The 3 Lessons From US Businesses Failing In the Japanese Market

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Having talked with some of my friends, I’ve realized there are similarities that exist in companies failing to expand into the Japanese market. 

Here’s a common situation: your business is doing well enough in the North America as well as other countries in Europe and Asia. You are looking for a new market to gain entry to. It seems Japan is pretty attractive to touch on, given the size of the market.

Having had successes in other countries, your company has gained confidence in your business scheme and operation. Without any doubt, you apply your practice on the Japanese market. However, it’s not working as well as expected. You don’t see any reason for why it’s not working especially since it’s working perfectly fine in other markets.

You might find a replacement manager and have him/her deal with it. But a few months later, you may see similar results: a failure.

In short, the issue comes from misunderstanding or underestimating the Japanese market and the remedy is localization. That’s it… but it’s easier said than done. 

Let me give you three lessons to help you understand the Japanese market a bit clearer so you avoid the same mistakes others have previously made.

  • Understand It’s the Way It Is For a Reason
  • Expect High Competition In Your Arena with Domestic Japanese Companies
  • Be More Adaptable To What Will Happen In Japan & Trust Your Country Manager

Understand It’s the Way It Is For a Reason

It’s the way it is for a reason. There may be many things you think are absurd or wacky. 

Of course, not every single thing may have a logical reason behind it, but it’s fair to assume that most of them do. You may need to think it through and figure out the reasons and context behind it before concluding that it’s just irrational.

One thing that is usually pointed out is design. It may look outdated for people from North America — see the image below:

Image: Uniqlo

This is a sample of 2017 flyers made by Uniqlo for the Japanese market. You might be surprised at how stuffed the content is, knowing their simple brand. 

But don’t get it wrong. It’s been tested out and has been the best performed design format in terms of earning foot traffic into their stores, which is primary purpose of a flyer. I don’t think they distribute similar flyers in any other countries knowing they purposely change the way they present themselves for each country and culture. Thus, this layout is fully localized to Japan.

Same goes for User Experience (UX) for web design. The biggest e-commerce website in Japan, Rakuten has similar a tendency in its design.

Image: Rakuten Home Page

There are lots of banners that dominate above the fold, which is considered to be a bad UX example in North America. But again, it’s been tested out and has been the best performing format.

A case study brought by Mario Sakata, a UX designer, may give you a bit clearer sense of the reason:

“banners or imageries were placed on the right and left sides, filling up the empty space with more content. When the users were shown this design, they were observed to be using it without any resistance. Given a large volume of information to satisfy their initially passive attitudes and the freedom to select what they wanted from among many candidates led to a sense of enjoyment, and resulted in them using the website.”

Image: Why Japanese Web Design is NOT so different by Mario Sakata 

Like I said, it is this way for a reason. You don’t want to misjudge based on your gut feeling as ‘This design is horrible. Let’s make it simpler and cleaner.’

To understand the behavior and figure out the reason why it’s the way it is, you need to talk to someone who’s familiar with Japanese behavior and to continuously test without any bias brought from North America.

Expect High Competition In Your Arena with Domestic Japanese Companies 

There are lots of Japanese companies and neighbouring countries like Korea and China that keep a keen eye on what’s going on in the North American market. Chances are some companies have been running a similar business to yours. Some examples that I can think of are the following:

  • Line who dominates in the messenger app market in Japan instead of WhatsApp.
  • Snow instead of Snapchat. 
  • 2channel instead of Reddit.
  • Chatwork in the business chat tool market instead of Slack (though Slack is more than a chat tool.)

Basically, what’s happening is that Japanese, Korean or Chinese companies take business ideas from trending businesses in North America and operate similar/identical businesses in a way that fits the Japanese market while you are expanding your businesses in North America. By the time you decide to break into the Japanese market, they’ll most likely have established their business in Japan and positioned themselves as a leader in the domestic market.

With this in mind, it wouldn’t be easy for your business to get in, given that your business may have major disadvantages in the Japanese market including differences in terms of language, culture and business practices.

Be More Adaptable To What Will Happen In Japan & Trust Your Country Manager

At some point in time, you might need to adjust your product offering in a way that becomes competitive in the Japanese market. A common area having an issue is the balance between value and pricing. 

In general, everything in Japan is relatively more affordable than one in North America such as real estate, restaurants and other services including the realm of B2B — I would assume that it has something to do with their lower income. Therefore, they tend to demand more for less cost and might see your offerings that come directly from your country as unreasonable. 

Unless your product doesn’t have any competition in the market, chances are you only have three options: 1) drop down the price, 2) consolidate the value of your offer, 3) yell at your country manager.

Surprisingly, #3 is what the majority of companies end up doing. Why? In the most case, the management team at the headquarters doesn’t fully understand what’s going on in the Japanese market. All they see is the struggle of the Japan team based on the figures. 

What would you say if your Japan team said our offer is not competitive enough in the Japanese market? You would think that is outrageous and that they are simply making excuses for their poor performance, but I can see that as reasonable since I have a sense of how hard it is to compete in Japan. 

The lesson from here is to trust your country manager. He/she is the one that competes on the front line. If the change doesn’t make financial sense, then it might be wise to withdraw from the Japanese market.

Wrap It Up!

I’ve covered three lessons regarding US companies expanding into the Japanese market based on what I’ve experienced and heard from my friends. You might want to think of the Japanese market as a totally different market than anywhere else. I’m confident that Japan is a tough market to tackle. I hope this article helps you have a clearer understanding of the Japanese market.

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