“Who will distribute and sell my brand?” is the most common question businesses ask when entering any new market. Like with many simple questions, it’s not always easy to find a good or a quick answer. And Japan is certainly no exception.
In my experience of consumer products in Japan and the region, there are 5 key assessment criteria to help source and screen the right partner.
1. Import Expertise
Assuming your business model involves shipping product from overseas, which for most new brands is typically the case, selecting a partner who can navigate the intricacies of customs and regulations is clearly essential. Import experience and expertise varies enormously by category, for example fresh produce versus packaged, never mind products which carry health or quasi pharmaceutical benefits. Ambient, chilled or frozen storage facilities are another; although Japan’s climate is temperate, the humid summers can necessitate air conditioned storage for “regular” products, chocolate confectionery is an example.
The best importers also have strong supply chain skills. There’s a general trade requirement that products have more than 70% of shelf life remaining on delivery which makes inventory management critical, especially if one wishes to avoid returns and write offs, not to mention the high costs of storage in Japan. Sales forecasting expertise is vital if you’re shipping from Europe or across the pacific, where lead times of 2-3 months are not uncommon.
2. Channel and customer coverage
Understanding your potential partner’s sales organisation and power is one of the most important factors in judging their suitability. There are two important aspects:-
a) What sales channels and key customers do they cover, directly? Most importers or distributors tend to be better at either retail or food service or possibly e-commerce. It’s important to know which major customers in the channel they trade with and any who may not be covered. Mitsubishi Shokuhin is one of the largest wholesalers in Japan but they do not have direct trading relationships with 7&i group for example.
b) What’s the structure of their sales organisation? It is reasonable to expect credible partners to have a Key Account Management team (KAM) who handle the largest and most important customers. However the Japanese market is still fragmented so knowing about your partner’s branch network and how they service cities besides Tokyo and Osaka is vital.
3. Category & product expertise
Every product category has different dynamics and rules. The tools and techniques to growing a pet food versus an ice cream business are different. Category knowledge takes time to acquire.
Hence before selecting a partner try to understand:-
a) What product categories are they strongest in and why? Is it generally premium or low value products? Are they stronger in domestically made items rather than imports? Alternatively, they may have specific expertise in added value and technically complex products like supplements or OTC. Knowing how long they have managed these categories is important too.
b) Who manages these categories? Larger partners may have specific marketing personnel responsible for sales promotion and brand building. Do they have access to ongoing industry and market data to inform strategy and execution? Japan is a data rich market but many distributors may have less access to consumer or shopper insights than you might expect.
c) Are there any obvious conflicting brands?
4. Competitive value chain
A good exporter will know how their costs break down from the factory to the retail selling price to understand who takes what share and why. In the past Japan has enjoyed an image of being an expensive and high value market, where exporters could take a cost plus approach to pricing; most who live here know these times have long gone.
When talking to importers explore what costs are covered in their margin. Whilst listing or slotting fees for new products are less common in Japan than other markets, there are many other trade promotion expenses ranging from centre fees with the large chains to monthly promotions, aisle end space, advertising support and returns. How are these budgeted?
A key factor in partner selection is how price competitive the exporter’s brands will be on shelf/on line. If the importer’s (or the exporter’s) margin expectations are too high then a compromise or an alternative Go-to-Market solution may be necessary. Many importers are still selling onto other wholesalers first before your product reaches the retailer.
E-commerce is causing a rapid realignment. However for exporters wanting to sell new – and perhaps unknown – brands, getting Japanese consumers to touch and trial is essential. Hence the role of mainstream retail remains critical, in my view.
5. In outlet/online activation
Getting your product into a store or onto an e-commerce platform is only the start, not the end of the journey. Without off take and velocity your brand will soon disappear. Most Japanese CVS chains have high daily sales rate requirements. What resources and skills does your partner have to promote brands in major channels and key customers? Strong partners will be used to arranging regular promotion slots with major retailers and have product ranging, merchandising and even planogram design techniques.
They should be able to share case studies or examples of how they have established and built brands for new exporters.
This Post was written by Rupert Sutton, management consultant and author of “Export and Expand: A practical guide to International growth”