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Japan girds for e-commerce explosion

Japan girds for e-commerce explosion

When e-commerce headlines are ho-hum stateside, biz pubs hunt for news overseas. This week's hot spot: Japan. Despite the country's technological prowess, Japanese businesses have faltered on the Web. The Economist cited statistics from Andersen Consulting that put 1999 e-sales of goods and services at $US500 million, about 3 per cent of the US total. But times are changing in Japan as a veritable sumo tournament of heavy hitters enters the online ring.

Fortune gave the early lead to Masayoshi Son, the aggressive founder of Softbank. North Americans are familiar with Son's Silicon Valley investments, such as his profitable 30 per cent stake in Yahoo. Son's electronic empire in Asia starts with a controlling interest in Yahoo Japan, "a gateway to Son's e-commerce sites, where he hopes to make real money by selling toys, news, books, music, stocks, bonds, insurance or foreign currency", wrote Fortune's Neel Chowdhury. To that end, Softbank has its hands in a variety of online businesses -- CarPoint Japan, E-shopping Toys Japan, E-Trade, and InsWeb, to name a few. Chowdhury called this strategy risky, as the low-margin pricing required for luring customers online "can ravage an Internet company's bottom line". Umm, when did that ever doom a Net startup?

Stories in The Economist and Wall Street Journal suggest that Son will have considerable competition from offline conglomerates, especially Fujitsu. The electronic powerhouses are using e-commerce to position themselves as portals, hopefully before "Japan's giants of retailing, finance and the media wake up," said The Economist. Fujitsu is taking the biggest steps to transform its Internet service into an e-commerce hub -- execs have designs on becoming the next AOL. Merging its two online services, the company plans to add a shopping mall, chat rooms and banking to the mix. Healthy scepticism abounds, though. "To date, (Fujitsu's) core strengths have been engineering and business-to-business services -- not the consumer branding or retail strategies emerging as crucial to e-commerce," wrote the Journal's Peter Landers.

Despite their obvious heft, these slow-moving conglomerates still have the upper hand. The Economist minced no words in saying that "few Japanese firms have a clue how to proceed," considering their strengths lie in manufacturing machines. A trade ministry that has quickly regulated online business and a telephone monopoly don't help either. Moreover, as a story in AsiaWeek pointed out, a major part of the online infrastructure is missing. "In Asia, where cash is king and consumer credit not widely used, it's all but impossible to set up e-shop and accept all major cards as payment," said AsiaWeek's Claire MacDonald. Leery banks are loathe to trust -- or set up their own -- transaction clearinghouses. But with the big kahunas pushing the e-envelope, that could change.


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