JAPAN IS DIALING 1 800 BUYAMERICA
It's not that easy for U.S. marketers to reach Yukio Arai. The 47-year-old Japanese farmer lives in a rural mountain village two hours outside Kyoto. But Arai, an avid mountain climber, has been shopping in America by mail from such catalogs as L.L. Bean, Patagonia, and REI for 20 years. "I don't really like America," he says. "But they make the best outdoor stuff."
Now, a strong yen and the growing popularity of things American, from clothes to collectibles to outdoor equipment, are helping U.S. catalogers rack up record sales to Japanese consumers. With phone and fax lines in their home offices that allow them to take orders from Japan around the clock--plus efficient delivery systems--U.S. marketers are bringing a new level of sophistication to a market that has barely been tapped. By doing an end run around traditional retailing and avoiding many of the tariffs on imported goods, catalogers can almost always beat the Japanese on price.
"VIRGIN TERRITORY." While trade barriers bedevil most other U.S. industries, direct marketers have practically a straight shot into Japan--and little local competition. "We consider it virgin territory," says William A. Dean, managing director of San Francisco catalog consultant Bruce, Dean and Co. Direct-marketing experts say the industry in Japan is comparable to that in the U.S. 15 years ago. Direct-marketing sales in Japan reached only $18 billion last year, compared with $300 billion in the U.S. American catalogers generated $1.8 billion of those Japanese sales in 1994, up from $1.5 billion a year earlier.
New efforts by some big-name marketers such as L.L. Bean, Lands' End, and Eddie Bauer should accelerate that growth. With sales flattening in the U.S., a boost from Japan is particularly welcome. Lands' End, battered by higher postal and paper prices and sluggish U.S. sales, saw its first-quarter earnings fall 70%. Its 11% sales growth came almost entirely from Britain and Japan. U.S. merchants also like the different demand cycles in Japan. Back-to-school buying, for example, takes place in March.
Even while Japanese retail sales have tanked during the ongoing recession, direct sales are growing at a healthy 5% to 7% annual clip as strapped consum-
ers look for bargains. Social factors, from more working women to an aging population are also fueling demand for mail-order merchandise. When the U.S. Commerce Dept.'s Osaka office offered 125 different catalogs for sale over the winter, Japanese consumers snapped up 300 a day at $2 and $3 each.
SOCCER SCORE. Bit by bit, savvy marketers are training their sights on this lucrative market. They're setting up toll-free 24-hour international phone and fax lines--a plus for customers who are up to 13 hours ahead of U.S. time--and engineering fast turnaround times. Some marketers, such as San Francisco-based accessory company California Gold, employ Japanese-speaking telemarketers in the States. Others, such as Bean, have set up Japanese offices to handle orders, returns, and complaints. Catalogs are changing, too. Many marketers have added Japanese-language inserts with sizing, tariff, and ordering information, while some, such as Lands' End, provide a complete Japanese-language catalog.
It's not just the big guys that are getting in on the action. Sports Endeavors, a $30 million North Carolina sports cataloger, started prospecting in Japan two years ago and sold $1.5 million worth of soccer equipment there in 1994. "Sales have exploded in the last year," says Alex L. Greene, director of international operations. He says comparable soccer equipment costs 80% to 200% more in Japan. And while Japanese companies take two weeks to deliver an order, he offers express shipping that can get the goods to a Japanese customer in 72 hours.
In fact, U.S. marketers can build in substantial margins and still beat Japanese competitors on price. Even without the 12% increase in the strength of the yen against the dollar since the beginning of the year, Japan's many-layered retail distribution system jacks up the cost in stores.
In addition, Japanese consumers ordering from American companies get a personal exemption on import tariffs of up to 10,000 yen ($115 at the moment) per order, though the average order runs 25,000 yen ($287). Foreign marketers also have an edge when it comes to mailing catalogs. Unbelievably, it costs less to mail across the sea than across Tokyo, though new international rates that take effect in January, 1996, will erase some of that advantage.
PLEASANT SURPRISES. The market's youth and peculiarities require some creativity. Few mailing lists are available. Most magazines are sold on the newsstand, so there are no subscription lists to buy. Companies that have developed their own lists guard them jealously. "In the U.S., companies will exchange and rent lists. In Japan, that's just not the case," says Donna Bhatia, vice-president for marketing at J. Crew Group's Clifford & Wills Inc. The lists that are available are expensive, poorly maintained, and not well-focused. Thus, response rates are a paltry 1%, compared with about 3% in the U.S.
There are pleasant surprises, though. "I'm constantly amazed at what does and doesn't sell here," says Robert Feeley, president of the Japanese subsidiary of Franklin Mint, the $800 million direct marketer of collectibles. "The biggest shock was that we can sell $2,000 pieces of jewelry through newspaper coupons." He says jewelry accounts for roughly 40% of direct marketing sales in Japan, compared with 5% to 8% in the U.S. As long as U.S. marketers keep offering their diamonds and outdoor gear at bargain prices, customers such as Yukio Arai will keep their orders coming.By Edith Hill Updike in Tokyo, with Mary Kuntz in New York