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********************************************************** Japan Internet Report No. 25 April 1998 ********************************************************** In this month's issue: - Branding important, says second FRI survey - Online stores don't measure up - Interview with Chris Hinkle of Dell Japan Online - Industry briefs - Toy-like use of Internet in Japan still deeply rooted - Come again? - Welcome new subscribers! ********************************************************** Branding important, says second FRI survey Branding is important, and in fact is the key to dominance in the search engine sector, according to the second Internet user survey conducted by Fujitsu Research Institute (FRI). Yahoo! JAPAN was the overwhelming search engine of choice, used by 60% of survey respondents. It greatly outdistanced both goo and Infoseek Japan, used by 16% and 12% of respondents, respectively. The key reason? Brand recognition. Most respondents who use Yahoo! JAPAN cited as reasons factors closely intertwined with brand recognition, such as "because it's well-known," and "because I remember the URL." In contrast, most respondents who use goo cited functional reasons such as "because it performs better than other search engines" and "because it's easier to use than other services." According to the study, the two news sites most frequently viewed are Asahi.com and Nikkei Net, cited by 35.3% and 28.3% of respondents, respectively. Again, brand recognition is a key factor. The reasons respondents gave for selecting Asahi.com, the most popular news site, included "because it's well-known" and "because I remember the URL." ********************************************************** Online stores don't measure up Also from the FRI survey: When questioned regarding key decision factors for choosing an online store at which to make an actual purchase, 51.3% of those with online shopping experience cited "easy-to-understand merchandise selection and purchasing procedures," while 48.3% cited "complete information about the merchandise." Both of these factors were rated MORE important than transaction security, payment method variety, or the store's reputation, yet both relate to the most rudimentary aspects of operating an online store. This suggests that there are still many, many online shops that are not meeting user needs at the most basic level, forcing visitors to search long and hard for detailed product information, conditions of purchase, and other critical information, according to FRI. ********************************************************** Interview with Chris Hinkle of Dell Japan Online This month we enjoyed an e-mail chat with Chris Hinkle, manager of Dell Japan Online, the most successful Internet-based merchandise sales site in Japan today. - Tell us the story of how you came to be working in wacky, wonderful Wagakuni (Japan). I first came here in 1990, literally one week after graduating from college. I had always wanted to experience living in another country, so I majored in Japanese, because I thought Japan would be different enough from the US to keep me interested. I taught English for a year, then entered a precision machinery manufacturer in Osaka, where I did sales and marketing. It was OK for a while, but the novelty of dealing with a totally Japanese corporate environment soon wore off and after a few years I really needed a change. About this time I started to hear about this new thing called the World Wide Web. A couple of my friends had e-mail in college, but that was really all I knew about the Internet. I started to study up on it, and decided that I wanted to be involved with it somehow. So I packed up all my belongings in a van, drove up the Tomei and started living in Tokyo, working for a small ISP/ICP. I really started from the ground up, learning a little about network administration, but mainly making Web sites and trying to market them in creative ways. Since my living accommodations were not exactly luxurious, I brought in my futon and sleeping bag and often ended up sleeping at the office. Right about the time I started thinking about maybe moving back to America, I got a job with a company with which JIR readers are possibly familiar: LINC Media. I did similar work for LINC for about eight months; the main site I was in charge of was the Australia Web <http://www.australia.or.jp>. I joined Dell in September, 1997, as manager of the Online Services Group and have been really enjoying myself here. - What do you do on a day-to-day basis at Dell? What is the most fun part of the job? In Dell Japan I run both the Internet and Intranet programs. On a day-to-day basis that means formulating and driving execution of strategies which will further Dell's lead in both areas. We feel using the Internet is the ultimate expression of our Direct Model, so we try to capitalize on this to provide the best customer experience on the web, running the whole gamut from driving general awareness, purchase, service and support to relationship management. Ultimately this lowers costs for Dell and our customers, and allows us to leverage human beings for more value-added activities that can't provided over the Web, like recommending what unit would be good for somebody's obaa-san, for example. On the Intranet side we're trying to increase productivity within Dell by making information more readily available across the company. We just launched our Japanese version of Inside Dell.com a few months ago, and since that time people have come out of the woodwork with new content they want to publish - when we launch phase two we'll essentially double our existing content. This speaks to the fact that Web publishing tools have gotten a lot better recently, and use of the Web has become increasingly natural to our employees here. Another benefit of using the Intranet is keeping down our internal network traffic, because we can largely eliminate the need for people to send file attachments with their e-mail. As for the fun part, there are a million things I love about this job. One thing is that after searching for years I've finally found what I want to do with my life: drive the integration of the Internet with business. I derive great satisfaction in knowing that what I'm doing didn't even exist 5 years ago - I'm on the bleeding edge. Also, without getting too mushy, Dell itself is a great company to work for. We say around here that Dell years are like dog years, because the pace is so fast. There's a huge opportunity to learn a lot in a very short