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Entering The Japanese Market Through Licensing and Reselling
Businesses entering the Japanese market will need to establish and maintain a strong relationship with local partners to succeed.
Most businesses entering Japan begin by finding a local partner to serve as an agent, distributor, and/or representative. Agents and distributors are the most common partnerships used by foreign firms to gain their foothold in Japan.
Many companies first setting up in Japan opt for partnership or distributorship arrangements with local partners during their Japan market entry. This has the benefit of giving their businesses quick access to the market while avoiding the difficulties of:
- The Japanese language
- Setting up a new distribution network
- Managing the business and legal requirements
- Things to look for in a partner include:
- Knowledge and experience with the local market
- Having an existing network of sales channels
- Expertise in local business and regulations
- Reliability to engage in the business development
Licensing is an arrangement where a business transfers the rights to the selling of product or service to another business in Japan. This is a useful strategy if the licensor has a good market share in the market you want to enter.
In a license agreement, the licensor will pay for limited rights to your product or service. This may allow them to manufacture, promote, and sell your product in Japan.
Licencing has the benefits of avoiding organising logistics for physical goods, marketing costs, manufacturing, and requires very little investment – so it can be lucrative guarantee of revenue.
Japan also attempts to protect intellectual property rights, making it attractive to foreign businesses looking to expand into Japan.
Licensing in Japan covers a large range of different product types, with toys as the biggest single category, followed by apparel, fashion accessories and software, video games and apps.
There are companies that provide expertise on brand license development and licensing, such as Sakura Linkage, and using these services can be very useful if it suits your market entry strategy.
Distributorship and Reselling in Japan
One of the common routes to Japan market entry is distributorship which allows foreign companies to deliver their products and services through an already established Japanese company. Your company will retain control over the production and development of your products and services, while letting another company handle the sales and logistics.
Distributorship requires a lower investment and can enable you to test the market for your product or service without too much expenditure. The reverse side is that you will lose a significant amount of the profit you could have made as well as the ability to develop a more permanent presence.
It is important to clearly outline the rules of the relationship with your distribution partner. For example, if, and for how long, will your distribution partner have exclusive rights to your product and your potential plans to enhance your local presence following initial market entry. Some key points to consider when appointing a distributor or reseller include:
- It is easier for a distributor with an established reputation and contacts list to introduce a new brand to the market
- How much are distributors going to invest in marketing to support their sales effort, and if they expect you to make a financial contribution?
- Will the distributor offer credit facilities to potential customers?
- Will the distributor carry a stock of the products they sell and take care of warehousing and inventory control in Japan?
- The following are some of the disadvantages of using a distributor in Japan:
- Distributors will expect heavy discounts and generous credit terms from you.
- You may lose control of the way your products are marketed and priced.
- There could be a long period of exclusivity, so you need to be sure that you choose one that has experience selling your type of products and has customers for the kind of goods you sell.
- Some tips when setting up a distributor/reseller arrangement in Japan:
- Treat the local distributors as long-term partners, not temporary market-entry vehicles. Structure the relationships so that distributors become marketing partners willing to invest in long-term market development with an agreement with strong incentives for appropriate goals
- Support the market entry by committing money, managers, and proven marketing ideas
- Maintain control over marketing strategy
- Ensure that resellers provide you with detailed market and financial performance data
Japan Market Entry Advisor
If you’re operating without a partner, you could benefit from working with a Japan market entry advisor, such as Sakura Linkage, who can help with business development, market research, tax and incorporation aspects, operational support, translations and localization.
