Your guide to open online business in Japan

By Macy
04/10/2023 UTC.

Japan has one of the top 3 largest e-commerce markets in the world, offering significant opportunities for foreign entrepreneurs looking to open online businesses. However, engaging the Japanese market requires an understanding of the unique challenges and regulations. This post provides an overview of the key steps and considerations for successfully launching an online business in Japan for international merchants. 

1. Target market analysis for online businesses in Japan

Before starting to sell in Japan, you must have a basic knowledge of the Japanese market. 

According to the Japan Times, "Online shopping is not yet a big hit in Japan. Despite consumers' familiarity with e-commerce transactions in other aspects of their lives, they still feel reluctant about buying foreign products."

However, this doesn't mean that ambitious individuals and businesses can't sell their products online to international customers. In fact, there are numerous companies in Japan that sell products from other countries. With the technology available today and the accessibility of the Internet, the location of your product's origin doesn't matter as long as you understand how to effectively market it online.

Japanese consumers prefer domestic websites due to their familiarity and competitive prices, while overseas websites are more commonly utilized by businesses rather than individual consumers.

Japanese consumers tend to favor purchasing from Japanese companies, with a significant 56% preferring to buy products from Japanese websites, according to a survey conducted by Rakuten Research. In contrast, only 13% expressed a preference for buying foreign products from websites located abroad. This preference might be attributed to consumers feeling more at ease when buying from websites that use their native language.

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We summarize some essential insights about the Japanese market for you 

  1. Japan has an aging population but also a growing number of millennials and women in the workforce, representing potential target demographics. You should consider generational differences in shopping habits.

  2. Japanese consumers value quality, convenience, and excellent customer service. Your online store should reflect these values through your product offerings, website design, and support services.

  3. Localization is crucial. Adapt your website content, payment methods, shipping options and marketing approach to the Japanese market. For instance, Japanese consumers tend to read vertically, prefer local payment services and expect fast shipping.

  4. Analyze your competitors to see what gaps you can fill or what strategies you can emulate. For example, Japanese consumers like buying products in bundles or sets, so consider product bundling options.

Thoroughly understanding your target customers will help drive traffic and conversions for your online store in Japan.

2. Legal requirements for opening an online business in Japan

Navigating Japan’s regulations is crucial yet tricky for foreign online entrepreneurs. Let’s check some key requirements:

  • Visa: To operate your e-commerce business from Japan, you need a proper long-term visa like a Business Manager visa. Requirements include showing substantial capital and a solid business plan.

  • Registration: Register as a legal corporation in Japan by establishing a subsidiary, acquiring a local company or using a Go-Ketsu structure. Options like Godo Kaisha LLCs are the simplest for small ventures.

  • Licenses: Acquire any relevant retail, import or financial licenses. For example, you may need licenses for certain types of imported merchandise. Research thoroughly to avoid legal issues.

  • Taxes: Register for corporate, consumption and payroll taxes. Hire an accountant experienced in Japan’s complex tax codes, which differ from Western ones.

  • Bank account: Open a business account with a Japanese bank to receive payments from customers and pay local expenses. This also establishes your company’s local address.

  • Product regulations:  Follow Japanese consumer safety standards and labeling requirements. For example, provide Japanese manuals for electronic goods.

You may need to commit ample time and resources to lay this administrative groundwork before launch. Partnering with an e-commerce enabler like Ezbuy Japan can smooth the process.

3. Steps to register an online business in Japan

Here is an overview of the standard process for establishing an online business in Japan:

  1. Choose a location in Japan for your business address, such as a dedicated office or virtual address service.

  2. Select a business entity structure like a GK or LLC and begin the registration process for incorporation.

  3. Obtain necessary visas that allow you to operate a business in Japan, which can take 6-12 months.

  4. Set up a Japanese bank account and accounting system for the business.

  5. Build your e-commerce platform and enroll in tax/payment collection services like simplified eTax.

  6. Apply for relevant retail licenses for your products and comply with Japanese consumer laws.

  7. Hire Japanese staff to handle local marketing, product sourcing, customer service and logistics.

  8. Find a reliable Japan-based fulfillment or shipping provider who can store inventory and handle order processing.

  9. Officially launch your online store and begin advertising, SEO and social media marketing in Japanese to attract local customers.

It can be seen that registering a business in Japan is quite complicated and time-consuming. That's why Ezbuy Japan is here to help you. We support foreign sellers in registering their businesses in Japan under the legal entity Ezbuy. Instead of having to go through the 9 steps mentioned above, you just need to focus on selling, and we will handle the rest.

4. Fulfillment and shipping options for online businesses in Japan

How you fulfill and ship orders is especially critical for Japan's demanding consumers. You should be focused on some sides:

  • Use local order fulfillment centers to quickly process Japan-based inventory. This reduces shipping times versus drop-shipping from overseas.

  • Offer inexpensive shipping options like "regular mail" for low-cost goods, as Japanese consumers are very price-sensitive on shipping fees.

  • For international shipping, provide seamless tracking and pre-clearance of import duties and taxes to prevent surprise charges.

  • Support popular last-mile delivery options like convenience store pickup and evening/weekend delivery.

  • Return policies should be generous to accommodate Japanese expectations.

Partnering with an established fulfillment provider like a 3PL with Japanese expertise is advisable for new players. With warehouses in Tokyo, Ezbuy Japan's fulfillment service can be a great option for your business. As your volumes grow, you can consider investing in your own warehouses near Tokyo and other major metro areas.

5. E-commerce platforms and payment methods used in Japan

Choosing the right e-commerce platform and payment methods ensures a smooth customer experience:

  • Platforms: Japan offers a variety of e-commerce sites where you can begin selling. Well-known names include Amazon Japan, Yahoo! Shopping, Mercari, Rakuten, and more.

  • Localize your site: Adapt to vertical Japanese writing, translations and local search optimization.

  • Payment methods: Offer options like credit cards, convenience store payment, PayPal and even cash on delivery, which some Japanese consumers still prefer.

  • Promotions: Tie in credit card points programs and seasonal sales calendars popular in Japan.

Make payments seamless and give customers their preferred options. Optimizing your platforms and gateways for Japan requires upfront work but pays dividends through higher conversions.

In conclusion, establishing an online business in Japan can be a rewarding endeavor. Japan offers a dynamic market with a tech-savvy consumer base and a strong appetite for innovative products and services. By adhering to legal and cultural norms, building strong relationships with local partners, and providing exceptional customer service, entrepreneurs can unlock the vast potential of the Japanese market.