Japan is an attractive market for companies and brands due to its size—120 million people—as well as the sophistication of its consumers. Unfortunately, the Japanese market also has a reputation for being incredibly difficult for non-Japanese to conduct business in. While every situation is unique, there are typically 5 mistakes foreign companies make in Japan which prevent them from achieving their desired outcomes in the market.
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Underestimating the Language Barrier
Language is critical to success in Japan yet it is the area non-Japanese companies continue to execute the most poorly in. There is no way around it, you need native speakers on your side if you want to succeed in Japan. English is not going to cut it in a country where less than 1% of the population is anywhere near fluent enough to operate in it.
An issue we often come across with clients regarding the Japanese language concerns their website. When you don’t speak Japanese, you may not realize, but the fact of the matter is that it’s immediately obvious when writing is poorly done—the same way it would be for native English speakers to pick up on awkward or unnatural phrasing or word-choice—and yet, while brands wouldn’t put up with this kind of thing in their native language, they seem fine to run with it here.
This is a huge mistake, and a costly one as well, as Japanese people are extremely sensitive to the language-related aspects of your business—be it the text on your website or your digital advertising’s headlines and captions.
With various costs required to enter the market it’s easy for the budget-conscious brand to look for ways to minimize those expenses. Why language is the first choice to cut back on, given its foundational nature to doing business here, remains a mystery.
The reality is that many foreign companies are not prepared for the financial investment required to enter the Japanese market.
In addition to the various administrative costs of officially setting up your business to operate in Japan, the minimum investment to run the business is also typically higher than many organizations had planned for. When companies insist on spending an amount in Japan they simply feel is sufficient based on costs in their own market, they fail without exception.
One of the biggest contributing factors to the cost of doing business in Japan is simply the high cost of labor. Even for businesses who are not setting up a physical presence in Japan, one of the cheaper options available, non-Japanese companies are surprised at the market rates of various service providers whether it be web design services, market research, social media management, etc.
Furthermore, for brands hoping to sell directly to Japanese consumers via ecommerce, for example, the concept of “testing the market” doesn’t really work here because in order to properly test the market and gauge demand or potential sales a fully functional Japanese-designed website is required.
Significant upfront investment is a given in the Japanese market, but most foreign companies make the mistake of not investing enough to get their venture off the ground.
General Lack of Understanding
The Japanese market continues to confound non-Japanese.
First off the culture is vastly different so consumer preferences naturally follow suit. Without knowledge of this culture it’s hard to understand the reason behind differences in preferences.
But what earned this common pitfall a spot on our list of mistakes foreign companies make in Japan is that more often than not non-Japanese companies attribute these cultural differences to Japan being “behind.” It is these same companies though that ultimately leave the market without making any sort of impact and after wasting valuable time and money.
And it’s not just medium-sized businesses that struggle, large multinational conglomerates face these same issues. Consider the case of Wal-Mart.
Wal-Mart has not been able to find the same level of success it enjoys in the US in Japan and much of it has to do with not understanding Japanese consumer behavior. In Wal-Mart’s case, their “everyday low prices” strategy works in the United States for American consumers, but this is not always the number one consideration for Japanese when it comes to food purchases; quality is also highly valued.
Other issues, of course, also contribute to Wal-Mart’s poor-performance here in Japan, however, the vast majority of issues are simply a result of not understanding the market or Japanese consumers and not doing anything to better adapt to them.
Assuming Success in Their Home Market Will Translate to Japan
It’s hard not to make this mistake, especially when you’ve achieved the level of success that allows you to consider expansion into overseas markets. However, let us come right out and say it, foreign companies that think they are invincible do not last long in the Japanese market. Even those that do manage to stay in the market often have to pivot and operate very differently than they do in other markets—oftentimes settling for a non-market leader position.
Take Airbnb and Uber for example.
Airbnb is no stranger to battles with city and local governments concerning their platform that allows home-owners to rent out spare rooms. At the same time, however, Airbnb was not prepared for the coordinated effort between Japanese authorities and businesses in the hotel and travel industry, which successfully created new laws that drastically limited Airbnb’s business model in this country. In June 2018, 80% of Airbnb listings in Japan (more than 40,000 in total) disappeared overnight as they would not meet the new laws passed specifically to curb homesharing.
Airbnb had simply assumed they could enjoy the same results they saw in the US and in other countries. But Japan is a different beast. The Japanese do not take kindly to disruption, especially when it comes to the social harmony of peoples’ living situations. Additionally, Japanese lobbyists are extremely effective at getting legislation that benefits businesses passed quickly, to squash those who would question the status quo.
Uber is a much more straightforward story and that is because their ridesharing service is essentially non-existent in Japan. Uber was quickly and summarily shot down by the powerful taxi lobby and regulations that were already in place to protect them.
What has been the result for these 2 juggernauts in Japan?
Uber more or less exists primarily as the entity that overseas UberEats—which has enjoyed a fair amount of popularity, especially in major cities like Tokyo. However, it must be noted that this market is not nearly as lucrative as transportation.
Airbnb has had to significantly alter their business model to be in line with Japanese laws and regulations and this has significantly limited operations. For example, outside of a few special zones, Airbnb apartments can only be rented out 180 days of the year and hosts must register with local governments. The numbers have still not recovered to their previous levels and they have shifted more focus to their platform as a marketplace where people can find and sign up for local “experiences” to take part in during their vacations.
Of the various mistakes foreign companies make in Japan, this is perhaps the hardest for successful companies and brands to come to terms with.
Choosing the Wrong Partner
A previous client had chosen a country manager who looked impressive on paper, but once the ball got rolling it became clear they actually had little insight into average Japanese consumers—which was critical for this extremely consumer-facing organization. The information and strategies presented and subsequently implemented by the country manager failed spectacularly in the market. This was a costly mistake to fix.
Another scenario that is also common is where an agency partner may be fluent in your language, but adopts a very Japanese way of conducting business. This causes its own set of issues, especially when you are not familiar with Japanese business practices. It may very well be the case that the Japanese style doesn’t mesh well with your company’s culture or your marketing manager dealing with Japan at HQ. The takeaway in this case is that linguistic fluency does not necessarily translate into cultural fluency.
Therefore, finding the right partner can also have a tremendous impact on the success or failure of your business in Japan.
While this is by no means an exhaustive list, it does highlight some of the most common mistakes foreign companies make in Japan. Unfortunately, many non-Japanese companies who have entered the market continue to wrongly attribute their failures to issues with the product or branding. More often than not, however, the issues actually started at the outset of their expansion into Japan.
Although even by avoiding these common mistakes success is still not guaranteed, with proper planning and the right foundation you will be miles ahead of other non-Japanese companies entering the market.
Questions about doing business in Japan? Contact us to schedule a call to see how we can help.