period of time. Plus, Dell is very bottom-line oriented; there's not a lot of superficial stuff going on here. - According to a Japanese newspaper article last year, Dell customers who buy online spend more per purchase than those ordering via telephone, and your online store tends to attract experienced users buying second PCs as well as SOHO customers. What is the compelling reason for purchasing online rather than via a toll-free telephone number? Two reasons we've heard from our online customers are the real-time configurator in our Online Store, and the detailed specs we provide. Add this to the fact that the store is open 24x7, and as you mentioned before our online customers are more experienced, so they need less human interaction than first-time customers. By and large they already know what they want. Also, although I don't have any metrics to support this, I'd say that like you and me, most of these folks are Web-heads, and just like playing with technology - it's more fun for them than the phone. - Do the PCs sold online in Japan have different specs than the U. S. machines? Are they made at the same location? Our units produced for Japan have basically the same specs although there are obviously some differences because of language. All Dell units for this market are manufactured in our factory in Penang, Malaysia. - Dell's been doing online sales in Japan for just over one year. How do you assess the past year and how do you see the business developing over the next year? Well, from my perspective it's been a great year. Right now our online sales make up roughly half of our consumer/SOHO business. Michael Dell has publicly stated that he expects half of our worldwide business to be online by the year 2000. That's a pretty tall order, but one we've taken to heart. To this end, we're driving to integrate our online activities both with our core business processes, as well as with our back-end operational systems. Two good examples are offerings we've produced recently: our Dell Outlet and our Dell Order Status feature. The Dell Outlet <http://www.dell.com/jp/dfo/index.htm> capitalizes on the "virtual" factory outlet idea - we sell cancelled units at a discount which we increase at regular intervals until the units sell. Since the units are still factory sealed the customers get a really great deal; sometimes they're discounted down to as much as 65% of purchase price. Our Order Status feature <http://jp.us.dell.com/Ordstatj/index.asp> allows our customers to track their orders from our factory in Penang to our distribution center here in Chiba. They can even sign up for e-mail notification of the unit's being shipped if they want. The whole process is tied in directly with our legacy systems, is automatic, and is largely maintenance-free. Two big challenges we will face this year are to improve both the services we offer our corporate customers online, as well as improve on our Online Service and Support offering. For our corporate customers we plan to roll out a service called "Premier Pages", which will give corporate customers their own private, password-protected sites through which they can purchase online, view their purchase histories, etc. On the Service and Support front, we want to give each customer the ability to receive customized service over the Web based on the tag number of their unit. For example, the system could call up unit-specific diagnostic information, recommend specific drivers for download, etc. - pretty cool stuff. - For you, what's the most interesting thing about Japan's Internet scene today? Where can JIR readers expect to see the wild action in the coming months? Geez, I don't know about any wild action. ;) What I *can* say is one trend I've seen recently is that peering has improved a lot in Japan, which has lead to faster connection times for your average user. This is obviously great for what I'm doing, and the state of the Net in Japan in general. One thing that I've always liked about the Net is how it empowers anybody who has the wherewithal to publish on it - it really breaks down barriers between those who are offering goods and services, and their audience/customers. In Japan this is magnified, because of the historic dependence on a long distribution chain. So what we've been seeing is people setting up Japanese-language servers in the US, Australia, or wherever, and providing higher-value goods and services to Japanese consumers via the Web. For me it's really cool to be a part of that. Chris Hinkle Manager, Dell Japan Online http://www.dell.com/jp/ chris_hinkle@dell.com ********************************************************** Industry briefs Ministries to put real estate information online in bid to improve transparency The Ministry of Construction and Ministry of Finance plan to start putting real estate information online in order to improve transparency and stimulate activity in Japan's slumping real estate sector. By making price and risk information available online and providing search functionality, the ministries hope to spur the securitization of real estate portfolios and help dispose of bad loans, according to industry watchers. The two ministries have convened a study group to work on specifics of the project, and expect an interim report in May. Real estate transactions in Japan have traditionally been conducted with considerable secrecy, and it is not common for information about specific properties to be made widely available to interested parties. FUJI ONLINE SYSTEMS to add keyword search functionality to online digital bookstore Tokyo-based FUJI ONLINE SYSTEMS, a FUJITSU subsidiary, will on April 20 add keyword search functionality to its Papyless Electronic Bookstore, an online store that sells digitized versions of books. The company also plans by June to increase the number of titles available online to 1,000, up from 800 today. The company made somewhat less than 3,000 sales per month in fiscal 1997, but hopes to boost this figure to 5,000 units per month in fiscal 1998. Survey finds 46% of Internet users have online shopping experience Nearly three of four Internet users have conventional mail-order shopping experience, and 46% have online shopping experience, according to a survey conducted by Tokyo-based MRI INFORMATION NETWORKS. The Web-based survey was conducted between March 11 and March 31 and drew 1,164 respondents. The top three merchandise categories for online shoppers were PCs/peripherals, food products, and books/magazines, respectively, a marked contrast to the top three conventional mail-order merchandise categories, which