3 tips for Japanese SMEs dreaming big
Japanese SMEs shouldn’t limit themselves to domestic markets any longer.
28 October 2016

Key takeaways

  • Despite being one of Asia’s most mature economies, Japan still has room to grow – particularly in international exports.
  • Small businesses can use e-commerce and regional manufacturing to improve margins and grow on both domestic and international fronts.
  • Japanese SMEs can expand into components, repairs, and other services to keep their profits stable.

Already flourishing as one of Asia’s most mature economies, Japan continues to prove its mettle with strong trade growth driven by its international exports. To keep up with the volume, DHL Express Japan made its largest investment for the company in the country since 1972 – building a brand-new facility for its Tokyo Gateway, more than doubling its previous size and allowing it to process more than 12,000 parcels hourly.

“We are seeing a significant, some might say surprising amount of growth in Japan’s cross-border trade, driven in large part by smaller businesses becoming more aggressive about exporting to international customers,” says Taketo Yamakawa, President and Representative Director of DHL Express Japan. Be it expanding into overseas markets or gaining more ground locally, here are three tips to help Japanese SMEs realize their increasingly lofty ambitions:

1. Test new markets with e-commerce

Many Japanese SMEs will already be familiar with selling online – after all, around 80% of Japanese consumers shop online, predominantly from local merchants. SMEs can apply their existing skills with Amazon, Rakuten and other marketplaces to list their products overseas – allowing them to test demand in a fast and relatively inexpensive way.

“China, the United States, and a range of other countries all have huge demand for Japanese goods,” says Taketo. “Many SMEs are intimidated by the perceived compliance burdens and costs of selling online to overseas customers, but they shouldn’t be. If your logistics partner has an international network, they should be able to walk you through the requirements or manage the entire process themselves. Even if a product doesn’t perform as well as hoped, the capital outlay for your business will be minimal – limited to just one or two parcels, rather than containers of goods.”

Regional manufacturing is increasingly attractive from a cost and quality perspective, allowing Japanese SMEs to support rapid domestic and international sales growth without prohibitive capital costs.

2. Manufacture offshore, ship in direct.

Although “Made in Japan” still commands a reputation for world-class quality, a growing number of businesses are offshoring their operations to China, South-East Asia, and other parts of Asia Pacific. By reducing the cost per product made, regional manufacturing broadens the number of overseas markets which Japanese SMEs can explore and sell to at a profit, whether through e-commerce or more traditional means. It also allows them to sell at higher margins to local Japanese customers – as long as they can ensure fast and reliable imports into Japan.

“Regional manufacturing is increasingly attractive from a cost and quality perspective, allowing Japanese SMEs to support rapid domestic and international sales growth without prohibitive capital costs,” Taketo says. “However, such a strategy only works if the products can be reliably imported into Japan without delays or compromises to customer service standards. If they adopt this model, it’s particularly crucial that SMEs employ delivery services that can handle customs and security on their behalf, whether for small shipment volumes or at far greater scale down the track.”

The market for components and spare parts has proven increasingly profitable for Japanese SMEs

3. Turn components into new products

Sometimes the whole isn’t greater than the sum of its parts. Japanese SMEs may find new and highly lucrative markets for the components of their existing products, particularly when dealing in complex goods like consumer electronics which require ongoing repairs and maintenance. These can supplement or even overtake sales of the SME’s core products.

“Our express gateways are experiencing increased growth from automotive businesses, which are starting to directly distribute repair parts and related goods for export to overseas car buyers,” says Taketo. “Catering to repairs, maintenance, and other after-market needs can allow Japanese SMEs to quickly carve out a niche for themselves. It also provides SMEs with a certain degree of insulation against downturns in demand: previous customers will still require your products for upkeep of their purchases, after all.”