Sector Trend Analysis – E-Commerce market trends in Japan

Note: This report includes forecasting data that is based on baseline historical data.

Executive summary

E-commerce has grown rapidly in Japan over the past five years, especially since the COVID-19 pandemic. Per capita, Japan has the ninth-highest e-commerce sales in the world. The market is highly concentrated, with the top four companies representing 73.0% of the Japanese e-commerce market in 2022.

The most important barrier to e-commerce in Japan is the lack of internet adoption by older consumers. Japan has relatively low rates of internet penetration compared to other Organisation for Economic Co-operation and Development (OECD) countries. Mobile phone e-commerce is also less popular than in other countries, and PC e-commerce is more popular. As a result, PC e-commerce sales are slightly higher than mobile e-commerce sales in Japan, whereas in neighbouring East Asian economies, mobile e-commerce is more popular by a significant margin.

Click-and-collect e-commerce has increased much more rapidly than delivery e-commerce, at 23.6% versus 3.3% compound annual growth rate (CAGR) from 2017 to 2022. Parcel lockers located next to train stations or neighbourhood shops are often more convenient for consumers than home deliveries that require consumers to be present at home.

Canada and Japan have entered into the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which reduces or eliminates tariffs for a majority of goods. Where tariffs do remain, they are very low. E-commerce tariffs do not exceed 10% and are near-zero when their value is less than ¥10,000. Cross-border e-commerce is growing in Japan, but it remains small relative to domestic e-commerce, which indicates that there is still significant room for growth in the market. Luxury goods such as watches and wine are major parts of the cross-border e-commerce market, as Japan is a major market for luxury goods.

 

Socioeconomic profile

Country economic profile

Japan's real goss domestic product (GDP) grew by 1.3% from 2021 to 2022, lower than the 2.0% real GDP growth from 2020 to 2021. Japanese GDP was US$4.23 trillion in 2022, which was 99.9% of real GDP in 2019. The Japanese economy has more or less recovered to pre-Pandemic levels. GDP growth is projected at 5.4% for 2022 to 2023, and will slow down afterwards, with 2.7% CAGR projected from 2022 to 2028Footnote 1. Inflation in Japan is consistently lower than in other countriesFootnote 2. Japan's economy had deflation in 2021, at −0.2%. Nonetheless, inflation reached 2.5% in 2022, and is forecasted at 2.6% for 2023Footnote 1. This is much lower than the OECD in general, which experienced 9.4% inflation in 2022 and is forecasted to experience 6.6% inflation in 2023. It is also lower than in neighbouring countries such as South KoreaFootnote 3.

Japan has a negative balance of trade, at US$−159.5 billion dollars in 2022, or 3.8% of GDPFootnote 4. This is a significant deterioration from 2021, when Japan had a trade deficit of US$25.4 billion in 2021. Japan last posted a positive balance of trade in 2018, at US$1.5 billion.

Historically stable, the Yen has been persistently weakening since 2020Footnote 5. As of November 17th, 2023, the USD/JPY exchange rate was 149.63, up from 103.85 on November 18th, 2020. This currency weakness is one of the causes of both inflation and the increasing trade deficit.

The Japanese economy faces a number of unique challenges. First, the population is aging, with no replacement through births or immigration. Japan has made very little progress on gender equality relative to other OECD countries: Japanese women earn slightly more than half of what their male counterparts earn, and the employment rate stood at 71.9% for women, versus 84.0% for menFootnote 1. According to the World Economic Forum, the gender gap is worsening: Japan was ranked 116th in their Global Gender Gap index in 2022, and fell to 125th place in the 2023 rankingFootnote 6. Household inequality is also increasing: 27.8% of Japan's households were middle class in 2022, down from 29.0% in 2017. The upshot of this increasing inequality, from an E-commerce perspective, is that the number of wealthy individuals will increase, which will expand the market for very high end brandsFootnote 4.

According to the Statistics Bureau of Japan, the largest sectors by employment were manufacturing, wholesale and retail, and medical care or healthcare. Manufacturing and wholesale and retail both accounted for about 10.4 million jobs (16.0% of the total), while medical care, healthcare and welfare accounted for 9.1 million jobs (13.9% of the total). Agriculture and forestry represents 1.9 million jobs (2.9% of total employment). Japan is not self-sufficient on a caloric basis: in 2021, it produced only 31% of its caloric needs, including 90% of its wheat, 80% of its flour, and 100% of its cornFootnote 7. Japan has always had limited arable land (12% of total land area), and cultivated land has decreased by 51% since 1960 due to encroachment by urban areas, industry and infrastructure. Japan imported a total of US$70.2 billion in agricultural products in 2022.

Demographics

In 2022, Japan was the eleventh most populous country in the world, with 125.1 million people in 2022, down from 126.3 million people in 2020Footnote 8. There are no current prospects for Japanese population recovery. According to Euromonitor, the population is set to decrease to 120.2 million by 2030. 97.5% of Japan's population were citizens in 2022. About 2.1% of the population consisted of migrants from other countries in Asia (or Japanese-born individuals with citizenship from another country, as is the case for many Korean-Japanese). Japan can therefore be said to have a very homogenous and rapidly aging population. By 2040, Japan is projected to be in the top-three oldest countries in the world, second in Asia to South Korea, with a median age of 53.7Footnote 9.

