How can I sell my products in Japan? I don’t speak a word of Japanese or have any connections in Japan.
Almost all foreign products sold in the Japanese market go through specialized distributors (importers).
These companies handle importation, marketing and promotion of your products, warehousing, and local support.
They typically purchase your products at a discount and then resell at a higher price to retailers, wholesalers, and even end-users in some industries.
These distributors work closely with the foreign companies that they represent, acting as your representatives in the Japanese market.
There is typically no problems communicating or working with these companies because they are experienced in dealing with foreign suppliers and have staff who can speak English.
What is the difference between distributors in Japan and distributors in other countries? How are distributors in Japan different from distributors in other countries?
Is there anything special about the Japanese distribution system? Are there any unique characteristics to the Japanese distribution system that I need to understand?
First, it is important to understand that there are two kinds of distributors in Japan: distributors that represent Japanese manufacturers and distributors that handle mainly non-Japanese products. There is very little overlap between these two categories.
Distributors that handle Japanese products are like distributors in other countries.
Their main function is physical distribution (warehousing and shipping). In other words, they focus on fulfilling demand that has been created primarily through the sales and marketing efforts of the Japanese manufacturers that they represent.
Japanese distributors that handle foreign products are different.
They provide both physical distribution as well as creating demand for your products in Japan through active sales and marketing efforts.
These companies will usually have a dedicated sales force as well as technical staff, if the products they sell require such support.
There is no charge to you for these additional services.
Japanese distributors usually purchase products at a discount from you and then resell the products at a higher price. It is this margin that covers their sales, marketing, and support efforts.
You will obtain the best results if you treat your distributor as a valued partner, an extension of your company in Japan, and provide them with the support they need to effectively sell your products in the Japanese market.
Can I sell directly to Japanese retailers?
In our experience, very few Japanese retailers are interested in doing business directly with foreign suppliers.
There are several reasons for this.
They rarely have staff that can speak English or know how to do business internationally.
They usually lack the ability to warehouse large quantities of product and instead rely on suppliers to ship small quantities of product directly to individual stores as needed.
Finally, retailers are notoriously slow in paying suppliers with Net 90 and longer payment terms not uncommon.
So what the solution?
Find a distributor who knows your industry and who has existing relationships with the right retailers for your products.
How many distributors do I need in Japan?
Do I need different distributors for different parts of the country? How about for different industries?
Japan is geographically a small country so there is typically no need to have different distributors in different parts of the country.
Most distributors that handle imported products are located either in the Metropolitan Tokyo area or Osaka. The larger ones will often have small sales offices in other parts of Japan in order to be closer to their customers. For example, many companies doing business with Toyota and its suppliers will have an office in Aichi prefecture (Nagoya).
Also when it comes to foreign products, distribution arrangements in Japan are usually exclusive. The logic here is that exclusivity allows the distributor to recoup the initial investment that they will need to make to develop the market for your products. In almost all cases though, exclusivity should be linked to meeting agreed annual sales targets.
However, there are situations where more than one distributor may be needed. The most common is when it would be difficult or impossible to serve multiple industries or markets using a single distributor.
Here are some clients where multiple distributors made sense.
A manufacturer of industrial products used in the automotive and aerospace industries.
A cosmetics company with a line of consumer skin care products and a line of professional products used in spas and salons.
An audio equipment manufacturer selling both consumer audio products and products used by recording engineers and other professionals.
A food company that supplies both grocery stores and the HORECA (Hotel/Restaurant/Café) market.
What is the difference between distributors and importers in the Japanese market?
In international trade, the main difference between distributors and agents lies in how they are compensated.
Distributors make money by buying products from the manufacturer at a discounted price and then reselling them at a higher price. This change in ownership of the goods is often referred to international trade as “taking title to the goods”.
Agents, on the other hand, get paid a commission on completed sales and rarely, if ever, take title to the goods.
Note that these roles are not carved in stone and a distributor may also act as an agent, depending on the nature of the transaction and the products being sold.
When it comes to Japan, distributors are much more common than agents except for a few market sectors such as textiles, commodities, and certain types of large capital equipment like aircraft and production equipment that is delivered directly to the end-user. Our internal database of over 12,000 Japanese companies that handle foreign products contains less than 100 companies that are pure manufacturers’ reps or agents.
In our experience, Japanese companies or individuals that act purely as agents or reps typically deal in a limited range of products and will only deal with a limited number of customers. They also usually lack the resources to proactively engage in any significant amount of market development.
An interesting cultural note: the same word is used in the Japanese language for both agent and distributor.
What is the role of importers and trading companies?
The terms “importers” and “trading companies” are often used to refer to Japanese companies that handle non-branded foreign products.
These companies generally differ from distributors in the following ways:
- They tend to specialize in relatively simple products such as food stuffs and commodities that don’t need much pre-sales or post-sales support. Some examples of products handled by trading companies would be grain, fish, lumber, and natural resources such as petroleum.
- They usually lack warehousing capabilities.
- They often act simply as brokers receiving a commission on sales that they arrange.
- They engage in little market development or proactive sales activities.
Trading companies can also refer to the large and highly diversified Japanese sogo shosha (総合商社) such as Mitsu & Co., Mitsubishi Corporation, Itochu, and Sumitomo Corporation.