Internet Triggers Western Gold Rush in Japan

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TOKYO -- Japan's rapidly expanding e-commerce market is attracting a growing number of western companies and domestic competitors to the Web, with Amazon.com and Toysrus.com leading the US pack.


Office Depot followed up the Web site presence of its Viking subsidiary with a new site of its own launched last month. Bertelsmann On Line Japan sold Stephen King's new novel exclusively on the Web for two months.


Sony is looking for $100 million in its first year online. Business-to-business cataloger Askul racked up $78 million in its first Web year and Sesyukai and Cecile, two of Japan's largest catalogers, are launching into m-commerce.


Amazon has been testing the Japanese waters for a couple of years and had been slated to open next spring, but an alliance with Osakaya, one of Japan's larger book wholesalers, is likely to move up the timetable to year-end.


Amazon will use Osakaya's new warehouse -- iBookCity -- that was built specifically for e-tailers and only completed in August. It can process a peak of 700,000 to 800,000 books.


The warehouse is the next step in Amazon's careful approach to the Japanese market. Last summer it decided to build a call center in Hokkaido in northern Japan and began advertising in the Japan Times and other national papers looking for service reps, IT managers and other staff.


Last year company efforts to buy a local online bookstore -- Bookservice, one of the most promising Japanese e-tailers -- became unstuck, sources said, but could not reveal the reasons for the failure.


It also held secret talks with Softbank, a major Japanese company with extensive US holdings, about a possible partnership, but those talks broke up as well without any firm commitment.


Amazon's decision to go it alone was prompted, analysts said, by BOL Japan's launch last summer. "We guess Amazon felt it had to hurry up and start here in order to catch up with the Germans," one analyst said.


The Stephen King deal also could have been a catalyst. BOL Japan got permission from Artist House, a Japanese publisher, to sell the book on an exclusive basis for two months -- from Sept. 6 to Nov. 5.


Toysrus.com is looking to open a Japanese Web site before the Christmas rush. The parent company will partner with Softbank e-commerce and McDonald Japan to invest in the new company.


A spokesman here said that Toysrus.com Japan will sell some 2,000 items with selection based on advice from the company's retail business here.


"Toysrus.com Japan will be the most successful e-tailer in Japan," said Den Fujita, president of Toysrus.com Japan and a partner in McDonald Japan. "I think toys are a most suitable category for online shopping."


Office Depot started with a straightforward translation of its English-language Web site as a first stage, said Isamu Odajima, president of both Viking and Office Depot Japan. "Next year we'll try to localize the site."


Office Depot is putting up its own Web sites in many parts of the globe, including the UK, Germany, Italy, France and Australia as well as Japan and several other countries -- eleven in all.


Sonystyle.com launched in the spring and orders have increased on a month-to-month basis, a spokesman said, with orders exceeding 10,000 a month. "PCs are one of our better-selling items," he added.


While the company does not reveal sales figures, sources close to the company think sales so far are nearly 1 billion yen (about $10 million) and "we think we have enough momentum to reach our target number" of 10 billion yen (about $100 million), the spokesman said.


BTB cataloger Askul -- which bills itself as a "happy office network service" on its Web site -- has been online for about a year and earned some 7.8 billion yen (about $78 million) in its first year.


The company's total sales were 47.1 billion yen (about $417 million), up more than 100 percent from the previous fiscal year, while profits grew 52 percent to 1.6 billion yen ($16 million).


Hiroyuki Komaz, vice president of business strategy, described e-commerce business as "incredible" in the spring but said the online advantage lay more in becoming cost-efficient than in total sales, at least for now.


But perhaps the most important deal was one announced Sept. 27 between America Online and DoCoMo, the mobile phone arm of NTT, to fuel the growth of Internet services both companies can offer in Japan, especially through the convergence of PC and mobile Web access.
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