********************************************************** Japan Internet Report No. 31 October 1998 ********************************************************** In this month's issue: - Will Japan's PC makers move to Internet sales model? - Watch out, WebTV: Here comes the Japanese government... - To commerce or not to commerce? - Nissan to launch used car sales online - Industry Briefs - Essay of the Month - Reader survey results - Mecklermedia covers TKAI - JIR Super Rock Jam Tokyo '98 ********************************************************** Will Japan's PC makers move to Internet sales model? Good question. It might seem so, given competitive pressures and the success in Japan of rivals such as Dell. In fact, last month Fujitsu announced that it has launched direct online sales of refurbished PCs and accessories in the U.S., and says that it is considering online sales in Japan if results in the U.S. and Europe are positive. But Fujitsu spokespeople admit that they won't necessarily take a direct online sales approach in Japan. Instead they are considering models whereby online orders would be passed on to dealers, or dealers would put up their own online "stores" under a master Fujitsu Web site. Even if a direct sales model were to be adopted, it would focus on sales of older PC models in order to "avoid friction" with the company's dealer network, one spokesman said. These admissions, and the fact that Fujitsu is trying out its online sales program in overseas markets rather than at home, suggest that a move to a direct Internet sales model is a long way off... ********************************************************** Watch out, WebTV: Here comes the Japanese government... WebTV may get some stiff competition in Japan next spring when NTT, majority-owned by the Japanese government, moves into the Internet television business through subsidiary NTT OFFTALK COMMUNICATIONS. Exactly how the the service will be formatted and provided wasn't clear to me, and NTT had nothing on their Web site about it as of 10/22/98 PST, but the company reportedly plans to make the service available to households for approximately 500 yen ($4) per month. It is also reportedly developing a set-top box it expects to price at under 100,000 yen ($862). Clearly NTT sees the Internet television business as either strategically important or potentially lucrative... ********************************************************** To commerce or not to commerce? Picture this exciting scenario of a Japanese company's first foray into online commerce: The firm announces a plan to start "testing" an "online mall" in cooperation with at least three other partners. The new "mall" won't actually sell anything, but there will be detailed descriptions of products, and the opportunity to provide "feedback" to the mall's sponsors. Visitors may also be able to subscribe to an online magazine or e-mail newsletter, which will further describe products and/or future services. The purpose of all this is to "develop expertise" in the online commerce sector, in preparation for a "full-scale launch" a year or so down the road. Tokyu Group is the latest company to announce exactly such a plan, dubbed NOREN-TOWN. The company is touting NOREN-TOWN as a "mail-order" Internet mall, which apparently will be launched without any commerce capability whatsoever. My question is: Why put up a storefront without any commerce capability? How can you gain any meaningful experience in online commerce without actually offering visitors the ability to purchase something? Why are Japanese companies so incredibly reluctant to try to actually sell something online? And why must they always try to spread the risk across at least three other partners? It's like wanting to test the waters without getting your feet wet - it just doesn't make sense. Readers: Any theories? ********************************************************** Nissan to launch used car sales online Now for some real commerce: Nissan will start selling used cars online next month. This is an excellent application in that it will 1) enable customer-initiated searches of a large inventory base, and 2) offer real utility in its presentation of online images. What will distinguish Nissan's efforts from those of rivals Toyota and Honda? For one, Nissan will offer an inventory of 100,000 cars, compared to only a few thousand offered by its competitors. Second, Nissan will sell non-Nissan brands and imports, breaking away from the "manufacturer-affiliated" sales model that is the standard industry. The company foresees annual sales of 20,000 cars from the effort. ********************************************************** Industry Briefs Number of Internet users reaches 11.5 million, says NIKKEI The number of Internet users in Japan reached 11.5 million at the end of September, according to a survey of 2,000 Internet users conducted by magazine publisher NIKKEI BP. The figure was up 18% from a half-year earlier. The survey also found that 7.2 million people in Japan use the World Wide Web, up only 14% from six months earlier, suggesting that the torrid pace of Web user growth has slowed. But e-mail users grew 27% over the same period, to 9.3 million, according to the study. A breakdown of the respondent base by access location showed that 25% go online exclusively from their homes, 37% use the Internet exclusively outside their homes, and 38% go online both from home and from work or other locations. Japanese text accounts for 10% of entire Web? Japanese Web sites had 36.5 million pages of text as of September 1998, according to a survey implemented by MPT's Institute for Posts and Telecommunications Policy. The number grew 1.8-fold in just six months, according to the Institute. The entire World Wide Web had 320 million pages of text in April of this year, according to a study by NEC's North American Research Lab. Foreign ISP entries to heat up domestic market... UUNET WORLDCOM, the world's largest Internet connectivity service firm, will move into the Japan market. The company will lease lines from JAPAN TELECOM and others and by year-end start offering high-speed corporate connectivity services that link Tokyo with other major cities around world, according to a spokesman. The firm plans to lease facilities and is not considering a capital investment or acquisition at this time, the spokesman said. Prices and other details of the new services were not yet available. With PSINET's acquisition of three local ISPs, competition between foreign service providers is certain to intensify, say industry watchers. ASCII playing dangerous game ASCII plans to move into the search engine market in April 1999. The company says it plans to exploit its expertise in computer-related information dissemination and electronic commerce to create a multi-faceted service unlike any other in Japan today. ASCII's financial situation has improved since it was acquired by