Terrie's Take 891 - Parcel Delivery Crisis Threatens Amazon's Japan Growth, e-biz news to Japan

Terrie's Take terrie at mailman.japaninc.com
Sun Apr 9 22:44:46 JST 2017

* * * * * * * * TERRIE'S TAKE - BY TERRIE LLOYD * * * * * *
A weekly roundup of news & information from Terrie Lloyd, a long-term 
technology and media entrepreneur living in Japan. 

General Edition Sunday, April 09, 2017, Issue No. 891

- What's New -- Parcel Delivery Crisis Threatens Amazon's Japan Growth
- News -- Japanese whiskies take 3 of top 13 awards
- Upcoming Events
- Corrections/Feedback
- Travel Picks -- Korea Town in Tokyo, Green Tea Fields in Shizuoka
- News Credits

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This last week, one of Japan's big 3 parcel delivery companies, Yamato, 
dropped a bombshell when a "inside source" told a major daily newspaper 
that they would gradually end their same-day deliveries for Amazon Prime 
customers. Apparently the company is already negotiating with Amazon to 
raise its rates on regular deliveries and to completely phase out 
same-day ones. Even as this development broke, Amazon Japan was 
scrambling to replace its second supplier in four years, by cutting a 
deal with Japan Post to take over Prime deliveries. What does Japan Post 
have that Yamato does not? Better national infrastructure, greater 
overall manpower, and a government exemption to park unattended - 
something that is illegal for private firms. But even with these points, 
Japan Post's current home delivery capacity is only about a third of 

This is a huge decision for Yamato, which took over the Amazon 
relationship from Sagawa in 2013 after Sagawa had a falling out with 
Amazon over wanting to increase prices. The year after Yamoto's sales 
jumped 10% to JPY150bn while Sagawa's dropped by JPY60m (no doubt 
picking up other clients in the ever-expanding online shopping sector to 
lessen the impact). Rumor has it that Amazon has been paying Yamato as 
little as JPY250 per delivery (drivers apparently get JPY150) and this 
coupled with the policy of giving customers the right to receive 
multiple visits until a delivery is completed has been the straw that 
broke the camel's back. There is no indication yet of what Japan Post is 
charging for the same service, but we can imagine that it is going to be 

This development with Yamoto is not a surprise to those in the online 
shopping industry. Sectoral sales have ballooned from JPY900bn annually 
in 2010 to around JPY11trn last year, and will further swell to JPY20trn 
in 2020. Yamato delivered roughly 1.8bn parcels in FY2016. Yamato has 
already said in a statement about labor improvement measures that it 
will probably introduce peak pricing as a way of spreading out delivery 
loads, as well as increasing the evening delivery window from just one 
hour (too tight for drivers) to two hours. When we look at the 
multiplying "failed delivery" notices to our own address, we marvel at 
the inefficiency of the concept, and wonder why the whole scheduling 
thing isn't just simply put online, replete with auto-reminders to 
customers' mobile phones and penalties for not being home at the 
appointed time.

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[...Article continues]

As far back as two years ago (2015) Rakuten and Japan Post started a 
collaboration to improve delivery efficiency by setting up trial 
delivery lockers in public locations around Tokyo. The problem has been 
that while the lockers have been popular with single women who are 
reluctant to meet delivery drivers at their front doors, most online 
shopping customers still want home delivery and hours that accommodate 
their working hours and other commitments.

Perhaps not coincidentally to the Yamato news, Rakuten and Japan Post 
made a new announcement that they would try expanding collaboration to 
reduce the number of repeat visits required to deliver a package. They 
came up with four key areas of logistics improvement:
* Increasing third-party pick up locations so that customers can 
(convenience stores, post offices, HAKO POST, and Rakuten Boxes)
* Implementing client designated pick-up locations
* Expanding notification services, especially online
* Providing incentives to customers who are present during their 
appointed place/time window, with Rakuten Super Points

With Amazon down to its last possible major delivery partner, Japan 
Post, one wonders where the company will go from here in order to 
continue expanding its JPY1.16trn/year (FY2016) business in Japan? 
Although Amazon is not commenting publicly, their losing Yamato forces 
them into the arms of a semi-government owned company that may lack the 
commercial commitment to keep Amazon deliveries as competitive as its 
Prime customers have come to expect. While we can reasonably assume that 
for now the two parties have come to commercial agreement on costs and 
service levels, we give it a year before Amazon is being pushed to 
accept higher fees and slower delivery times. This may threaten Amazon's 
Japan growth and in fact, could strangle it if the company doesn't find 
another supplier. Luckily for them, they recently have embarked on a 
China export business out of Japan that will make up the revenue slack 
temporarily, but which will become badly exposed if China-Japanese 
politics breaks out again.

