Sometimes it seems like Japan is almost invisible in global e-commerce.

Despite a dynamic domestic e-commerce market and a long tradition of global exports, Japan just  doesn’t seem that interested in selling to the outside world.

But things are changing, and Kazuyoshi Nakazato of Zig Zag is working to make sure they change even faster.

We talk about why Japan is unrepresented in global e-commerce, why that’s changing, some things you should never try to sell online.

It’s a great conversation, and I think you’ll enjoy it.

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Show Notes

  • Why even small e-commerce is global
  • The bowling ball export experiment
  • What are Japan’s biggest export markets for e-commerce
  • How acquire overseas e-commerce customers
  • How to select overseas markets to target
  • How fast are Japanese e-commerce exports growing?
  • How to grow and thrive as a small e-commerce site
  • How to get Japanese founders to think more globally

Links from the Founder

Transcript

Welcome to Disrupting Japan.

Straight Talk from Japan’s most successful entrepreneurs. I’m Tim Romero and thanks for joining me.

Japan is missing out on the global e-commerce boom. Well, there is plenty of e-commerce going on in Japan, but it’s almost all domestic and Japan is really missing out on the growing global market.

However, Kazu Nakazato, founder of Zig Zag is changing that. Japan’s e-commerce exports are still relatively small, but growing at 140% a year. And Kazu is looking to increase that even more.

But as you’ll hear, that’s not easy. Kazu and the team at Zigzag are up against strong entrenched interests, language barriers, and one particularly frustrating aspect of Japanese business culture that we’ll talk about in a few minutes.

Kazu and I also discuss what COVID taught us about the resilience of global e-commerce. Some things you should never try to sell online. And Kazu also shares some really great advice about how to survive and grow as an independent e-commerce site.

But you know, Kashi tells that story much better than I can. So, let’s get right to the interview.

Interview

Tim: So, we’re sitting here with Kazu Nakazato of Zig Zag.

Kazu: Yeah, Zig Zag.

Tim: Who’s helping Japanese e-commerce sites sell globally. So, thanks for sitting down with us. So, I explain really simply what you do, but I think you can explain Zig Zag much better than I can. So, what does Zig Zag do?

Kazu: We offer a service called global base. Our eCommerce site can quickly transform into share site. It’s very simple. All it takes is a single line JavaScript tag. It’s provide marketing input forms, marketing our customer support and payments support.

Tim: That’s a lot for one line of JavaScript to do. So, it covers the translation, payments, logistics?

Kazu: Yes. Shipping.

Tim: Okay. Wow. And do you handle like returns?

Kazu: Returns, yes. And there are 200 countries.

Tim: So, tell me about your customers. Who’s using Zig Zag? What kind of e-commerce sites?

Kazu: Fashion, cosmetics, Anime and entertainment type. For example, Japanese apparel is Beams and Tower records about 2,500 website.

Tim: So, that’s quite a range. So, is it mostly the bigger sites like Tower Records and Beams or small independent sites also using it?

Kazu: Yeah, for example in Fukuoka, very, very small apparel shop. And in Chiba, bowling maker site.

Tim: Like bowling ball maker?

Kazu: Yeah, bowling ball. Very, very heavy.

Tim: I was going to say that’s really expensive to ship.

Kazu: Yeah. FedEx or DHL, air or by ship.

Tim: Exporting bowling balls. Are like Japanese bowling balls, like really high quality or something?

Kazu: Maybe customer is living Saudi Arabia.

Tim: Okay. Where are the biggest export market? Where are they exporting to?

Kazu: Number one is USA. Number two is Hong Kong and Taiwan and China.

Tim: That’s interesting. Before we dive deep and talk about e-commerce in general, I want to back up a little bit and talk about you. So, before you started Zig Zag from like 2010, you were CEO of a company called Growbits, right?

Kazu: Growbits, yes.

Tim: A very similar business model.

