Trade Promotion and Advertising in Japan
Business Guide--How doing business in Japan
2008/01/15 18:00 | by 
Product Pricing in Japanese marketplace
Tough economic times have made price an increasingly important consideration for Japanese consumers. Traditionally, many people made their buying decisions based on a product's attributes, quality, and brand name and they were willing to pay more for superior quality. However, Japanese consumers are now more price conscious and notions such as bargains and value have become mainstream. If an imported product can be purchased more cheaply than a domestic product, consumers will be interested. This has proven to many Japanese that U.S. products can be affordable and of a quality that’s similar or even superior to Japanese goods.
This recent ability to compete on price has opened doors for U.S. products. However, landed cost is only one part of a total pricing scheme and should not be the only consideration for U.S. firms interested in exporting to Japan. Distribution mark-ups often cause imports to price at levels far higher than comparable domestic products. For instance, shipping costs between the port of Osaka and Tokyo have been shown to be three times higher than shipping costs from the U.S. West Coast to Osaka. A good example is imported U.S. apparel products, where street prices often are three to four times FOB.
Japanese manufacturers traditionally set prices at each level of the distribution chain and enforce compliance using complicated rebate systems. This price maintenance has come under pressure from consumers who are demanding lower prices and from manufacturers who themselves find the rebate system burdensome. As distribution practices have undergone reform, costs have been coming down and distributors have gained additional flexibility in selecting and purchasing items.
The pricing structure of imported goods varies according to the types of distribution channels and services importers or wholesalers provide (e.g., inventory, advertisement costs, packaging costs, financing, acceptance of unsold/returned goods, etc). It is a multi-layered system with established lines of product flow. In recent years, more and more middlemen have either been eliminated or forced to cut prices.
As Japanese consumers have become more price-sensitive, markups along the various distribution stages have tended to become smaller. There are now some retailers who import products directly in order to offer lower retail prices. But U.S. suppliers should understand that retailers usually import smaller quantities. And other importers and wholesalers usually are uninterested in representing products that retailers import directly.
Finally, U.S. exporters should also consider yen fluctuations in their product pricing and sales strategies.
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