Complex distribution channel

 In addition to severe quality requirements of Japanese customers, Japanese distribution channel in industrial market is one of the most complex and toughest things for foreign manufacturing companies.

 

 Most of foreign companies think they can sell their products directly to Japanese end-users. However, it is almost impossible to do it in Japanese industrial market. There are generally one or two distribution companies between end-users and foreign manufacturing companies, especially when end-users are big companies. The reasons are followings?:


1. Risk

For Japanese end-users, they do not want to do business directly with foreign manufacturing companies as it is simply risky to do it compared to doing business with Japanese companies. So end-users often request foreign companies to sell their products through Japanese trading companies.


2. Payment condition
End-users do not pay money immediately after receiving products. In the worst case, they pay money 6 month after receiving products, which is of course not acceptable for foreign companies. So there is no choice for foreign companies to sell through Japanese companies that can accept such long-term payment condition.


3. Stock
End-users do not want to have extra stock, so they usually purchase products with small amount. On the other hand, they often request product manufacturer to deliver products with short delivery time. (Imagine Toyota’s?Kanban?or Just-In-Time System) As a consequence, end-users request product manufacturer to have enough stock and deliver immediately as soon as they receive orders, which is almost impossible for them.


 Because of the above reasons, foreign companies would need to sell their products through Japanese distributors. And it is quite common to sell their products through not only one distributor but also two distributors. And each distributor add margin of 10 – 30%.

 Therefore please understand that?prices of your products to end-users will be much higher (it can be 2 or 3 times higher) than you imagine, as Japanese distributors increase these prices. And this is Japanese traditional distribution channel.

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