Why should you start a dropshipping business in Japan?

With a wealthy older generation and almost an entire population online, Japan offers one of the best environments for dropshipping. The country stays at the top of the charts globally for both its gross domestic product and ecommerce profitability.

Location

Japan is made up of four main islands, Hokkaido, Honshu, Shikoku, and Kyushu. It is situated to the east of China, Korea, and Russia.

Wealth

According to The World Bank, in 2020 Japan listed as the 3rd wealthiest country in the world and the second-richest East Asian country. With a GDP of USD 40,193, Japan was placed ahead of Germany and below China. In 2020, it held 5.14% of the global economy.

Source of wealth

Japan has advanced manufacturing and service sectors. The country offers world-class manufacturing for:

• Electronics
• Cars
• Machinery
• Steel
• Ships
• Chemicals

The services sector accounted for about 69% before the Covid-19 pandemic (Statista, 2019). It includes highly successful financial services and the world-renowned Tokyo Stock Exchange, retail, real estate, insurance, and telecommunication.

Should you invest in an online business for buyers in one of the richest and most powerful countries in the world? Here are some of the key benefits of dropshipping in Japan:

• Japan has the third largest ecommerce market worldwide, as of 2022
• Internet penetration rate of 94%
• Smartphone penetration rate of 85%
• 48.2% of the population buy online each week
• Toys, hobby and DIY, electronics, media, and furniture are the most popular products purchased online
• Innovations in the postal service for efficient deliveries

Japan has the third largest ecommerce market globally by value. However, as suggested in the Global Ecommerce Report by JP Morgan in 2021, this is only due to population density. In reality, 9 out of 10 purchases are made offline. Regardless, the country's shopping habits are developing rapidly with room for successful dropshipping businesses.

Ecommerce revenue

The ecommerce market in Japan was valued at USD 128.3 billion in 2021 by ecommerceDB. A forecast report from Research and Markets predicts this will increase to almost USD 298 billion in 2026 with a CAGR of 7% during this time.

56.3% of the Japanese are over the age of 45, nevertheless, as a country, they are still technologically advanced. Around 94% (118.3 million) used the internet in January 2022, as per figures from DataReportal.

An article by Tech Jury in 2022 reports that while the average internet user spends 2 hours and 33 minutes on social media per day, the Japanese only use these platforms for 48 minutes.

According to Statista, these were the most popular social media channels in 2021:

• LINE (similar to WhatsApp), 79.6%
• Twitter, 58.2%
• Instagram, 47.7%
• Facebook, 30.8%
• iMessage, 15.6%

While social media doesn't appear to be as prominent in Japan as in other countries, it is still worth creating a dropshipping website that is mobile-friendly. Investing in social commerce might be less of a priority than focusing on customer service quality.

Referring to research from ecommerceDB, in 2021 these product categories experienced the most sales online:

• Food and personal care (27%)
• Fashion (20%)
• Toys, hobbies, and DIY (19%)
• Electronics and media (19%)
• Furniture and appliances (15%)

As with ecommerce around the world, there are new digital innovations every year. These are some trends in ecommerce that are becoming more common in Japan, as per Netwise, 2021:

• Virtual reality shopping
• Live commerce on platforms such as TikTok
• Personalised shopping experience
• Subscription services

Data from Statista suggests that more than 85% of the population in Japan use a smartphone in 2022. By 2027, it is expected to reach 94% despite the country's low numbers of young people.

Mobile commerce is still slightly lagging behind desktop-based shopping. The Global Ecommerce Report by JP Morgan found that only 34% of Japanese online shopping in 2020 was via smartphones. By 2024, mobile commerce in Japan is set to grow at a CAGR of 7.1%.

Last mile delivery options in Japan are improving with the use of bots and drones. McKinsey reports in 2021, that Japan is one of the front-runners in advancing logistics technology. The motive is not only to modernise the delivery process but to solve the issue of labour shortages in a hyper ageing society.

Drones are expected to be fully operational in Japan by 2023, says an article in Post & Parcel, 2021. Delivery provider, Japan Post, is joining forces with Autonomous Control Systems Laboratory to send packages to customers by air.

Japan is known for offering exceptional hospitality, regardless of if it's during an expensive hotel stay or visiting the local convenience shop. The importance of treating customers well goes back to the deep-rooted culture of Omotenashi.

Originating from a tea ritual, Omotenashi is the name given to the extreme care and attention to detail given when serving guests. Today, it's still important for Japanese customers to receive a very high level of service, both online and in physical shops.

For dropshippers, it's crucial to have a level of customer service that will satisfy Japanese buyers or risk quickly losing business.