induced demand has taken a breather,” said an executive at an ecommerce company.
Japan is a laggard in terms of ecommerce. According to a 2022 survey of 39 countries by German research company Statista, Japanese go online for daily essentials about 40 per cent less than the average. Only 22 per cent of Japanese surveyed have reserved restaurant tables online, while 24 per cent bought shoes and 32 per cent ordered food. All three categories were up five to nine percentage points from the previous survey in 2021, but ranked the lowest among the 39 countries.
In Japan, online shopping forms only a small part of personal consumption. A survey by the Ministry of Economy, Trade and Industry found that ecommerce accounted for 8 per cent of goods sold in 2020.
The key to reigniting ecommerce is to combine it with bricks-and-mortar stores, which have seen higher sales after an easing of Covid restrictions.
This article is from Nikkei Asia, a global publication with a uniquely Asian perspective on politics, the economy, business and international affairs. Our own correspondents and outside commentators from around the world share their views on Asia, while our Asia300 section provides in-depth coverage of 300 of the biggest and fastest-growing listed companies from 11 economies outside Japan.
“The role of physical stores will expand,” said Tomoyuki Mochizuki, vice-president of ecommerce consultancy Itsumo. Suitmaker Fabric Tokyo is adding more stores that specialise in product display to meet customer demand to see merchandise before ordering. Fabric Tokyo found that if it combined ecommerce and bricks-and-mortar services, shoppers tended to spend twice as much than when ordering online.
Many consumers are apparently growing tired of shopping on smartphones. Onward Holdings’ new service lets customers try on its garments found online at physical shops before placing an order. The stores that introduced the service have seen sales recover to pre-pandemic levels, said a company official.
The main bottleneck throttling ecommerce is a shortage of delivery workers. Parcel delivery companies handled a record 4.8bn units in fiscal 2020 and the number was expected to hit 10bn in the 2040s. The ecommerce sector will be unable to sustain growth if the shortage of delivery personnel becomes acute.
Amazon Japan and Askul have established their own delivery networks in co-operation with small and midsize logistics companies, while Seiyu and Rakuten Group have begun operating self-driving robots to deliver fresh food and boxed meals on a trial basis.
Innovation and better infrastructure are the keys to making ecommerce a growth engine in the post-coronavirus era.
A version of this article was first published by Nikkei Asia on July 30. ©2022 Nikkei Inc. All rights reserved.