Bloomberg News

Amazon Surge in Japan Lifts Yamato’s Express Deliveries

August 14, 2014

Yamato Transport Co. Branded Box

Tokyo-based Yamato has the largest share of the nation’s express delivery market, with 46 percent last fiscal year, according to a report from Japan’s transport ministry. Photographer: Kiyoshi Ota/Bloomberg

As more Japanese use mobile phones to shop online, Asia’s biggest parcel shipper is ready.

Yamato Holdings Co. (9064) is seeing so much demand for everything from computer disks to electrical parts by customers of Amazon.com Inc. (AMZN:US) and other online retailers in Japan that it bet 140 billion yen ($1.4 billion) on its largest processing warehouse next to Tokyo’s Haneda airport.

The company, the region’s largest express shipper by sales, built the multifloor building and complex, called Haneda Chronogate, with about 200,000 square meters (2.2 million square feet) of sorting space, more than double the size of its next-biggest site, to enable same day delivery of Internet purchases in most parts of the country.

Yamato is taking advantage of a boom in online buying that has boosted express parcel deliveries more than 10-fold in the past three decades in Japan, as the number of mobile phones surged to 144 million last year from 200,000 in 1988. Haneda added a fourth runway to make it an alternative for international freight to Narita, about 60 kilometers east of the capital.

“The expansion of the use of mobile phones is making it easier to access the Internet and buy products from anywhere 24 hours a day,” Hiroaki Mochida, an analyst at Marusan Securities Co. in Tokyo, said by phone July 25. “Yamato is the largest express parcel delivery service in Japan and stands to benefit the most from that. While it will take a long time to recoup the costs, building them near Haneda airport was the right choice.”

More Packages

Express parcel shipments touched a record 3.6 billion packages in the year ended March 31, and have risen almost 10-fold from 385 million in 1985, according to figures from Japan’s transport ministry. The increase comes as the number of people in the nation has been declining every year since peaking at 127.8 million in 2008, according to U.S. Census Bureau data compiled by Bloomberg.

Tokyo-based Yamato has the largest share of the nation’s truck express delivery market, with 46 percent last fiscal year, according to a report from Japan’s transport ministry. Closely-held SG Holdings Co. is the second largest, with 34 percent of the market, and government-owned Japan Post Holdings Co. is third, with 12 percent, the report said.

FedEx Corp. and UPS Corp. ship letters and parcels internationally, although not in the domestic to domestic market, as do Yamato and its Japanese competitors. Yamato is an important partner for operations in Japan, Kumiko Imai, a Tokyo-based spokeswoman for Amazon said by e-mail last week.

Amazon Surge

Yamato, the main deliverer of Amazon goods in Japan, trucks products from the retailer’s own warehouses in Japan and through its own facilities.

“Yamato has evolved its services in order to increase electronic orders, focusing on demand from consumers,” said Yamato Transport’s spokesman Kiyotaka Ohbuchi. “Our current offerings include home delivery in as little as one day.”

The company also offers the option to have orders delivered to a convenience store and a service that allows customers to easily trace package locations using smartphone applications, Ohbuchi said.

Amazon’s Japanese website had 40 million page views, excluding mobile phone access, in November last year, up from about 30 million in 2010, according to the latest figures from the company. The retailer declined to give figures on shipments.

Smartphones

“Smartphones can be used throughout the day, so they have a strong advantage over computers,” said Ryota Himeno, a senior analyst at Barclays Plc in Tokyo. “Users feel comfortable shopping with smartphones, wherever and whenever.”

Amazon’s sales jumped 23 percent to $19.3 billion last quarter, even as it posted a wider loss. International sales, which make up just under half of total revenue, increased 18 percent in the three months ended June, to $7.3 billion, according to the company, which doesn’t break out regional figures.

The Seattle-based e-retailer started in Japan in 2000, and says it is the biggest user of express parcel delivery in the country. Rakuten Inc. and Askul Corp., both based in Tokyo, are the largest local competitors to Amazon.

Rakuten’s shopping website operates like a shopping mall and the individual vendors decide what delivery companies to use, in comparison to Amazon’s system where it organizes the shipping for sellers, Rakuten spokeswomen Yumi Sakashita said last week.

Competitors’ Strategy

Askul primarily uses Yamato for shipments to individuals because the delivery company has lots of experience and a high level of service, punctuality and safety, Tokyo-based spokesman Kosuke Ito said by telephone last week.

The company uses its own distribution system when shipping between companies, its main business, he said.

Yamato should also focus on attracting more businesses to Chronogate to use its storage facilities, Shinichi Yamazaki, an analyst at Okasan Securities Group Inc. said by phone Aug. 1.

Shares of Yamato have risen 2.9 percent this year, compared with a 6 percent decline in the Nikkei 225 Stock Average. Rakuten has declined 15 percent and Askul have 21 percent this year. Amazon shares have slumped 18 percent in New York trading.

“It’s going to take a long time to pay back the investment,” Yamazaki said. “Yamato needs to target business to business shipments. It can act as a warehouse for companies trying to cut back on inventories.”

To contact the reporters on this story: Chris Cooper in Tokyo at ccooper1@bloomberg.net; Kiyotaka Matsuda in Tokyo at kmatsuda@bloomberg.net

To contact the editors responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net Philip Revzin


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