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********************************************************** Japan Internet Report No. 24 February/March 1998 ********************************************************** In this month's issue: - Birthday, JIR now searchable online - Hottest three sectors for online sales - Interview with Tim Clark of TKAI - Industry briefs - Online shopping: Getting it/not getting it ********************************************************** Birthday, JIR now searchable online This 24th issue marks the second full year for Japan Internet Report (JIR). Hard to believe it's been two years since the first JIR. We've had a lot of fun putting out this newsletter and look forward to continuing in 1998. It's been pretty busy here at TKAI over the past two months, for reasons explained in this month's interview. We've completely redone our Web site, and made the entire site searchable, including some back issues of JIR. Have a look at <http://www.tkai.com/>. ********************************************************** Hottest three sectors for online sales Here are the three sectors/business-to-consumer applications, in alphabetical order, that I believe will show the strongest growth over the next few years in terms of actual yen volume transacted online: Finance Online trading by individual investors is poised for rapid growth (see Industry Briefs). As personal financial planning become more common in Japan, we should also start to see Japan-specific modifications of applications that are proving popular in the U.S., such as retirement planning and mortgage research/comparison shopping. Retail sales The "big three" computer-centric product groups (software/hardware/games/peripherals, books, and music/video) will soar. Other categories such as apparel and specialty foods will show less impressive growth, while sales of "digital content," a hot topic in the Japanese press at the moment, will largely flop. Travel Sales of airline tickets and commuter train passes will skyrocket. Sales of tour packages and related services will also grow, though not as strongly. Stay tuned next month for another Webitorial... ********************************************************** Interview with Tim Clark of TKAI A number of people have suggested I interview myself, and for a number of reasons, this was the month to do it. Sure is easy when you know both the questions and the answers in advance... Tell us how you came to be involved in Japan's online scene. - I started studying Japanese at Stanford University. I took first, second and third year as intensive courses, then took a quarter of fourth year under the regular program. After graduating, like any good former student I was broke and in debt, so I worked temp jobs in Silicon Valley and Seattle to save money, then moved to Japan in early 1984. My goal was to "master" the Japanese language, but in order to get a visa I taught at a computer programming college for a little over a year. That experience was invaluable, as I was the only foreigner in the entire school, including both staff and students, and gained exposure to Japanese computing issues. That work bankrolled a half year of additional intensive study at Shibusawa Eiichi Kokusai Gakuen in Fukaya (Saitama Prefecture). It was a live-in program, with six hours of intensive instruction daily. I did at least three hours of homework each night. There were never more than four people in each class, and my classmates were usually Korean nationals, which really pushed me since their knowledge of kanji was of course very good. I had a great time and loved every minute of it. I was lucky to have the opportunity to live both in the Japanese countryside and in the major cities. Foreigners who have lived only in Tokyo or the other megalopolises sometimes lack an appreciation of the full spectrum of Japanese life. After coming out of that program, I could read Japanese newspapers rapidly without a dictionary and was involved in doing translation work part-time, primarily in high-technology fields. I moved to Tokyo and started working full-time for a high-tech news monitoring service, Digitized Information, a company with which TKAI still has strong relations and which co-sponsors this newsletter. Working at Diginfo was a blast. I'd get up at 4:30 a.m. and would be reading the papers by 5:30 or 6:00. We'd summarize the news, prepare the reports, and work our tails off until noon or so. Then Aki and I would go out to lunch. In the afternoon I'd often travel around Tokyo selling the service. I brought in IBM Japan, AMD, Northern Telecom and about 15 other new customers. Sometimes we'd work until 8:00 or 9:00 p.m. I got to know Tokyo well, and it was extremely interesting monitoring high-technology developments, especially telecom-related news. By actual count, I've done summary translations of over 10,000 Japanese newspaper articles over the past ten years. In the early days, sometimes I'd do more than 20 a day. It was also interesting doing work simultaneously for rival companies such as Motorola and NTT. We'd be reading highly sensitive in-house Motorola correspondence one minute, then translating a speech into English for an NTT exec the next. I got my first modem in 1986. I can't remember if it was a 1200 or a 2400 baud model, but it was a real screamer for the time and cost me about 30,000 yen, I think. We basically just transmitted files and I played around a bit with one of the fledgling online services, a music service, but didn't get heavily involved. After joining Kodak in Tokyo in 1988 as a planning specialist, I used