No doubt Amazon is thinking to the midterm (5-10 years out). We believe 
that delivery drones will be allowed in Japan as an early adopter 
country, and it's not inconceivable that Japan will become a leader in 
this field, due to its declining population. Whether airborne or 
self-driving drones will be the future is not clear at this point, 
although with the rapid increase in apartment dwellers, an airborne 
delivery system equivalent to a smart Roomba vacuum cleaner (those 
things are noisy but amazing) could mean veranda landings and 
better-than-front-door service.

Another midterm option would be to bring in non-Japanese to execute 
actual deliveries. Do they need to speak Japanese to hand over a parcel? 
No, not really. A 3-way Facechat with a Japanese-speaking call center 
could solve any customer inquiries, while Google Maps is now 
sufficiently accurate that a foreign delivery person could find most 
addresses while navigating in their own language. There are already some 
foreign delivery people employed in Tokyo. We remember back in 2013 
seeing one foreign guy on a Yamato three-wheeler delivering packages 
around Sakura Shimmachi (Setagaya Ward, a very conservative upmarket 
suburb). We saw him working in the area for some months, so obviously 
the locals were OK with it.

In the short-term, Amazon may decide to start its own delivery company 
or to invest in a second tier business. There are plenty of regional 
trucking companies who'd love to compete with the 3 majors. But to do 
this, Amazon would also have to invest significant effort into helping 
the new kid get technology and to rationalize the aforementioned 
delivery options.

Another short-term option would be to do away with delivery trucks 
altogether and move to light motorcycles (like Japan Post and Ricoh 
copier supply guys) or bicycles (like Uber Eats). Bicycles are 
particularly interesting because coupled with a low-cost barrier to 
entry, the task of delivering parcels could be democratized and farmed 
out to a freelancer group of a much broader age range - like college 
kids who don't yet have a license. The other great thing about bicycles 
is that now that you can rent them, so the parking fines are almost 

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+++ NEWS

- Pasona brings in first group of Filipina housemaids
- Preemptive nationalization of 273 uninhabited islands
- Lawson enjoys record profit
- Japanese whiskies take 3 of top 13 awards
- 7-Eleven parent antes up in USA

=> Pasona brings in first group of Filipina housemaids

Six licensed outsourcing companies led by Pasona group are now hiring 
and managing housemaids from the Philippines on 3-year contracts to work 
for Japanese customers in Japan's so-called "special zones" which 
include Tokyo, Osaka, and Yokohama. The first group of 25 ladies came in 
with outsourcing company Pasona last month and are undergoing training 
before being assigned to homes around the capital. The official job 
title of the ladies is "Foreign homemaking support personnel," a term 
apparently designed to avoid the impression that they are laborers or 
immigrants. ***Ed: Can't call a spade a spade with the current 
right-leaning political environment. Still, 25 down and 100,000 to go... 
Wait until they start falling in love and getting married here. Then, 
maybe, they can become immigrants.** (Source: TT commentary from 
mainichi.jp, Apr 08, 2017)


=> Preemptive nationalization of 273 uninhabited islands

Via the government's Headquarters for Ocean Policy entity, the Abe 
administration this week embarked on a preemptive effort to register 
Japan's ownership of 273 uninhabited remote islands as national 
property. The government said it took the action to forestall any claims 
by China or other nations that the islands may be close to. ***Ed: 
Although we don't know the details, we were intrigued by the government 
also saying it would "support the lives of residents on such islands". 
What does that mean exactly, we wonder? Can we move there and draw a 
pension?** (Source: straitstimes.com, Apr 07, 2017)


=> Lawson enjoys record profit

FY2016 has been a great year for Japan's "conbini" convenience stores. 
The nation's second largest operator is Mitsubishi-controlled Lawson, 
which owns 13,111 stores nationwide. The group company saw a record 
operating profit of JPY74bn for the year, 2% up on the previous year. 
Revenue rose to JPY630bn. Lawson puts its ongoing growth down to surging 
consumer interest in healthy products such as green smoothies and 
low-sugar bread, as well as pre-made meals. Other business units in the 
group that also did well were its deli chain, Seijo Ishii [Ed: One of 
our favorite stores!] and United Cinemas. (Source: TT commentary from 
asia.nikkei.com, Apr 08, 2017)