Kazu: Growbits is logistic only service.

Tim: So, you left Growbits to start Zig Zag. So, what was the difference between like Growbits and Zig Zag? Because they’re both focused on consumer facing exports for Japanese e-commerce sites. So, what’s the big difference between the two?

Kazu: Growbits is not my company.

Tim: Well, that’s an important difference.

Kazu: And Growbits is broadening logistic only, Zig Zag is a customer support and payment and online support.

Tim: Oh, okay. Yes. So, you left to form like a more full service company. And so you’ve been running Zig Zag since 2015, right? Eight years.

Kazu: Eight years. Yeah.

Tim: So, that’s interesting because 2015 was still kind of early in Japan’s e-commerce boom.

Kazu: The first three years, only one.

Tim: Just you?

Kazu: Yes.

Tim: For three years?

Kazu: Yes.

Tim: Okay. How big are you now?

Kazu: Now? 55.

Tim: 55.

Kazu: Yes. And customer support partner in the Philippine and China and also partner in Chiba. All the team maybe 100 over.

Tim: I mean it’s a lot of growth, but a lot of work over eight years. What’s been your go-to-market strategy? So, how did you get your customers? Do you integrate with Rakuten or Base or Shopify?

Kazu: First core to website. Moshi-moshi faster. Second strategy and IS Partner now in Japan. Cart service, e-Commerce cart in the GMO shop.

Tim: Oh, GMO. Yeah, that’s right.

Kazu: Future shop and Ebisu Mart, EC Bin. These are carts for large commerce site and many commerce site network. IS Partners company Zig Zag service.

Tim: Okay. It’s an option for their customers.

Kazu: Overseas being option on.

Tim: So right now in Japan, what are the biggest e-commerce platforms?

Kazu: Rakuten and Yahoo do not yet offer our service.

Tim: But what about companies like Base?

Kazu: Base is not IS, but e-service supporting.

Tim: Okay, so you can integrate with them?

Kazu: Yes.

Tim: All right. So, that makes sense. But there’s two parts of it. So, it sounds like integration makes it very easy for the users of this e-commerce platform to use your service. But how do you convince these shops to sell overseas? Because it seems like most Japanese e-commerce has no thought to selling overseas. It’s strictly selling in Japan.

Kazu: Social media. In the China market, we approach TikTok, WeChat and Alipay network.

Tim: So, like if you’re running an e-commerce site, you’re talking about the payments, logistics, returns, Zig Zag handles, all that. But there’s also what seems to me to be the most difficult part, which is actually finding the customers.

Kazu: Anime category is a community, Facebook, Twitter.

Tim: That makes sense for something like Anime that has strong word of mouth. Yeah, they have fans. But you also mentioned like some of your biggest customers are like fashion, cosmetics. These are really competitive for internet advertising. So, how do those companies reach customers in say America?

Kazu: Advertising, organic search and organic grounding about 2% and 8% overseas access.

Tim: Really? Yeah. So, are people searching for that specific brand?

Kazu: Yeah, brand and Anime character name.

Tim: For example, you mentioned Beams. So, Beams is kind of a select shop, right? They’re not their own brand. They find cool, interesting products from other brands. So, what are the customers searching for? Are they searching for those other brands?

Kazu: These they increase Instagram and Pinterest.

Tim: So, photos. And so these are like, for example, Beams or Beams like shops running their own Instagram and their own Pinterest and people saying, oh great, click on that.

Kazu: Yes, yes.

Tim: Do you also work with the e-commerce sites overseas, selling into Japan for example, Chinese companies or…?

Kazu: Yeah, from US to over the world and Chinese and maybe Korea. From Korea to worldwide.

Tim: So, for this kind of a strategy, having an internationally enabled e-commerce site, relying on social media or word of mouth advertising or organic search, is there like an ideal type of business perfect for this kind of e-commerce strategy?