Consumer income and expenditures

Average annual consumer expenditure in Japan stood at US$18,416 per capita in 2022, and is expected to increase 5.0% to US$19,345 in 2023. Consumer expenditure is projected to grow at 3.3% CAGR through 2028, reaching US$22,426 at fixed 2022 prices. In 2022, consumer expenditure on food and non-alcoholic beverages was US$2,994, and is expected to increase by a CAGR of 2.9% through 2028, lower than the forecasted CAGR of 3.3% for all consumer expenditure over the same period.

The total value of consumer foodservice sales stood at US$140.8 billion in 2022, down from US$167.3 billion in 2017. Growth is forecasted at 4.2% through 2027, however, with growth being driven by cafés and bars (6.9%), full-service restaurants (5.7%) and street stalls and kisoks (3.7%). Independent outlets are set to grow at 5.9% CAGR, whereas chains will grow at 2.8% CAGR. Growth will be slowest for limited service restaurants, at 1.4% CAGR through 2027.

Global e-commerce

Global e-commerce grew rapidly during the COVID-19 pandemic. Worldwide, online retail sales represented 16% of total retail sales in 2019, and this increased to 19% in 2020Footnote 10. Lockdowns and self-isolation have prompted consumers around the world to switch from in-person purchases to online ordering with delivery.

Recently, global growth in e-commerce has slowed to pre-pandemic ratesFootnote 1. The changes brought by the pandemic are likely structural and permanent, but they also represent a one-time shock to the system. In 2022, world retail sales grew by 2.9% year-over-year, compared to 20.6% from 2020 to 2021 and 30.1% from 2019 to 2020. Growth is forecasted to increase over the coming years, with 8.2% growth projected for 2023 and 9.6% projected per year from 2024 to 2027.

Food and drinks/tobacco products are the two fastest growing categories for e-commerce retail sales growth, with 8.8% and 8.2% worldwide year-over-year growth in 2022. Fashion and appliances/electronics remain the two largest categories, with 16.8% and 18.6% shares of international e-commerce retail sales.

China and the United States accounted for 60.8% of total growth in retail e-commerce sales from 2017 to 2022. China has grown faster than the world average, with 18.7% CAGR growth from 2017 to 2022, as opposed to 17.9% CAGR for the world. E-commerce retail sales grew more slowly in the United States over the same period, with 15.9% CAGR from 2017 to 2022. China and the United States represented 31.4% and 30.7% of global e-commerce retail sales in 2022. Latin America was the fastest growing region in the world, with 37.4% CAGR from 2017 to 2022, followed by Eastern Europe, which grew 30.4% CAGR.

The COVID-19 pandemic has permanently shifted the consumption habits of consumers around the world, especially in middle-income and developing countries. In a 2020 survey of 3700 consumers in 9 countries, the United Nations Conference on Trade and Development found that more than half had increased their online retail purchasesFootnote 11. These shifts in habits transcended socioeconomic lines. For example, in Brazil, online purchases increased among low-income and vulnerable consumers.

E-commerce in Japan

Consumer habits and consumption trends

  • E-commerce growth has driven retail sales growth in Japan over the last six years, especially since the pandemic. Offline sales shrank over the same period.
  • E-commerce grew 4.0% year-over-year in 2021-2022 to reach US$122.4 billion.
  • Both domestic and foreign-owned e-commerce companies operate in Japan. These companies offer convenient shipping options that are adapted to the needs of Japanese consumers.
  • E-commerce is forecasted to see 3.2% current value CAGR through 2027, double the growth rate of offline sales.

Retail e-commerce drove growth in retail sales in Japan between 2017 and 2022. Overall, retail e-commerce grew by 7.3% CAGR from 2017 to 2022, while offline retail shrank by 0.3% over the same period. Total retail sales, online and offline, grew by 0.6% CAGR from 2017 to 2022. Prior to the pandemic, in 2018-19, retail e-commerce grew by 5.3% year-over-year, whereas offline retail shrank by 0.2%. The pandemic caused a significant acceleration of these trends: e-commerce grew by 18.7% year-over-year in 2019-20, while offline sales shrank by 3.1% in the same year, which caused overall retail sales to drop by 0.6%. Offline sales have rebounded somewhat but remail below pre-pandemic levels as of 2022, whereas the growth of e-commerce now appears structuralFootnote 1.

E-commerce growth is expected to slow through 2027, but it will still outpace offline sales. E-commerce sales in Japan are forecasted to grow at 3.2% CAGR from 2022 to 2027, while offline sales are forecasted to grow 1.6% over the same period.

E-commerce and offline retail sales in Japan, historic, US$ million, 2017 to 2022
Category 2017 2018 2019 2020 2021 2022 CAGR* % 2017-2022
E-Commerce 86,067.7 89,117.2 93,880.9 111,436.6 117,669.0 122,434.1 7.3
Offline 713,878.6 714,271.4 713,067.6 690,645.9 692,150.4 701,861.8 −0.3

Source: Euromonitor International, 2023, all rights reserved

*CAGR: Compound Annual Growth Rate

E-commerce and offline retail sales in Japan, forecast, US$ million, 2022 to 2027
Category 2022 2023 2024 2025 2026 2027 CAGR* % 2022-2027
E-Commerce 122,434.1 127,069.1 131,496.6 135,599.7 139,467.7 143,065.0 3.2
Offline 701,861.8 718,198.0 729,677.2 740,770.7 750,693.3 760,261.5 1.6

Source: Euromonitor International, 2023, all rights reserved

*CAGR: Compound Annual Growth Rate

Cross-border e-commerce is increasing

Cross-border e-commerce (CBEC) represented 3.4% of total e-commerce sales in 2022, up from 2.7% in 2017. Cross-border e-commerce experienced 13.1% CAGR from 2017 to 2022 compared 7.3% CAGR for domestic retail e-commerce from 2017 to 2022. CBEC allows Japanese consumers to have access to Western brands, especially luxury brands and specialized goods, such as designer clothing, high-end Swiss watches, and French wineFootnote 12. Japan generally has low import duties on most goods, at between 5% and 10%.