e-mail on a daily basis, but the Internet was still essentially unknown outside of academic and research circles in Japan at that time. It wasn't until I moved back to the states on an educational leave of absence for an MBA in 1990 that I started getting more involved. And it was in 1994 on a trip back to Japan that I had my mystical Internet experience. Since then I've devoted myself full-time to the Japanese Internet. My first thought was to provide U.S. companies with a cost-effective vehicle for reaching consumers in Japan online, while simultaneously providing Japanese consumers with an application that offered real utility. Another aim was to create an opportunity to query Web users and build a database for research and direct marketing. This resulted in the development and launch in July 1995 of the Do-it-Yourself Import Center. We now have a database of about 5,000 cooperating "DIYer" Web users who can be queried for market research purposes. More detail is available on our Web site (http://www.tkai.com/services/e-marketing/grassroots.html). Tell us about your work with Amazon.com. - We were honored to be selected as their provider of Japan-specific services. In addition to developing and maintaining their Japanese Web pages, which launched in December of last year (http://www.amazon.com/jp/), we're doing their banner creative and buying in Japan. We're also involved in Japan-specific market research on their behalf, which to me is some of the most exciting and productive work we've done yet for them. That's about all I can say about it. TKAI has a strong track record of research into Japan's online industry. We've done nearly a dozen separate Web-based surveys both for our clients and our own internal work, querying more than 30,000 Japanese Web users in the process. We also published the authorized English language version of Yahoo Japan's Web User Report, which to my knowledge had the largest sample size (20,600) of any Japanese Internet study released to date. Access to and control over all this raw data has helped us develop a deep knowledge base. What made you decide to start publishing Japan Internet Report? - I really enjoy following Internet developments in Japan, and there didn't seem to be any publication devoted specifically to this subject. I wanted to get in touch with other people with similar interests, and of course let people know about the services we provide. So JIR is really a shameless promotional vehicle for TKAI... Absolutely. This interview is proof of that! But I must say, and I think longtime readers would agree, that we've been extremely conservative about tooting our own horn in JIR. And we've interviewed folks who offer services competitive with ours, essentially providing them with the opportunity to promote themselves directly to our very best customers. We did that because we think those people have interesting things to say about what's going on with the Japanese Internet. What's more, I think the team we have in place now at TKAI is outstanding -- I honestly believe that even the largest, most Internet-savvy companies in the world would have a hard time matching the particular blend of skills, expertise and knowledge that we've built up over the past three and half years working exclusively with the Japanese Internet. And thanks to the incredible fortune we've had working with top clients, both "Internet-centric" and traditional, this knowledge base continues to grow very quickly. Have you considered charging for JIR? - No. I know that we'd lose 98% of our subscribers if we charged. And if the remaining subscribers were willing to pay the necessarily substantial fees, they'd want us to cover specific topics, etc. and we'd lose our editorial independence and it would cease to be any fun. It's extraordinarily difficult to charge for any kind of Web or e-mail-based information service, in my opinion. Almost everybody fails. I also believe in giving something back to the Internet community. Two years ago when I started JIR I gave very little thought to the promotional value of this newsletter, but as it turned out, it's been quite substantial - not just for TKAI but for our interviewees and (very occasional) advertisers as well. But by far the biggest satisfaction is hearing from subscribers who find JIR useful, and helping them get in touch with others in this community of people around the world who have deep interests in Japan and the Internet. Tim Clark TKAI (USA) http://www.tkai.com/ Tel. (503) 235-4433 Fax (503) 235-4422 tim@jir.net ********************************************************** Industry briefs Individual investor use of Internet for trading growing rapidly in Japan Individual investor use of the Internet for buying and selling stocks and other financial instruments is growing rapidly in Japan, say industry watchers. DAIWA SECURITIES reports that subscriptions to its "home trading" Web-based individual investor trading service rose sharply after Japan's stock market plummeted last fall, and that the combined total of online accounts at all its branch offices is growing at a rate of 6,000 per month. Most of the new subscribers are individual investors in their 30s investing relatively small sums, according to a spokesman. Meanwhile, NOMURA SECURITIES claims that hits on its stock pages on the World Wide Web have exceeded three million per month. Other smaller securities firms also report steady growth in home trading, reflecting greater PC penetration into the home and higher recognition of the personal computer as an investment tool, say industry analysts. SOFTBANK to enter