=> Japanese whiskies take 3 of top 13 awards

UK-based Whisky Magazine and The Drinks Report have just announced their 
2017 World Whiskies Awards, and of the 13 categories 3 Japanese whiskies 
took top spot. Among entries from Canada, UK and USA, Kirin's Fuji 
Gotemba distillery won the Best Grain award with its Single Grain 25 
Year Old Small Batch. The product is aged in ex-Bourbon barrels for the 
full 25 years, and goes through two distillation processes to come to 
market. Price? About JPY130,000 per 700ml bottle outside Japan...! 
***Ed: Why are they aging Whisky in Bourbon barrels?" we wondered. The 
reason was apparently cost-motivated initially, but then led to a huge 
fan base of the vanilla/caramel taste imparted to the base spirit. 
Interesting reading.** (Source: TT commentary from dmarge.com and other 
sources, Apr 03, 2017)

http://bit.ly/2olXw2K (the awards list)
http://bit.ly/2nXx0cR (reasons for using Bourbon barrels)

=> 7-Eleven parent antes up in USA

Seven & I Holdings, the parent of 7-Eleven and these days the largest 
convenience store operator in the world, has announced its largest 
foreign acquisition to date, paying US$3.3bn for 1,108 gas stations and 
convenience stores belonging to Sunoco. The chain of retail outlets is 
mostly in Texas and the eastern seaboard. Sunoco earned US$103m on sales 
of US$7.7bn for its retail business last year, giving the acquisition a 
multiple of 32x - steep for a retailer, but not out of line for Japanese 
firms seeking new profit sources with ultra-cheap money. ***Ed: Our 
guess entirely, but with financing costs of about 0.5% per annum, the 
interest on this deal will be around US$20m annually, leaving US$80m in 
fresh profit for Japan.** (Source: TT commentary from japantimes.co.jp, 
Apr 06, 2017)


NOTE: Broken links
Some online news sources remove their articles after just a few days of 
posting them, thus breaking our links -- we apologize for the inconvenience.



---------- ICA Event - Thursday 20th April ----------------

Speaker: Sriram Venkataraman - ex SVP Infosys Japan and presently 
Independent Business and Technology Advisor
Title: "India as an Innovation Center: Is there a case?"

Details: Complete event details at http://www.icajapan.jp/
Date: Thursday 20th April, 2017
Time: 6:30pm Doors open
Cost: 1,000 yen (members), 2,000 yen (non-members) Open to all. No sign 
ups at the door!!!
RSVP: By 5pm on Monday 17th April 2017
Venue: Room F, 9F, Sumitomo Fudosan Roppongi Grand Tower 3-2-1 Roppongi, 
Minato-ku, Tokyo, 106-0032


No corrections or feedback this week.



=> Shin-Okubo: Korea Town, Tokyo
Food, K-Pop, Cosmetics, Oh My!

Shin-Okubo Station, on the Yamanote Line, is a small station with only 
one exit. At first glance, the area seems ordinary, the streets lined 
with convenience stores, chain ramen, and beef bowl kyuudon shops. Turn 
to the east, however, head towards the underpass of the bridge, and 
you'll have stepped into a whole new world.

Restaurants serving authentic Korean food line the streets and smaller, 
branching alleys. If you are in the mood for bibimbap, tteokbokki, stews 
or Korean barbeque, you're in the right place! You may also be tempted 
to spend a couple hundred yen to try the popular street food, hotteok 
("hottoku" in Japanese). These delightful snacks should not be 
underestimated! They are usually filled with syrupy cinnamon and brown 
sugar, some with nuts to add that extra crunch. Most vendors also offer 
a variety of flavors if you are in the mood for cheese or chocolate.


=> The Green Tea Fields of Shizuoka
A historic green tea cultivation region with a view

Green tea is one of Japan's most representative products - and one of 
its most delicious. Green tea used to be such a prized commodity that it 
was used as a form of taxation in the late 1700s. One of the most 
prominent tea regions is Shizuoka prefecture, which has a long history 
of tea cultivation - thought to have begun as early as the 1200s. With 
hundreds of years of experience in the making, Shizuoka's tea is one of 
the world's finest.

Shizuoka is the largest tea-producing area in Japan, with an estimated 
40% of tea being produced in the prefecture. However, quantity isn't 
everything. In the World Green Tea Contest 2016, Shizuoka tea farms took 
home the majority of the Grand Gold and Gold prizes for Japan, 
indicating that quality and innovation are important to the area, too. 
In fact, being such a large tea-producing region offers Shizuoka the 
advantage of having plenty of collective skilled talent to research new 
teas, as well improve the taste and quality of current types.




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Written by: Terrie Lloyd (terrie.lloyd at japaninc.com)

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