Companies hoping to sell CBEC goods to Japan should be aware of the particularities of the Japanese retail e-commerce environment. First, Japanese websites look very different from Canadian ones: they tend to be text-heavy, since consumers prefer to have as much information as possible before making purchasesFootnote 12. Proper translation of websites by fluent Japanese speakers is absolutely essential to capture the complexities of written Japanese and to properly convey keywords and concepts, and 99% of Japanese citizens are monolingual. Japanese consumers expect high-quality delivery services, such as next-day delivery, scheduled delivery and nearby pick-up locations in convenience stores. Some 90% of e-commerce fulfilment is handled by three companies: Yamato Transport, Sagawa Express, and Japan PostFootnote 13. Most purchases are made by card, but cash-on-delivery and convenience store payment methods are still popular.

Generally speaking, it is easier to work with a local agent or importer than to sell products directly from Canada to Japan on websites such as Rakuten or Amazon. Agents and importers can help exporters clear their products through customs, store inventory in Japan, and co-ordinate with online marketplaces or stores to ship products to customers.

Makuake is using crowdfunding to grow cross-border e-commerce

Makuake is a company that specializes in cross-border e-commerce facilitation for small and medium businesses. Makuake has Japanese and global versions of its website, with the Japanese website selling foreign goods to Japan and the global website selling Japanese goods in foreign marketsFootnote 14. In either case, companies work with Makuake and Japanese importers to list their product on their website and set a crowdfunding target. If this target is reached, then importers will bring the product in and sell it. Otherwise, they will not. This reduces the risk of selling an unknown and therefore unpopular product to the Japanese market.

Products sold on Makuake's Japanese website must be new to the Japanese market. A foreign product that has an established market should be sold through other e-commerce channels.

Foreign and domestic companies fulfill domestic e-commerce purchases

While CBEC has grown significantly in the last few years, domestic e-commerce remains much more popular, with 96.6% market share in 2022. Japan's domestic e-commerce market is fulfilled by both foreign and domestic companies. The top five e-commerce companies in Japan are Rakuten, Amazon, Softbank, Japan Consumers Co-operative, and Aeon Group. Collectively, these five companies have a 77.5% market share. Rakuten, JCC and Aeon are domestic companies, whereas Amazon is a foreign company with domestic operations. The case of Softbank is more complicated: it has a variety of Japanese e-commerce brands, but also operates Yahoo marketplace, which was previously a joint-venture between Softbank and Yahoo! Inc. of the United States before being wholly acquired by Softbank in 2018Footnote 15.

Japanese consumers tend to be loyal, and this is especially true for older consumersFootnote 12. Points systems are used by major e-commerce companies to foster loyalty, and partnerships with other firms are common. For example, Rakuten has partnered with the Lawson chain of convenience stores. Purchases at Lawson give consumers Rakuten points, which can be redeemed on Rakuten for monetary valueFootnote 1. Companies tend to register their users and tailor recommendatiosn to their preferences.

Retail giant Aeon is seeing major grocery e-commerce growth

In 2017, Aeon, Japan's leading retail chain, had only a 0.7% market share of e-commerce sales. By 2022, this share had grown to 4.5%, making Aeon the fifth-largest e-commerce company in Japan. In November 2019, Aeon partnered with the UK's Ocado Group to develop its Aeon NEXT grocery business using their Ocado Smart PlatformFootnote 16 (Aeon NEXT was renamed to Green Beans in 2023). Aeon's interest in developing its online delivery infrastructure was opportune given the upcoming COVID-19 pandemic, but Aeon and Ocado were only able to launch their first consumer fulfillment centre (CFC) in July 2023. Further CFCs will open in Japan in the coming years. In the meantime, Aeon has seen its market share expandFootnote 1, although it struggled to meet consumer demand during the pandemic lockdownsFootnote 17.

Aeon is a conglomerate that operates in a huge number of market segments, including liquor, financial services, and bicycles. Its strength is in direct-to-consumer sales, and many of its component companies have online stores. Green Beans remains Aeon's most developed web platform, however, and its focus is grocery items. As Aeon's CFC infrastructure expands, Green Beans should continue to gain market share in the Japanese e-commerce market.

The growth of live commerce

Live commerce is becoming increasingly popular in Japan, as is the case in other East Asian markets. Live commerce consists of an online livestream broadcast which is paired with an e-commerce store, such that consumers can purchase goods as they watchFootnote 18. In Japan, the appeal of live commerce is that it helps consumers to get more information on products before they make purchases. For example, a consumer shopping for cosmetics can ask questions on whether a product is suitable for their skin typeFootnote 19. Live commerce streamers must be both entertaining and perceived as trustworthy.