securities business within the year SOFTBANK will enter the securities business within the year, the company disclosed February 6. The company will focus on providing Internet-based stock purchasing services to individual investors, and is reportedly considering a partnership with a leading U.S. security firm. SOFTBANK will leverage the stock price information service and high traffic volumes provided by YAHOO! JAPAN, a subsidiary located at SOFTBANK headquarters. The company's move into online securities services is another indicator that the Big Bang, which officially begins in April of this year, will bring real change to Japan's financial sector, say industry watchers. VICTOR, YAMATO TRANSPORT, LAWSON to offer service fulfilling Internet orders via convenience stores VICTOR CO. OF JAPAN, parcel delivery service YAMATO TRANSPORT, and convenience store operator LAWSON will be in April start offering a service whereby products ordered over the Internet can be picked up by consumers at their nearest LAWSON convenience store. The partners will call on online merchants to use the unique fulfillment system, charging delivery and fulfillment management fees. Sales will be handled by VICTOR subsidiary BENEFIT ONLINE of Tokyo. The partners hope to expand the service to include convenience stores operated by firms other than LAWSON, and hoped to make the unique arrangement the de facto fulfillment standard for consumer-oriented electronic commerce over the Internet. YAMATO TRANSPORT, NITTSU to offer Web-based package tracking services Leading parcel delivery services YAMATO TRANSPORT and NIHON TSUUN (NITTSU) will start offering Web-based package tracking services on February 19 and in March, respectively. NITTSU will also become the industry's first carrier to offer a service whereby the sender of a package can be notified via e-mail that a delivery has been completed. Internet-based parcel tracking services are already offered by SEINO TRANSPORT and the Japanese Post Office. Together with YAMATO TRANSPORT and NITTSU, these carriers account for approximately 70% of Japan's consumer parcel deliveries, meaning online package tracking functionality will be the industry norm within a month, say industry watchers. JCB starts accepting online transactions JCB, Japan's largest consumer credit card firm, on February 26 started distributing free of charge software that enables its cardholders to make secure online purchases at its J-Mall Internet shopping site. The development marks JCB's endorsement of secure online credit card transactions, a move that will provide a substantial boost for online job shopping in Japan, say industry watchers. JCB is reportedly interested in partnerships with overseas malls, and hopes to quickly distance itself from other domestic credit card firms by providing complete international online transaction compatibility through use of the SET protocol, according to a spokesman. VECTOR to offer credit card-based sales of shareware via Internet Tokyo-based software venture firm VECTOR will on March 25 start a new service whereby Internet users can purchase shareware directly online using their credit cards, without going through the usual registration procedures that most online merchants in Japan require. VECTOR sees the new service has a way to help shareware software developers collect their fees with more certainty, while providing Internet users with an open purchasing environment. The company hopes to expand the service to include application software offerings from small and mid-sized developers, according to a spokesman. Internet emerging as effective channel for CD-ROM sales to non-metropolitan areas The Internet is starting to emerge as an effective channel for selling CD-ROMs to consumers outside of Japan's metropolises, say industry watchers. Tokyo-based multimedia content developer SYNERGY KIKAGAKU claims that it now sells 150 units per month via its Web site, settling the online transactions via credit card and offering 15% discounts compared to retail sales, even when shipping charges are included. Meanwhile, other firms such as SME INTERMEDIA, DIGITALOG, and VOYAGER are gearing up to start full-fledged online CD-ROM sales in March. Traditional CD-ROM distribution channels reach only Japan's major metropolitan areas, and wholesalers are starting to find that Internet sales are more efficient than trying to reach poorly located regional retailers. MATSUSHITA plans to be able to accommodate 400,000 Internet subscribers six months ahead of schedule MATSUSHITA ELECTRIC INDUSTRIAL plans by mid-1999 to be able to accommodate 400,000 subscribers to its Hi-HO Internet conductivity service. MATSUSHITA's ISP business had only 15,000 subscribers in September of last year, but the number had soared to 60,000 by January of this year, well beyond expectations. As a result, the company decided to boost capacity to 400,000 subscribers half a year ahead of schedule. Japan's ISP industry has been rocked by vicious price competition, but MATSUSHITA is holding its own by offering more online content and by leveraging its powerful brand name, according to a spokesman. NTT to offer on-site Internet setup service for consumers NTT plans on March 2 to start offering a new service whereby it will travel to consumer homes, deliver and set up a PC, and configure the machine for Internet access, all for a fixed price of yen248,000 ($1,938) including the computer. The new service, dubbed Marugoto Omakase ("leave everything to us") Menu, is designed to help beginning computer users and older consumers overcome the difficulties in