E-commerce and Japan’s Economy
TOKYO – Three years ago, Tomoko, a 54-year-old housewife, purchased everything from clothes to food to stationery at various local retail suppliers. Today, Tomoko rarely goes out to shop, preferring instead to buy most of what she needs online.
Not only is online shopping, also called e-commerce, convenient, says Tomoko, it is also inexpensive. “Groceries alone used to cost my family of three nearly ¥250,000 every month,” she said, adding, “Now they cost a third of that.”
In a country where nearly 80 percent of the population has access to the Internet, Tomoko’s shopping preferences are fast becoming the norm rather than the exception.
E-commerce has shown steady growth in Japan, with the Ministry of Economy, Trade and Industry (METI) estimating that e-commerce’s market share grew from 2.5 to 2.8 percent between 2010 and 2011, and 2.8 to 3.1 percent between 2011 and 2012.
Hady Kahy, associate professor of economics at Temple University, Japan Campus, projects that e-commerce’s market share will continue to grow. He suggests that such growth as demonstrated by the Japanese e-commerce giant Rakuten, Inc., which posted in fiscal year 2013 revenue in excess of ¥518.6 billion (+29.5 percent year-over-year), heralds a bigger shift to e-commerce over the next ten to twenty years. Kahy notes that, as Japanese society continues to age, more people––in particular the massive baby-boomer generation (those in their 40s, 50s and 60s)––will be drawn to e-commerce for its convenience and accessibility.
Even as e-commerce encourages consumption, it likewise bolsters sales.
“Most of my business is done online,” says the owner of Tokyo-based aroma shop tk-kota. A supplier of essential oils and herb teas, tk-kota conducts an estimated 75 percent of its sales transactions through Rakuten’s online marketplace, Rakuten Ichiba.
However, there are those who worry that e-commerce will hamper job growth. Ferdinand Maquito, research fellow at the Atsumi International Foundation and adjunct professor of economics at Temple University, Japan Campus, speculates that the transition to e-commerce, while beneficial for business in the sense that retail outlets could expand their market borders, would adversely impact employment. “Computers are categorized as a disruptive technology,” says Maquito, “so much so that half of the jobs in the next few decades will be taken over by computers.”
According to a monthly labor force survey released by the Statistics Bureau of Japan’s Ministry of Internal Affairs and Communications, the national unemployment rate fell in August 2014 from 3.8 to 3.5 percent. Though Japan’s employment situation cannot compare to those of Greece, Spain or even the United States, the Statistics Bureau found that approximately 31.6 percent of employed persons work 1 to 34 hours a week, indicating that many Japanese are underemployed and stable job openings are scarce.
Maquito argues that most of this volatility in the job market is in the manufacturing sector, not the service industry to which e-commerce belongs. However, e-commerce would give free-standing stores like tk-kota little choice but “to reduce their outlays . . . [and] limit their physical exposure,” adds Kahy.
This is not to say that e-commerce cannot create jobs.
Chika True-Daniels, section manager of recruiting at Rakuten, Inc., suggests that, by cultivating a forward-thinking mindset, Rakuten will expand into other industries, paving the way for more job opportunities. To this end, True-Daniels says she seeks job applicants who are skilled at adapting to – and finding effective ways to work within – fast-evolving business environments.
Despite Prime Minister Shinzo Abe’s recent efforts to reinvigorate Japan’s stagnant economy, the country remains beset by the same lack of vision that has plagued it for the past two-and-a-half decades, says Maquito.
Therefore, if Japan is to make a true economic recovery, it must follow Rakuten’s example in adopting a progressive mindset. In the same vein, Japanese consumers and small businesses must – like Tomoko and tk-kota, who each discovered through e-commerce that the future is for those prepared to welcome innovation – set aside their reservations about flying in the face of tradition.
Copyright © 2014 Elliot Silverberg. All rights reserved.