Kazu: Promotion is very difficult. Focusing country category forecasting. Taiwan, Hong Kong and figure character hobby is US and EU.

Tim: And is that just because in the US and EU there are communities that are fans of Anime and in Taiwan, Hong Kong, there’s communities that are fans of Japanese fashion.

Kazu: Yes. Fashion category in the America, but Chinese people sizes too wrong America size.

Tim: Oh right, right. Just the sizes.

Kazu: Yes, yes.

Tim: Ah-Huh. I hadn’t thought about that

Kazu: From America, Access. But name is Kim Sang, Vi Sang, Chinese’s name. Very, very many user.

Tim: Are there any kind of goods that you just won’t work with at all? Like what kind of goods just don’t sell well overseas?

Kazu: Very big and very heavy.

Tim: Well, yeah, but you were saying bowling balls were doing …

Kazu: Bowling is rare. Rare case. Very heavy. And very large item is very expensive shipping cost.

Tim: Yeah. So, shipping costs. Yes. Well that makes sense. Fashion is very light. Yes. Anime is digital.

Kazu: Character goods are very light package, videos, trading cards, Pokemon cards …

Tim: Ah, right, right. Collectibles.

Kazu: Yes.

Tim: So, I’m curious about e-commerce in general in Japan. In Europe and especially in the US the end of COVID or let’s say the slowing down of COVID because it’s still here. When COVID has started to go down e-commerce sales have started to go down as well. Is the same thing happening in Japan?

Kazu: No, in Japan. Growth continues, 140% growth.

Tim: From last year?

Kazu: Yes. For overseas.

Tim: We only look inside Japan. That’s still growing very strong?

Kazu: No, inside e-Commerce is down.

Tim: So, within Japan it also came down after Corona. Well, that makes sense. So, e-commerce in Japan seems to be really dominated by like the big three. So, Rakuten and Amazon and Yahoo.

Kazu: … and Mercari

Tim: Oh yeah, Mercari. Do we still see a lot of smaller e-commerce sites?

Kazu: Trends is towards bigger.

Tim: What’s happening to like the small e-commerce sites?

Kazu: Maybe difficult. Very difficult. But each e-commerce shop maybe get chance marketing become simple and social media, Shopify system, easy selling marketing.

Tim: Well, that’s the thing that I’m trying to understand. It’s much easier to start an e-commerce site today than ever before. We have platforms like Shopify, Base, I mean so many of them now. As you mentioned, marketing on social media is really simple. Zig Zag is allowing shipping internationally. Very simple. Flip a switch. But it’s really hard to run an e-commerce site. The market share for the independence sites are getting smaller and smaller.

Kazu: More small.

Tim: Why?

Kazu: Why? Very many players. Very difficult searching for users.

Tim: Too many hard to find?

Kazu: Brown and item, what is originality? Consumer don’t know item originality.

Tim: So, there’s nothing unique about most e-commerce sites. They’re selling the same thing that you can buy on Rakuten? So, what is the secret for a successful small e-commerce site?

Kazu: I think one message, one story, item originality.

Tim: What I think is interesting, even though we’re talking about very small shops, the branding is the most important thing. So, they’re doing something unique. They have a unique brand in people’s minds, even if they’re small and only selling a few goods. That makes sense. I’ve noticed that. So for example, in China, there is huge interest in Chinese e-commerce sites selling to the world.

Kazu: Shein.

Tim: For example. Yeah. I mean they’re an exceptional example.

Kazu: Cheap item, fast cycle.

Tim: Yeah, they’re an exceptional example of that. But even like all these little factories are on Alibaba or they have independence sites, they’re really aggressive in selling to the rest of the world. But Japanese e-commerce sites don’t seem to be so passionate about going global.

Kazu: Maybe Japanese people not global thinking.

Tim: Yeah. Why, why is that?

Kazu: Japanese island and Japanese character, Kana and Kanji character.