were outerwear apparel, innerwear apparel, and miscellaneous household goods, respectively, according to MRI. LYCOS moving into Japan Leading U.S. search engine service/information provider LYCOS is moving into the Japan market. The company has struck an agreement with SUMITOMO CORP. and leading ISP INTERNET INITIATIVE JAPAN (IIJ) to create a joint venture firm called LYCOS JAPAN that will start operations this month. The new company will be capitalized at 875 million yen ($6.8 mil) and will be 40%-owned by LYCOS, with SUMITOMO and IIJ holding 50% and 10% stakes, respectively. In addition to banner advertising, LYCOS JAPAN plans to develop revenue streams from online transaction commissions and other sources, according to a spokesman. LYCOS's move into Japan means all four leading U.S. search engines will be competing in the domestic market, intensifying service competition and giving a boost to the fledgling electronic commerce sector, say industry watchers. NTT to offer worldwide Internet facsimile service NTT announced March 23 that it plans from mid-April to start offering an Internet-based facsimile transmission service worldwide. The company says its new service will be unique in that it will enable users to transmit handwritten facsimile messages as e-mail messages. An NTT spokesman also said that rather than its usual policy of targeting Japanese firms operating overseas, the company will promote the service to potential customers regardless of national origin. Services will be provided by wholly-owned subsidiary NTT INTERNATIONAL COMMUNICATIONS. Rates will be lower than those offered by KDD, which started a similar service for ISPs this month, according to the spokesman. KDD to offer domestic long distance services in July KDD announced April 9 that it plans to start offering full-fledged domestic long distance telephone services effective July 1. Subscribers will simply dial the same "001" prefix they currently use to make international calls through KDD, eliminating the need to register a separate carrier or remember another prefix. KDD says it will offer a three minute rate of yen69 ($0.52) for weekday daytime calls traveling more than 100 kilometers, undercutting current NTT rates by 23%. When used in combination with a new KDD discount service, the new rates will go even lower than those offered by TTNET, the current low-price leader, according to a KDD spokesman. KDD will also become the first carrier to offer a single, nationwide rate, regardless of distance, for late-night/early morning calls, the spokesman said. NTT to purchase stake in U.S. ISP VERIO NTT announced April 8 that it plans to purchase a capital stake in Denver-based ISP VERIO. NTT will buy a 12.5% stake or invest $100 million, whichever is lesser, following VERIO's upcoming IPO. The Japanese telephone giant will invest the funds by June and dispatch a director to sit on VERIO's board. VERIO, established in 1996, has approximately 190 access points across United States and specializes in serving small and mid-sized firms. An NTT spokesman said NTT hopes to start offering cooperative services with the Denver-based company within the year, including U.S. connectivity for OCN subscribers in Japan. (NTT is really ramping up its PR efforts in the U.S., with full-page ads in the Wall Street Journal and BusinessWeek - Ed) AOL JAPAN aiming to win subscribers with "lifestyle information" approach Tokyo-based AOL JAPAN will launch an aggressive effort to win new subscribers through an emphasis on providing information "closely related to consumer lifestyles," the company announced. The firm yesterday announced a site integration deal with KINOKUNIYA, Japan's largest bookstore, and says it will start offering content for children, plus music information, shopping and entertainment channels. It will also start auditioning both professional and amateur creative people in an attempt to beef up its staff in charge of content production. But critics say the company was too late to market, and is unlikely to be able to catch up with rivals such as NIFTY and and BIGLOBE. (Late breaking news: AOL Japan announced this week that it expects to have 100,000 subscribers by the end of this month - Ed) ********************************************************** Toy-like use of Internet in Japan still deeply rooted Looking through publications such as the Japanese language Internet Magazine, I'm always struck by how much of the content still consists of fare such as making jigsaw puzzles with ActiveX, sending virtual pets by e-mail, and other applications that could only be characterized as, well, childish. This "Internet as toy" or "Internet as plaything" mind-set is still deeply-rooted in Japan. This is good news for U.S. vendors of character merchandise and software companies that can figure out how to tap into the admittedly difficult-to-fathom Japanese game psyche. But in the U.S. it's becoming increasingly clear that, with the exception of games, pure entertainment applications on the World Wide Web are a tough sell. In the U.S., what people seem to want to do online is accomplish everyday tasks - and looking at the demographics of business-oriented Internet users, that generally means things like making travel plans, checking stock prices, reading news, making efficiency-driven retail purchases, trading securities, running retirement planning scenarios, and so forth. These types of applications are slowly starting to take hold in Japan, but it will be quite some time before they achieve U.S. levels. One area where we'll see rapid progress is in online stock purchases. I mentioned this last month, and Dmitri Ragano, formerly of ASCII, was kind enough to send me the URL for a good article he wrote on the subject. Check it out: http://www.ascii.co.jp/english/news/archive/98/03/18/#1 ********************************************************** Come again? Over the last week we lost some e-mail as result of a massive spamming attack on one of our providers' e-mail servers. The problem appears to have been resolved, but if you haven't heard back from TKAI, please retransmit. Our apologies! ********************************************************** Welcome new subscribers! This month we welcome new subscribers from Brazil, China, Israel, Hong Kong, the Netherlands, Germany, Spain, Canada, Japan and the U.S. With five more subscribers, JIR will have more than 1,000 readers each month. ********************************************************** 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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