Sri Lanka mulls strategic entry into Japan's retail market

As Lanka's exports to Japan topped the $ 223 million mark, it is mulling a strategic, entry to one of the most coveted online markets in the world - Japan.

"Japan is the second biggest retail market in the world. Japanese are also heavy internet users with a large e-commerce base.

Using a top Japanese online giant like Rakuten could give Lankan exporters a wide-coverage and a low cost entry to this promising market," said Export Development Board (EDB) Director General Sujatha Weerakoone at the 'Japan's Rakuten Platform for Sri Lankan Products' for Lankan exporters at the EDB recently.

The session consisted of a special in-depth presentation by Japan's Kanagawa based Takashi Yoshino (Principal, Y and F Associates LLC).

Representatives from over 40 export firms were present.

Sri Lanka's exports to Japan has shown a steady rise. In 2012 exports to Japan recorded $ 215.74 million and in 2013, it rose to $ 223.82 million. Apparel, tea and seafood (prawns and fish) became the leading products in 2013.

Not only in Japan, but across the world, Rakuten is considered as one of the largest e-commerce retailers. Within Japan, Rakuten is the largest e-commerce retailer. Rakuten is present in 19 countries.

As for Japan, around 30 percent of the $ 13 billion annual Japanese e-commerce traffic goes via Rakuten. With a single login to Rakuten, 78 to 80 million regular Japanese web users access its many services - which include retail business, travel, telecoms, banking and e-money services.

The B2B2C Rakuten platform recently reported revenue at $4.6 billion with operating profits of about US$ 244 million.

"Japan is the second biggest retail market in the world. The Japanese are heavy internet users. Using an online Japanese giant such as Rakuten will give us a low cost entry to this market with immediate wider coverage," said Weerakoone and added "This is also a novel concept and more importantly, a good, Sri Lankan product validation window."

"This is also a global online export strategy incubator for us. The lessons from this would be important for us in placing our export products with top e-commerce retailers of the world," she said.

"We are only exploring the possibility of introducing this and doing a test-run for our exporters and are not imposing this on them. The online presence will also lift the burden for our exporters to maintain a ready inventory in Japanese warehouses," Weerakoone said.

"This is a challenge and a try out for Sri Lankan exporters. The Japan e-commerce market is unlike many international online sales portals we know such as Amazon," said Principal Yoshino.

"Japan's retail consumer market is the world's second largest. It is not conducted in English but almost totally in the Japanese language. More than 75 percent of the Japanese buy products online and 29%-30% of the Japanese heavily use Japan's top online e-commerce portal Rakuten.

Other top e-commerce portals are Yahoo Japan (7.5%), and Amazon.com (12.4%). Rakuten has six million credit card customers and more than 75 million users in Japan.

In February Rakuten acquired Viber for $900 million and is hoping to increase their user base to two billion through mobile internet shopping. Sri Lankan product details have to be in the Japanese language when placed with Rakuten.

All catalogues are translated into the Japanese language for Japanese customers. Products from 27 countries are displayed at present and Japanese customers have access to 95 million products from around the world.

"It is time Sri Lanka too joins this," said Yoshino.

"Before displaying products, prior analysis and research is done by Rakuten so that they cater the best products and services to customers.