Live commerce replicates aspects of purchasing products from department stores or boutiques, since live commerce streamers can act like salespeople and provide advice directly to customers. Live commerce has unique advantages, however. First, companies can gather very detailed data from their customers, such as complaints and feedback. Second, live commerce can operate for low-cost on social media platforms. This simplifies marketing, lowers overhead, and allows companies to customize their retail environmentFootnote 19.

Live commerce saw massive growth during the pandemic. In 2019, live commerce represented 0.1% of all e-commerce in Japan. In 2020, it represented 1.3% of all e-commerce sales, and it has maintained its market share through to 2022. In dollar terms, live commerce sales stood at US$140.8 million in 2017, US$158.0 million in 2019, US$2.4 billion in 2020 and US$2.8 billion in 2022. The increase in the popularity of live commerce is therefore likely to be structuralFootnote 1. Many retailers are using livestreaming to market groceries, apparel and cosmetics while interacting with customers. Partnerships with well-known livestreamers are additionally being explored.

The digital consumer in Japan

Key trends

Internet access

Internet penetration in Japan is less extensive than in other OECD countries. Japan had 118.3 million internet users in 2022, accounting for 94.0% of the population. This is a relatively low ratioFootnote 20. For example, the proportion of internet users in South Korea is 97.9% of the populationFootnote 3. Broadband access was limited to 84.1% of households in 2022, less than Indonesia (85.2%) and slightly more than Thailand (83.9%). If considered as a separate region, Okinawa Prefecture (which includes other islands in the southern Ryukus) has the lowest rate of broadband access, at 79.4%. The central Honshu regions of Chubu and Kanto have the highest rates of household broadband access, at 85.5% and 85.1%, respectively. Only 75.7% of households had personal computers in 2022, although 97.4% of households had mobile phones, of which 89.5% were smartphonesFootnote 1. Many Japanese consumers therefore only access the internet through their phones.

Search engines

The two most popular search engines in Japan are Google, with 76.1% market share, and Yahoo! Japan, with 16.6% market share. Google's market share has been increasing since 2016 from 64.4%, while Yahoo!'s has fallen over the same period from 27.9%. The increased prevalence of Chrome as the default browser in workplaces is a large part has increased the popularity of GoogleFootnote 21. Local search engines are not popular.

Social media platforms

Line is the most popular social media messaging platform in Japan, with 89 million users in January 2022, representing 70.7% of the total population and 75.3% of internet users. Line is used by all ages of internet users: 41.9% of the user's platform base was over the age of 50 in 2022. Facebook has a more limited reach, with 15.6 million users in 2022, equivalent to 13.8% of the eligible population (13 and over). YouTube is the most popular social media platform, with 102 million users in 2022, equivalent to 81.1% of the total population and 86.2% of Japanese internet users. Instagram is relatively popular compared to other Meta platforms, with 46.1 million users, equivalent to 40.9% of the eligible populationFootnote 20.

E-commerce market

With US$148.1 billion in retail sales in 2022, Japan is the third-largest e-commerce market in the Asia-Pacific region, and the fifth largest in the world, behind China, the USA, the United Kingdom and South Korea. Japan was surpassed by South Korea in 2021. Per capita, Japan has the ninth-highest e-commerce retail sales in the world, at US$1,186 per person, and the third-highest in East Asia, behind South Korea and the Hong Kong SARFootnote 1. PCs are slightly more used than mobile phones to make purchases: 51.8% of retail e-commerce sales were made by PC in 2022, compared to 48.2% for mobile phones. Other devices such as tablets are marginal at most. Domestic purchases represented 96.6% of retail e-commerce sales in Japan in 2022, but cross-border e-commerce is gaining rapidly, with 13.1% CAGR from 2017 to 2022, compared with 7.3% CAGR for domestic e-commerce over the same period. Domestic and foreign e-commerce companies share the market: Rakuten and Amazon have the two largest market shares, at 23.6% and 23.0% respectively in 2022.

E-commerce sales and customers

The three most popular categories of products for e-commerce are fashion (16.7%), food (15.8%) and appliances and electronics (15.0%). Food e-commerce sales have increased by 52% since 2017. The pandemic increased the popularity of locker delivery, which prevented contact between delivery people and customers' homes. These lockers have remained popular as they are a low-cost and convenient delivery option, often located near to train stations.

E-commerce market sizes: retail sales including cross border

Japanese e-commerce sales increased by 43.5% from 2017 to 2022, reaching US$148 billion. PC e-commerce remains more popular than mobile e-commerce, but mobile e-commerce growth has outpaced PC e-commerce growth, at 9.1% CAGR from 2017 to 2022 versus 6.1% for PC e-commerce. Foreign e-commerce remains small relative to domestic e-commerce, but has grown at 13.1% CAGR from 2017 to 2022, compared to 7.3% CAGR for domestic e-commerce. The largest product categories are fashion, food and appliances and electronics. Appliances and electronics saw the largest growth at 9.6% CAGR from 2017 to 2022, especially after the start of the COVID-19 Pandemic, followed by food, at 8.7% CAGR. Click and collect e-commerce grew by 23.6% from 2017 to 2022, compared to 3.3% for delivery e-commerce. Delivery remains the most popular fulfilment method, at 69.4% of sales, down from 84.8% in 2017.

