The Great Wave of E-Commerce Keeps Growing in Japan

Already the fourth leading e-commerce market in the world, e-commerce sales numbers in Japan have grown steadily in recent years with a compound annual growth rate of 5.2 percent between the years 2018 and 2021, but is set to grow even further this year according to leading data and analytics company GlobalData.

“The Japan e-commerce market has registered sustainable growth over the last five years supported by high mobile and online penetration and high consumer preference for online transactions,” says Ravi Sharma, Banking and Payments Lead Analyst at GlobalData, “Consumers are increasingly shifting from in-store to online purchases, with e-commerce being one of the few areas that continued to register a positive growth even during the COVID-19 pandemic.”

Japan’s e-commerce market numbers have been especially buoyed by the growing successes of international e-commerce retailers Amazon and Yahoo with Japanese consumers, with Amazon particularly looking to prescription drug sales as a way to further establish itself in Japan’s online retail market.

According to the Nikkei newspaper, Amazon is developing plans to partner with small and medium sized pharmacies in Japan from next year when electronic prescriptions will be made available to Japanese consumers for the first time. These plans come following Amazon’s acquisition of North American primary care organisation One Medical, initially announced in July.

“The opportunity to transform health care and improve outcomes by combining One Medical’s human-centered and technology-powered model and exceptional team with Amazon’s customer obsession, history of invention, and willingness to invest in the long-term is so exciting,” Amir Dan Rubin, One Medical CEO, said at the time, “There is an immense opportunity to make the health care experience more accessible, affordable, and even enjoyable for patients, providers, and payers. We look forward to innovating and expanding access to quality healthcare services, together.”

Amazon’s plans for the Japanese market, however, are not without their challenges. Earlier this month, a Labor Union was formed by as many as 15 drivers subcontracting for the e-commerce giant in the Japanese city of Nagasaki, with the drivers raising complaints about working conditions and particularly the exacerbation of issues caused by Amazon’s AI software.

“The AI often doesn’t account for real-world conditions like rivers or train tracks or roads that are too narrow for vehicles,” vice executive chairman of Tokyo Union Tatsuya Sekiguchi, who is assisting the drivers in their union efforts, told Bloomberg, “The results are unreasonable demands and long hours.”

The drivers also suggest that the increased demand being caused by Amazon’s growth in the region is not being taken into consideration with logistics strategising, further compounding workloads for subcontractors working with the retailer.

Amazon, meanwhile, has been quick to suggest that the drivers as subcontractors are not employees of the e-commerce retailer and therefore their working conditions are not its responsibility.

“Drivers are doing their jobs under contract with our subcontractor and they are not our employees,” a company representative reportedly said in a statement to The Asahi Shimbun, one of Japan’s most popular newspapers, “The subcontractor is responsible for drivers’ employment, contracts, operation management and payments.”

Nonetheless, these troubles show no signs of slowing down e-commerce growth in Japan, with 70 percent of Japanese consumers now purchasing products online on a monthly basis following major behavioural changes accelerated by the COVID-19 pandemic.

“The COVID-19 pandemic has brought in a permanent shift in consumer buying behavior pushing them towards online, a trend that is expected to continue,” says Sharma, “As a result, e-commerce sales will increase at a CAGR of 5.2% between 2022 and 2026 to reach JPY27.4 trillion ($237.8 billion) in 2026.”

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