How to sell direct to Japanese consumers on the Net Bargain America Corp. President & CEO Tom Sato

n Second Largest economy in the World n 10 Million Internet users n 5 million Mobile Internet Users n Millions travel to US for vacation n An average Japanese tourist spends $3,000 on shopping

n Trade Figures show that US is lagging behind in International Trade n n 2000 expected to be over $80 B

n Most Trade barriers are all but extinct but….. n Cultural Differences n Language Barrier n Japanese are accustomed to premium quality service n Trade regulations

n Growing Marketplace without any dominant player n Most online shops do not have strong infrastructure n There are no crazy guys selling at cost n Likelihood of repeat business

n When taking orders online from Japanese customers, the home pages must be in Japanese

n Follow the Japanese online commerce guideline set by MITI n Order form must be formatted for Japanese addresses n Shipping cost must be clearly stated n Confirmation must be in Japanese

n Around 10% of orders have wrong addresses- as entered by recipient n Very low percentage of credit card fraud n Higher percentage of credit card input errors n Higher instance of double entry n All orders are checked by customer service

n Japanese addresses are the most complicated n There are addresses that ends with “No Number” “Up the Hill Around the Corner” n Customer Service checks addresses and uses database system to correct errors

n Customs law is different from courier service to post office n USPS results in a greater realized tax advantage to Japanese consumers n Packaging and Packing must be within Post office guidelines

n Import duty and consumption tax is waived for small personal import n Regulation was created in 1990 to support US-to-Japan catalog commerce n Most packages valued below $200 get through without being taxed n Regulation is vague and enforcement arbitrary; some higher value packages may get through without taxation

n Japanese Health Regulation n Japanese Import Regulation n FDA Regulation n Export Regulation n Anti-Terrorist Regulation

n US Post Office bulk shipping system for International parcels n Automatically prints customs forms & address labels n All parcels are Prioritized and Insured n Customs information is sent digitally n All parcels are traceable via Internet n System is connected to our E-commerce server

n If you don’t have a Japanese specific shipping system… –Expect high # of package losses at SFO Airport –Packages with wrong address will be returned to you two months later –Your customers may be charged a high customs duty, consumption tax and collection fee –Tracking packages will be problematic at best

n In-house shipping center with proprietary system n Modular workstation based system that is scalable according to needs n More than 90% of orders are shipped on the same day n QA System that checks before shipping

n Japanese HATE back orders n E-Commerce system that is connected to inventory control n Products at Zero inventory level are removed from presentation by system n Low level of Inventory (Less than a week’s worth of goods) triggers reorder n Small volume “just in time” procurement

n Must be done in Japanese n and telephone n Almost all s are answered within 24 hours n Net-ready Japanese customer support is rare

n Refund: Via credit card n Return of merchandise: to Japanese address via subcontractor – cost $6 n On average only one package a week is returned n Reship: If it’s broken in transit, we will send another

n Magazine: Bargain America Magazine n Magazine : 13 titles n Japanese Editorial Team n Japanese Content n No Spamming

n Most Japanese Internet users read magazines n Good content is required n Cost of Marketing is low n Issued Weekly n Opt-in and free subscription

n MSN n NTT-X Goo n Gateway Japan n Usen Broadcasting n Yahoo Japan

n Existing customer base : 40% return rate!!! n Targeted -based discount coupon system n Online competition (contest) system n Marketing performance measurement system

n Coupons are sent according to past purchasing history and other data n Coupons work well to bring back past customers

n Competition works well to win new customers and attract attention from the Japanese press n All entrants are sent discount coupons

n Product selection according to Japanese needs and taste n All products are tested in small volumes n Promoted in Magazines n Product description in detail n Wide coverage but narrow selection : 850 SKUs

n Product selections are done by Japanese staff n Japanese fashion trends are followed by Japanese staff n Some products have such a premium in Japan than you can sell above domestic retail price n Understanding Japanese regulations