E-commerce retail sales by device, product category, delivery method and channel, US$ millions, 2017 to 2022
Category 2017 2018 2019 2020 2021 2022 CAGR* % 2017-2022
E-Commerce 103,267.9 106,926.8 112,642.5 133,706.6 142,371.6 148,137.1 7.5
E-commerce by device
Mobile E-Commerce 46,173,1 48,989.0 52,799.4 63,763.6 68,218.6 71,391.9 9.1
PC E-Commerce 57,094.8 57,937.8 59,843.1 69,943.0 74,153.0 76,745.2 6.1
Cross-border e-commerce
Foreign E-Commerce 2,756.9 3,046.6 3,719.8 3,917.4 4,602.0 5,095.4 13.1
Domestic E-Commerce 100,511.1 103,880.3 108,922.8 129,789.3 137,769.5 143,041.6 7.3
E-commerce by product category
Fashion 17,452.9 18,399.0 19,413.8 21,910.1 23,435.3 24,687.8 7.2
Health and Beauty 7,620.7 8,028.7 8,398.6 9,053.4 9,503.2 10,115.9 5.8
Appliances and Electronics 14,096.0 15,157.6 16,192.4 19,070.4 20,709.5 22,252.6 9.6
Drinks and Tobacco 4,373.5 5,213.5 4,033.0 4,655.7 5,071.2 5,472.9 4.6
Food 15,385.7 16,287.9 17,186.0 19,625.8 21,953.4 23,368.7 8.7
Home Products 5,531.9 5,844.7 6,234.3 6,799.0 7,115.8 7,300.8 5.7
Other Products 38,807.3 37,995.4 41,184.4 52,592.1 54,583.3 54,938.4 7.2
Delivery vs pickup e-commerce
Click-and-Collect E-Commerce 15,745.6 17,651.7 21,103.5 30,751.4 38,173.2 45,366.2 23.6
Delivery E-Commerce 87,522.3 89,275.1 91,539.1 102,955.3 104,198.4 102,770.9 3.3

Source: Euromonitor International, 2023, all rights reserved

*CAGR: Compound Annual Growth Rate

All food and drink categories experienced positive growth in online sales from 2018 to 2023, most notably for soft drinks, edible oils, processed fruit and vegetables, and sweet biscuits, snack bars and fruit snacks. Soft drinks are the largest food and drink category, surpassing processed meat, seafood and meat alternatives. Most growth occurred after the start of the COVID-19 pandemic in 2020.

E-commerce retail sales of packaged foods by category in Japan, US$ millions, 2018 to 2023
Category 2018 2019 2020 2021 2022 2023 CAGR* % 2018-2023
Total Store-Based Food and Drink Sales[1] 195,216.1 195,426.5 197,653.6 198,201.1 202,610.2 210,772.3 1.5
Total E-commerce Food and Drink Sales[1] 8,698.8 8,864.5 9,869.0 10,311.2 10,929.0 11,697.6 6.1
Rice, pasta and noodles 1,188.5 1,190.1 1,270.9 1,272.4 1,276.5 1,349.9 2.6
Dairy 748.4 763.8 798.8 793.1 807.8 840.1 2.3
Plant-based dairy 34.4 38.2 41.0 41.4 41.6 42.4 4.3
Processed meat, seafood and meat alternatives 1,469.8 1,500.5 1,584.3 1,645.3 1,653.1 1,707.1 3.0
Sauces, dips and condiments 575.9 589.7 678.2 692.7 705.3 721.5 4.6
Baby food 76.0 76.8 76.1 78.0 81.3 84.9 2.2
Baked goods 638.3 655.7 651.6 711.4 754.2 801.2 4.7
Sweet biscuits, snack bars and fruit snacks 173.0 185.0 225.8 234.8 242.5 255.7 8.1
Savoury snacks 405.3 419.4 500.9 542.9 565.2 589.9 7.8
Confectionery 430.2 442.6 523.7 519.3 536.6 566.9 5.7
Ice cream 167.1 169.4 208.1 224.7 228.0 239.0 7.4
Edible oils 57.8 63.8 72.3 76.3 88.3 86.9 8.5
Meals and soup 657.2 694.9 760.9 829.2 897.7 942.4 7.5
Breakfast cereals 32.2 33.3 39.9 43.0 43.5 43.8 6.3
Sweet spreads 34.3 34.5 41.4 40.9 40.8 41.8 4.1
Processed fruit and vegetables 67.5 70.5 84.6 89.9 94.7 101.0 8.4
Hot drinks 536.3 538.2 569.8 616.5 646.2 684.9 5.0
Soft drinks 1,432.4 1,420.9 1,725.1 1,867.8 2,248.8 2,635.7 13.0
Alcoholic drinks 688.6 697.5 896.9 977.6 1,064.6 NC

Source: Euromonitor International, 2023, all rights reserved

*CAGR: Compound Annual Growth Rate

1: Excluding fresh food and alcoholic drinks

NC: Not calculable

Between 2018 and 2023, store-based packaged food sales increased by 1.5% CAGR. Online packaged food sales increased by 4.5% CAGR over the same period, and total online food and drink sales increased by 6.1% CAGR, driven by a very rapid increase in soft drink sales. As such, e-commerce now represents 4.9% of the Japanese packaged food, up from the 4.3% share of sales it held in 2017. Store-based food retailing still remains overwhelmingly popular.