establishing an Internet connection, a process that can be daunting even for relatively experienced computer users. It is also a clever method for selling subscriptions to NTT's OCN and ISDN services, say industry watchers. An NTT spokesman said Marugoto Omakase will be the first-ever on-site Internet setup/connectivity service in Japan to target the average consumer. MITI to require Internet vendors to display phone numbers, contact names Japan's Ministry of International Trade and Industry (MITI) plans within the month to implement a ruling that will require Internet vendors to display business telephone numbers and contact name information on their Web sites. The ministry says the move is necessary because of growing problems with fraud and questionable business practices amid the proliferation of Internet-based retailers and service providers. A MITI spokesman also said the ministry will implement an inspection of a number of Web sites in May in order to determine compliance with the new ruling. MATSUSHITA ELECTRIC INDUSTRIAL to launch Web-based research service MATSUSHITA ELECTRIC INDUSTRIAL will on March 16 start offering a Web-based research service. The company will charge a minimum of 500,000 yen ($3,906) for collecting 100 responses to a ten-question survey, with detailed analysis and reporting services starting at 3.0 million yen ($23,438). The surveys will have game-like qualities to make them fun to answer, meaning clients can expect strong responses from participants, according to a spokesman. The surveys will be hosted on Hi-Ho, MATSUSHITA's ISP subsidiary. Internet use by women, families soaring, according to report by JMR SCIENCE Internet usage by women and families is soaring, according to a report compiled by Osaka-based market research firm JMR SCIENCE. The company estimates that 15.5% of all users are women, and that 42.1% of all users access the Internet from PCs located in their living rooms. One-third of all respondents have had their PCs for less than a year, according to the study, which queried 3,000 Internet users. The results show that, compared with the average consumer, Internet users are generally more interested in self-improvement and investing in their own education, according to a JMR SCIENCE spokesman. We're not making this up... SHARP, SILICON GRAPHICS JAPAN, TELEWAY, NETSCAPE COMMUNICATIONS JAPAN, and two other firms have cooperatively developed an "Internet refrigerator" that contains an LCD touch panel/display built into the refrigerator door. The partners plan to start experimenting with the unusual new device in June as part of the Okayama Information Highway project, a high-speed data network initiative sponsored by Okayama Prefecture. Approximately 30 volunteer households with cable access will have the new device installed. The experimenters plan to deliver an electronic regional information "circular" to participating households and experiment with PHS-based remote control of the device and other functions. ********************************************************** Online shopping: Getting it/not getting it Most of Japan's online retailers and service providers still don't "get it." What I mean is that they still insist on membership-based sales models, requiring the visitor to go through elaborate registration procedures before he or she can actually make a purchase online. Some of these companies are even trying to charge users annual membership fees - apparently for the privilege of making further purchases from the company! This is presumably done to ensure security, offer payment alternatives to credit cards, qualify potential customers, and to gather detailed demographic and other data on registrants. And I suppose some consumers feel more secure in "members-only" environment. But this approach turns off many people who just want to quickly and efficiently purchase products and services without joining "clubs" or becoming "members." After all, the whole point of the Internet is that you don't have to become a "member," and participation is free and open to anyone. Lately there are signs, though, that some Japanese firms are starting to move away from the membership model. See, for example, the article in Industry Briefs about online software sales by Vector. This story is almost completely unremarkable except for Vector's recognition that a lot of people in Japan simply want to buy software online with their credit cards, and not have to go through some ridiculous "registration" ritual in order to do so. Our research, too, shows that consumers favor the open, credit card-based online shopping model. This is the way the Internet is heading, in my opinion, and Japanese firms that try to create and control their own "members-only" subgroups from the population of Internet users are going face an increasingly strong headwind as time goes on. ********************************************************** Tim Clark Editor To subscribe or unsubscribe to JIR, send any message to: subscribejir@tkai.com unsubscribejir@tkai.com Copyright 1998 by TKAI and Digitized Information, Inc. All rights reserved NOTE: Some JIR industry briefs appear later in Computing Japan magazine under modified titles. JIR is co-sponsored by Digitized Information, Inc. of Tokyo, a leader in providing daily English language coverage of electronics industry developments in Japan. For more information on monitoring electronics industry developments in Japan, or to receive a free e-mail sample of service offerings, please contact Digitized Information at diginfo@gol.com
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