Japanese E-Commerce Set To Explode

E-commerce is set to explode in Japan from about $4 billion (US$) in 1999 to $693 billion in 2003, according to a new report from Andersen Consulting and Japan’s Ministry of International Trade and Industry (MITI).

The study reports that business-to-business (B2B) e-commerce in Japan skyrocketed to $3.2 billion in 1999, a 420 percent increase from the previous year’s $610 million. MITI and Anderson Consulting expect this expansion to continue until B2B e-commerce reaches $651 billion in 2003.

While B2B Explodes, B2C Develops Steadily

Meanwhile, business-to-consumer (B2C) e-commerce in Japan is steadily climbing. Although Japan has been slow to take to e-commerce, Andersen predicts that B2C e-commerce will reach $42 billion in 2003, up from under $1 billion in 1999.

Automobile, Travel and Real Estate Drive B2C Market

The major market segments that will contribute to B2C growth are automobiles, travel and real estate, the report predicts, with each segment topping $9.5 billion in value.

Still, despite the astronomical gains that are expected in the coming years, the report points out that e-commerce services will represent only two percent of household consumption.

Roadblocks to E-Commerce in Japan

The report says that development of e-commerce in Japan has been slowed by a number of factors, most notably the high cost of telecommunications and the lack of Internet applications being produced in the Japanese language.

About 65 percent of Japan’s estimated 20 million Internet users gain access through the telephone network of Nippon Telegraph & Telephone Corp. (NTT), formerly a government monopoly.

NTT has not lowered access fees in 23 years, the report states, charging about $2 an hour instead of the flat fee enjoyed in the U.S. The high fees have caused Internet users to largely curtail their Web-surfing.

Reportedly, NTT is currently testing a flat-rate Internet service in Tokyo and Osaka, charging $75 a month. The fee supposedly will be offered under the condition that users subscribe to an NTT-supplied ISDN line.

Meanwhile, Sony Corp. has announced plans to build a wireless loop to provide low-cost, high-speed Internet access in large Japanese cities, while VerticalNet has announced a deal with Softbank to create VerticalNet Japan that will launch B2B trading networks in both English and Japanese.

Limited Online Sales in Japan

Most industries have been unable to generate significant online sales in Japan, according to the report. Almost 50 percent of online sales in Japan in 1999 were for electronic goods, the report states, while 40 percent were automotive goods.

Sales of commodity items and luxury items, which are well under 10 percent of the total, have not caught on with the Japanese public.

Regarding B2B e-commerce, the report states that Japan’s distribution system of middlemen may be holding back the movement to B2B e-commerce. In some sectors, it is feared that the emergence of online B2B e-commerce could cause as many as four million people to lose their jobs.