Store-based and e-commerce retail sales of packaged foods by % breakdown in Japan, 2018 to 2023
Category Outlet Type 2018 2019 2020 2021 2022 2023 CAGR* % 2018-2023
Total Store-Based Packaged Food Sales 95.7 95.6 95.3 95.2 95.1 95.1 1.9
Total E-Commerce Packaged Food Sales 4.3 4.4 4.7 4.8 4.9 4.9 4.5
Edible Oils Store-Based Retailing 94.9 94.7 94.5 94.3 94.2 94.1 5.1
Edible Oils E-Commerce 5.1 5.3 5.5 5.7 5.8 5.9 8.5
Sauces, Dips and Condiments Store-Based Retailing 95.8 95.7 95.5 95.4 95.3 95.2 1.9
Sauces, Dips and Condiments E-Commerce 4.2 4.3 4.5 4.6 4.7 4.8 4.6
Meals and soup Store-Based Retailing 96.5 96.3 96.1 95.8 95.7 95.6 3.0
Meals and soup E-Commerce 3.5 3.7 3.9 4.2 4.3 4.4 7.5
Sweet Spreads Store-Based Retailing 95.9 95.8 95.6 95.5 95.4 95.3 1.2
Sweet Spreads E-Commerce 4.1 4.2 4.4 4.5 4.6 4.7 4.1
Baby Food Store-Based Retailing 90.4 90.0 89.8 89.4 89.5 89.5 0.2
Baby Food E-Commerce 9.6 10.0 10.2 10.6 10.5 10.5 2.2
Dairy Store-Based Retailing 95.4 95.3 95.3 95.1 95.1 95.1 1.1
Dairy E-Commerce 4.6 4.7 4.7 4.9 4.9 4.9 2.3
Plant-based dairy Store-Based Retailing 95.3 95.2 95.2 95.1 95.0 94.9 2.5
Plant-based dairy E-Commerce 4.7 4.8 4.8 4.9 5.0 5.1 4.3
Baked Goods Store-Based Retailing 97.0 96.9 96.9 96.8 96.8 96.8 2.9
Baked Goods E-Commerce 3.0 3.1 3.1 3.2 3.2 3.2 4.7
Breakfast Cereals Store-Based Retailing 94.2 94.0 93.9 93.7 93.6 93.6 4.3
Breakfast Cereals E-Commerce 5.8 6.0 6.1 6.3 6.4 6.4 6.3
Processed Fruit and Vegetables Store-Based Retailing 96.1 96.0 96.0 95.8 95.8 95.8 6.7
Processed Fruit and Vegetables E-Commerce 3.9 4.0 4.0 4.2 4.2 4.2 8.4
Processed Meat, Seafood, Alts. Store-Based Retailing 95.8 95.7 95.7 95.5 95.5 95.4 1.4
Processed Meat, Seafood, Alts. E-Commerce 4.2 4.3 4.3 4.5 4.5 4.6 3.0
Rice, Pasta and Noodles Store-Based Retailing 92.7 92.6 92.6 92.4 92.4 92.3 1.3
Rice, Pasta and Noodles E-Commerce 7.3 7.4 7.4 7.6 7.6 7.7 2.6
Confectionery Store-Based Retailing 95.0 94.9 93.6 93.4 93.5 93.5 −0.3
Confectionery E-Commerce 5.0 5.1 6.4 6.6 6.5 6.5 5.7
Ice Cream Store-Based Retailing 96.7 96.7 96.0 95.7 95.7 95.7 1.6
Ice Cream E-Commerce 3.3 3.3 4.0 4.3 4.3 4.3 7.4
Savoury Snacks Store-Based Retailing 96.1 96.1 95.4 95.1 95.0 95.0 2.2
Savoury Snacks E-Commerce 3.9 3.9 4.6 4.9 5.0 5.0 7.8
Sweet Biscuits, Snack Bars and Fruit Snacks Store-Based Retailing 96.0 95.8 95.0 94.8 94.7 94.7 1.7
Sweet Biscuits, Snack Bars and Fruit Snacks E-Commerce 4.0 4.2 5.0 5.2 5.3 5.3 8.1

Source: Euromonitor International, 2023, all rights reserved

*CAGR: Compound Annual Growth Rate (retail sales)

Company shares

Four Japanese e-commerce companies represent 73.0% of the market. Softbank Corp has gained market share rapidly in the last five years by growing its main brand, Yahoo Marketplace, and by acquiring other brands such as Zozotown. This has allowed it to become the third largest e-commerce company in Japan. The two leading companies, Rakuten and Amazon, both saw their market share increase from 2017 to 2022, and now represent 46.6% of the Japanese e-commerce market. The Japan Consumers Cooperative Union, for its part, saw its market share decrease from 14.1% to 12.9%, such that it fell from the third-place company to the fourth place company. Retail giant Aeon has massively expanded its online presence. It represented only 0.7% of e-commerce sales in 2017, and increased its market share to 4.5% in 2022.