CSK, and the company wants to develop a search engine-based banner advertising business into a key revenue stream following its mainstay game software and computer magazine businesses. But some observers (namely me), citing ASCII's flop with its free, advertising-supported ISP business, say the company is playing a dangerous game by entering a rapidly maturing sector already full of powerful competitors, especially Yahoo! Japan and NTT. NTT is becoming extremely aggressive with its "goo" search engine - watch for some slick moves early next year... HMV JAPAN to start selling music over Internet Tokyo-based HMV JAPAN, a unit of HMV, one of the U.K.'s largest music retailers, will start selling music CDs online next year. The company plans initially to offer approximately 10,000 titles, but will boost its catalog to 600,000 in the future, according to a spokesman. Parent HMV started selling music online in the U.K. about two months ago, and has plans to expand sales to the U.S. and Canada next year, the spokesman said. NTT DATA to offer SET-enabled version of CAFIS service In a move that could give a substantial boost to Japan's fledgling Internet shopping sector, NTT DATA COMMUNICATIONS will in January of next year start offering Internet Shopping Service, an SET-enabled version of its CAFIS (Credit and Finance Information System) service, the most widely used consumer credit checking service in Japan. NTT DATA has been experimenting with SET verification since December last year, but has now received official certifications from VISA INTERNATIONAL/MASTERCARD INTERNATIONAL, and says it will start an experimental version of the new service October 9. Software may help search Internet for illegal use of music, video NTT has developed software that enables high-speed searches of video footage or music files. The new software is useful when, for example, a user downloads a six-hour television broadcasts into a PC and wants to search for a certain 15-second commercial. Previous methods for performing such searches were slow, inaccurate, and cumbersome, according to an NTT spokesman. The new software uses original "time series active search methodology" and should prove useful in examining the Internet for illegal use of music and video footage, according to the spokesman. Good idea: 30,000 yen/year Internet access for schools FUJITSU plans within the year to start offering 30,000 yen ($252) per year unlimited Internet access to elementary, junior high and high schools in Japan through InfoWeb, its ISP. FUJITSU follows ISP INTERNET INITIATIVE JAPAN (IIJ) to become the second company to announce heavily discounted Internet access plans for schools. Other ISPs are certain to follow with similar offers, say industry watchers. Only $76! What a bargain! NTT plans next year to start offering discount local line services to elementary, junior high and high schools that are using the circuits to access the Internet. Specifically, the company says it will offer 100 hours of telephone service per month for 9,000 yen ($76). Ordinarily it costs 20,000 yen ($168) for 100 hours of daytime local telephone service. ISPs are starting to offer schools discounted connectivity rates, and if communications charges drop as well, Internet usage at schools should enjoy a big boost, say industry watchers. This industry watcher asks: What would happen to Internet usage in the U.S. if everyone had to pay $168 in phone bills each month for being connected to their ISPs for five business hours each day Monday through Friday? That's the situation in Japan today... SOFTBANK, INGRAM MICRO to conduct joint distribution, channel assembly operations SOFTBANK and California-based INGRAM MICRO will combine forces to stock, sell and distribute personal computers and peripherals, in addition to developing a channel assembly (CA) business for bundling software and peripherals with PCs. Each partner plans to purchase $50 million of the other's stock. The CA business to be developed by the two companies will pose a threat to PC manufacturers in Japan because the system does not rely on the sale of name-brand computers, according to some industry observers. ********************************************************** Essay of the Month This month we refer you to a series of intriguing and exceptionally thought-provoking essays compiled by Bill Totten, president of Ashisuto, one of Japan's largest software distributors. My favorite at the moment is "Weakest Link in World Economy?" . The complete series of "Our World" essays is available at <http://www.billtotten.com/english/ow/index.html>, and Bill's personal Web site can be seen at <http://www.billtotten.com/>. Highly recommended reading. ********************************************************** Reader survey results So far every JIR feature other than the interview has been rated both "extremely useless" and "extremely useful" in nearly equal measure, so it's hard to gauge the consensus. One problem was that the <www.tkai.com> server became unavailable shortly after the last JIR went out, meaning most responses came from readers in Japan - readers in the U.S. and elsewhere were unable to access the questionnaire. My apologies. Please have a second go if you would at: http://www.tkai.com/jir/survey.html ********************************************************** Mecklermedia covers TKAI This month Internet media mogul Mecklermedia mobilized its manpower to immortalize JIR publisher TKAI. The article can be seen at: http://www.internetnews.com/intl-news/1998/10/1904-japanese.html ********************************************************** JIR Super Rock Jam Tokyo '98 JIR Super Rock Jam Tokyo '98 (formerly JIR Schmooze 'n Booze) is set for Thursday night November 5 at the fabulous Kosai Kaikan, featuring original members of the following Super Groups: Australian Tourist Commission, BMC Software, Chubb Insurance, Coca-Cola Japan, Daiichi Kangyo Bank, Digitized Information, DirecTV Japan, Dun & Bradstreet, Ericsson, Fuji-Xerox, Gateway 2000 Japan, Global Online Japan, Grey Daiko Japan, Hitachi Business International, Hoffman PR, Human Code, InfoPlus, Lands' End, McCann-Erickson, Morgan Stanley, NEC, O'Reilly & Associates, PSINet, Silicon Graphics, TSR, TKAI, Typhoon, Washington State Japan Representative Office and many more! This fabulous event is completely sold out, but it looks certain to become a regular party, so check your JIR party calendar frequently... ********************************************************** Tim Clark Editor To subscribe or unsubscribe to JIR, send any message to: subscribejir@tkai.com unsubscribejir@tkai.com Copyright 2002 by Ion Global and Digitized Information, Inc. All rights reserved ------------------------------------------------------------ Ion Global (USA) Japanese e-business specialists http://www.tkai.com/ Tel. (503) 235-4433 Fax (503) 235-4422 ------------------------------------------------------------