Tim: Yeah, but I mean, China uses Kanji too. It’s a Chinese characters.

Kazu: Maybe China is not island.

Tim: Yeah. Well that’s true. It’s a big, big country. What’s the best way to change that way of thinking? How do you get Japanese e-commerce site owners thinking about global market?

Kazu: They maybe change globally.

Tim: But for example, recently the Yen became much cheaper. Like last year it dropped like 25%, which I would think would make every e-commerce site in Japan want to sell overseas. But did it change anyone’s opinion?

Kazu: No.

Tim: Oh, because that’s like pure profit, right?

Kazu: I think why your website provide access 2% or 8% overseas access, I said every e-commerce site marketing people.

Tim: So, you can say that even now, 2 to 8% of your traffic is overseas.

Kazu: But e-commerce marketing people said, our company can’t sell overseas.

Tim: Why? What are they worried about?

Kazu: They think very difficult customer support or disrupt payment. Yes. Japan’s company is just worry too much.

Tim: Okay. Yeah. Well, I agree with that.

Kazu: Let’s try overseas. We say no.

Tim: Do you think it’s improving? Do you think people are getting more open-minded to — well, if business is up 140%, I guess that means more people are doing it now.

Kazu: Maybe for next five years, continued  growth.

Tim: All right, well, listen Kazu, thank you so much for sitting down with me today.

Kazu: Thank you.

Outtro

… and we’re back.

Like almost everything else about the internet, e-commerce did not work out quite like we expected.

I mean, it’s great. Don’t get me wrong. I certainly don’t want to go back to the pre-Amazon, pre-Rakuten brick and mortar days.

Shopping is just so much simpler now, but that brief boom in small, interesting online shops delivering quality goods to a global market might be coming to an end. I mean, I hope not, but we are clearly in a consolidation phase where the big platforms are taking increasing market share.

That’s a shame because the large platform dominance and their focus on convenience and efficiency not only results in a greater conformity of goods available, but it results in lower quality as well. In a way, it is that very convenience of e-commerce that has led to consumers growing acceptance of incredibly low quality or even counterfeit goods. It’s simple economics, really.

When you buy something, you pay more than just the price of that item. You also invest your own time. Maybe you have to wait for the weekend, travel across town to a particular shop, talk to a few people, buy the item and come back home. Your investments much more than that purchase price and the quality you demand will be correspondingly high.

But when your time investment is simply pushing a button on your phone, well, the expectations drop. This consumer sentiment has been leveraged best by Chinese e-commerce giant Shein, who is taking fast fashion to its natural extreme.

Even after last year’s drop in startup valuations, Shein is still worth about $65 billion. And in 2021, they sold over $16 billion in low quality clothes and accessories that often won’t even survive more than a few wearings. But the prices are so ridiculously low that, on average at least, their customers are okay with it.

It’s going to be interesting to see if this kind of market pressure will change the famously high standards of the Japanese consumer. I sincerely hope it does not. But over the years, I’ve learned never to bet on culture to win over market forces.

And this brings us to Kazu’s advice about surviving and thriving as an independent e-commerce site. Get the consumer to invest their time in you, not just their money.

Now, you obviously don’t want to make them drive across town. You want them to spend their time getting to know you and know your brand and know your story. And that’s good advice. Not just for e-commerce startups, but for all startups and business in general.

Your company and your brand needs to occupy a unique place in your customer’s mind.

Even if it’s small, show them something unique and valuable and customers will pay attention.

 

 

If you want to talk more about e-commerce or brand building, Kazu, and I would love to hear from you. So come by disruptingjapan.com/show 201 and let’s talk about it. And hey, if you enjoy the show, share a link online or just tell people about it. In this age of over the top hype, you’d be amazed how much power a simple, honest recommendation has.

But most of all, thanks for listening and thank you for letting people interested in Japanese startups know about the show.

I’m Tim Romero and thanks for listening to Disrupting Japan.