Top-10 E-commerce company shares in Japan: historical retail sales, %, 2017 to 2022
Company name 2017 2018 2019 2020 2021 2022
Rakuten Group Inc 17.1 17.9 19.5 20.8 22.8 23.6
Amazon.com Inc 16.8 18.5 20.0 21.5 23.2 23.0
Softbank Corp 5.3 6.2 10.0 13.1 12.9 13.5
Japan Consumers' Co-operative Union 14.1 13.9 13.4 11.8 12.3 12.9
AEON Group 0.7 0.9 1.3 1.5 1.7 4.5
Japanet Takata Co Ltd 1.7 1.5 1.7 1.4 1.4 1.5
KDDI Corp 0.8 1.0 1.1 1.1 1.1 1.4
Yodobashi Camera Co Ltd 1.0 1.0 1.0 1.0 1.1 1.2
Bic Camera Co Ltd 0.6 0.6 0.7 0.7 0.8 0.9
Fast Retailing Co Ltd 0.4 0.5 0.7 0.8 0.8 0.9
Others 41.5 38.0 30.6 26.3 21.9 16.6
Source: Euromonitor International, 2023, all rights reserved

Brand shares

The largest single e-commerce brand in Japan is Rakuten Group's Marketplace, which had a 23.3% market share in 2022. Amazon's e-commerce sales were split between Amazon and Amazon Marketplace, with the latter being a platform for third-party sellers. The second-largest e-commerce brand in Japan is Co-op, which sells products for members of the Japan Consumers Cooperative Union.

Top-20 E-commerce brand shares in Japan: historical retail sales, %, 2017 to 2022
Brand name Company name (GBO) 2017 2018 2019 2020 2021 2022
Rakuten Marketplace Rakuten Group Inc 16.9 17.6 19.3 20.5 22.5 23.3
Co-op Japan Consumers Cooperative Union 14.1 13.9 13.4 11.8 12.3 12.9
Amazon Amazon.com Inc 9.9 11.0 11.8 12.6 13.3 12.5
Amazon Marketplace Amazon.com Inc 6.8 7.6 8.3 9.0 9.9 10.6
Yahoo Marketplace Softbank Corp 5.0 5.7 6.8 10.0 9.3 9.4
Aeon AEON Group 0.7 0.9 1.3 1.5 1.7 4.5
Zozotown[1] Softbank Corp 2.2 2.6 2.7 2.7 3.1 3.6
Japanet Takata Japanet Takata Co Ltd 1.7 1.5 1.7 1.4 1.4 1.5
au PAY Market/au Wowma![2] KDDI Corp 0.8 1.0 1.1 1.1 1.1 1.4
Yodobashi Camera Yodobashi Camera Co Ltd 1.0 1.0 1.0 1.0 1.1 1.2
Bic Camera Bic Camera Co Ltd 0.6 0.6 0.7 0.7 0.8 0.9
Uniqlo Fast Retailing Co Ltd 0.4 0.5 0.7 0.8 0.8 0.9
Belluna Belluna Co Ltd 0.8 0.8 0.7 0.7 0.7 0.8
Suntory Wellness Suntory Holdings Ltd 0.7 0.7 0.7 0.6 0.6 0.6
DHC DHC Corp 0.8 0.7 0.7 0.6 0.5 0.6
Omni-7 Seven & I Holdings Co Ltd 0.9 0.9 0.8 0.7 0.7 0.6
Nitori Nitori Holdings Co Ltd 0.2 0.3 0.3 0.3 0.5 0.5
Lohaco Softbank Corp 0.4 0.5 0.5 0.4 0.4 0.4
Yamada Denki Yamada Holdings Co Ltd 0.4 0.4 0.4 0.4 0.4 0.4
Dinos Fuji Media Holdings inc 0.5 0.5 0.5 0.4 0.3 0.4
Others Others 35.2 31.3 26.6 22.8 18.6 13.0

Source: Euromonitor International, 2023, all rights reserved

1: Company was Zozo Inc in 2018 and Start Today Co in 2017

2: KDDI Corp's brand in Japan was au Wowma! until 2019

Opportunities for Canadian suppliers

Opportunities from the Comprehensive and Progressive Agreement for Trans-Pacific Partnership

Canada and Japan have entered into the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which entered into force on December 30th, 2018Footnote 22. The CPTPP gives Canadian agriculture and agri-food products preferential market access to key export markets, including Japan. Under the agreement, tariffs will be eliminated or reduced on a wide range of Canadian exports for the agricultural sector, including meat, grains, pulses, maple syrup, wines and spirits, seafood, and other agri-food products.

Japan has eliminated tariffs on close to 32% of tariff lines on agriculture and agri-food products after entering into force on December 30th, 2018. A further 9% of tariff lines will provide preferential tariff treatment through permanent quotas and country-specific quotas for Canada. The remaining tariff lines will provide tariff elimination or reductions over a period of up to 20 years, or reductions of the in-quota or out-of-quota tariffs. Global Affairs Canada's overview of the CPTPP and Canada's agriculture and agri-food sector provides a detailed description of these changes.

The CPTPP encourages and streamlines rules of origin for members, allowing for clear identification of the true origin of a product. This creates opportunities for Canadian manufacturers to market their goods as authentically Canadian.

One of the first steps before entering the market is to determine whether or not a product is authorized for sale in Japan. There could be restrictions due to phytosanitary or food safety related concerns that can prevent a product from being imported. Products must meet Japanese regulations for food ingredients, especially with regard to food additives.

Exporters are strongly recommended to work with the local import agent, distributor, and the end-user to make sure the products are in compliance with Japanese regulations and all proper documentation has been completed. Further information can be found in the Canadian Food Inspection Agency's Exporting food out of Canada guideFootnote 23 and the Trade Commissioner Service's Step-by-Step Guide to ExportingFootnote 24.

