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Letter from Japan: It's a Jungle Out There
The local/global Internet binary is never wider than in Japan
By PETER MCKILLOP
April 14, 2000
Web posted at 8 p.m. Hong Kong time, 7:00 a.m. EST
This week Amazon.com, the American e-retailer, announced with the standard breathless P.R. hype that it was finally ready to do business in Japan. A word of warning: if the e-wreckage of struggling U.S. new-economy firms trying to do business in Japan is any indicator, Amazon will soon appreciate the real meaning of its name.
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For American internet service-related companies trying to do business here, Japan is a jungle. Many American Internet business-to-consumer dotcoms are decidedly notcoms in Japan and still vying just to gain traction. Troubled partnerships include AOL Japan and Mitsui; Double Click and TransCosmos; Schwab and Tokio Marine. Being a hip, new-economy business may get you on the cover of Red Herring in the U.S., but in Japan it means nothing if you don't understand the local business culture, new or old economy. The laid-back, informal, "speak your mind" California business culture has run into a rigid world of Japanese corporate blue suits.
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E*bay is trying a more traditional route -- and it won't be easy. It has hired a veteran businesswoman who has a strong track record introducing U.S. fast food to Japanese consumers. But many wonder whether she may be a bit too senior to really understand the new rules, speed and culture of an Internet company.
One of the few non-hardware e-companies that appears to be succeeding is Starbucks, and that, like McDonalds, Burger King or Disneyland is primarily a franchise operation. Softbank has had some success with its joint ventures because founder Masayoshi Son is as comfortable cutting deals over pizza in California as he is bowing and handing our business cards in Japan. Now he just has to learn how to actually make money.
The American companies know that to truly succeed in Japan they must find the Holy Grail of the local Internet. All are desperately seeking a cool Japanese national who has an M.B.A. from M.I.T. or Stanford, speaks perfect English, has worked for a traditional Japanese company (preferably a telcom) and has lived and worked in California. These guys do exist. Shige Saitoh worked for NTT and Netscape, graduated from Tokyo University and has an M.B.A. from M.I.T. But he has no intention of joining those big, lumbering American firms. He's now COO of Digital Garage and preparing to take the Internet business/e-commerce firm public later this year.
Amazon faces its own challenge. It is simply too late and too American. And it is going up against the hottest Internet company in Japan: Rakuten, Hiroshi Mikitani's booming cybermall, is transforming the way Japan shops. The site has been running since 1997 and is stickier than a cinnamon bun. It was grown from just a few retail shops to more than 2,000, selling everything from fish to pashmina scarves. Unlike Amazon, it's profitable.
What makes Rakuten so successful is that it melds the best of an Amazon with a intimate feel of how Japanese love to sell and shop. At its seminars to eager retail "tenants," it preaches the word of Amazon's Jeff Bezos -- every customer must be treated individually. But Rakuten then lets his cyber merchants take care of all the hard stuff that has caused Amazon so much grief. It is up to the retailers to store and send their products.
Watch how Rakuten's B-2-Boom flea market fares among serious investors when it goes public later this month.
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