Japan's Ease of Doing Business ranking and e-commerce business environment

With a score of 78.0 in 2020, Japan ranked 29th out of 190 countries in the world when it comes to Ease of Doing BusinessFootnote 25. This is a very low ranking for a country of its size, indicating that Japan is a challenging business environment for foreign companiesFootnote 26. The Ease of Doing Business score is based on ten categories. Japan ranks highly in resolving insolvency (3rd), getting electricity (14th) and dealing with construction permits (18th). Starting a business and getting credit are incredibly challenging in Japan: it ranked 106th in the world in 2020 for starting a business and 94th for getting credit. Prior to the COVID-19 pandemic, it took 11 days, and 8 official procedures, to start a business in JapanFootnote 26. A mistake in any one procedure may mean one has to start over. There have been some reforms: prior to 2020, companies operating in Japan needed to make and register a company seal known as a hanko, at a cost of ¥10,000-¥20,000. This requirement is now voluntary rather than mandatoryFootnote 27. It is worth noting that the World Bank has paused updates on the Ease of Doing Business report as of 2021 due to data irregularities, and reforms have therefore not been captured by rankings.

Despite these barriers, laws governing e-commerce in Japan are straightforward. There are no laws specifically regulating business to business (B2B) e-commerce. Business to consumer (B2C) e-commerce laws require businesses to provide information such as cancellation policy to consumers, prohibit junk emails, and prohibit excessively disadvantageous terms of serviceFootnote 28. Import duties are low on most products: tariffs are generally between 5% and 10% on most products, and the import threshold is ¥10,000. Below this threshold, rates are effectively zeroFootnote 12.

For more information

The Canadian Trade Commissioner Service:

International Trade Commissioners can provide Canadian industry with on-the-ground expertise regarding market potential, current conditions and local business contacts, and are an excellent point of contact for export advice.

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Resources

  • Euromonitor International, 2023
  • Euromonitor International, Economy, Finance and Trade: Japan, March 2022
  • Euromonitor International, Retail E-Commerce in Japan – Analysis, March 2023
  • Euromonitor International, Retail in Japan – Analysis, March 2023
  • Euromonitor International, Income and Expenditure: Japan, August 2023
  • Euromonitor International, Japan in 2040: the Future Demographic, June 2020
  • OECD, Trade in goods and services forecast (indicator), 2023. Accessed on 17 November 2023
  • Ocado Group, Our partnership with AEON, 2023
  • Makuake Inc., About Us, 2024
  • Statistics Bureau of Japan, Labour Force Survey: 2022 Yearly Average Results, January 2023. Accessed on 17 November 2023
  • TA-NE Japan (blog). Live commerce in Japan – transforming online shopping. March 2022
  • World Bank Group. Data: Population, total, 2023. Accessed on 30 November 2023
  • World Bank Group. Ease of Doing Business Scores, 2021. Accessed on 30 November 2023
  • Wall Street Journal Markets (WSJ Markets). Japanese Yen: USDJPY (Tullett Prebon). Accessed on 17 November 2023
  • UN News. Pandemic has forever changed online shopping, UN-backed survey reveals, October 2020
  • UN News. Global e-commerce jumps to $26.7 trillion, fuelled by COVID-19, May 2021
  • World Economic Forum: Global Gender Gap Report, June 2023
  • International Trade Association. Japan – Country Commercial Guide, November 2022
  • Cross, John. Japan is the 29th Easiest Country In Which To Do Business. Here's What That Means. Mailmate, November 2020
  • Holm Perrault, Alexandre. Sector Trend Analysis – E-commerce market trends in South Korea. Agriculture and Agri-Food Canada, Global Analysis. September 2023
  • Monks, Adam. A Guide to the Japanese Ecommerce Market for Cross-Border Brands. ESW, October 2021
  • Dunn, James. An Introduction to Shipping for E-commerce in Japan. Blog post (Medium), March 2018
  • Chin, Kimberly. Altaba Sells Remaining Yahoo Japan Shares. Wall Street Journal, September 2018
  • Arora, Arun, with Daniel Glaser, Aimee Kim, Philipp Kluge, Sajal Kohli and Natalya Sak. It's showtime! How live commerce is transforming the shopping experience. McKinsey Digital. July 2021
  • Kawai, Ken and Takashi Nakazaki. Digital Business Laws and Regulations Japan. International Comparative Legal Guides, 2023
  • Kemp, Simon. Digital 2022: Japan. Data Reportal, February 2022
  • Reidy, Susan. Focus on Japan. World-Grain, April 2023
  • Ando, Ritsuko. Japan's fussy food shoppers finally go online amid pandemic. The Japan Times, July 2020
  • Shibata, Nana. Japanese companies graduate from 'hanko' stamps era. Nikkei Asia, June 2020
  • Yamada, Yuji. Most popular search engines in Japan. The Egg, 2022
  • Global Affairs Canada. CPTPP partner: Japan. August 2023
  • Global Affairs Canada. CPTPP explained. August 2023
  • Canadian Food Inspection Agency. Exporting food: a step-by-step guide. December 2019
  • Trade Commissioner Service. Step-by-Step Guide to Exporting. September 2022

Sector Trend Analysis – E-Commerce market trends in Japan
Global Analysis Report

Prepared by: Alexandre Holm Perrault, Market Analyst

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