BY RACHEL HOWE

The emergence in Japan of e-commerce -- buying and selling over the Internet -- represents a historic opportunity for foreign businesses and new Japanese companies to crack one of the toughest global markets.
     It's a chance for foreign companies to avoid substantial trade barriers, the influence of Japanese keiretsu (trading groups) and a convoluted, multilayered distribution system -- but only if they master key principles about Japan's Internet habits.
     Japan's e-commerce market is expected to grow rapidly.
     Its population in 1998 was about 14 million, and the country spent about 200 billion yen on on-line commerce. The number of Internet users in Japan is estimated to grow to 27 million by 2001, with on-line commerce revenues to reach 1 trillion yen.

Non-Japanese businesses have
an opportunity to crack a
tough market and reap
rewards.

     But a single-minded focus on growth numbers doesn't relay the whole story. The government of Japan is investing in an Internet industrial policy, aiming to create a business landscape vastly different from the "basically free" cyber-business environment anticipated by foreign ventures.
     For this reason, companies should be closely watching the regulatory and industrial policy tools that Japan's government employs regarding the Internet.
     The results will determine the pace of growth, structure and business practices of Japan's on-line marketplace.
     To gain insight into how the Japanese use the Internet now, my firm reviewed over 30 studies on the Internet in Japan, and supplemented that data with official statistics and nonsurvey sources.
     We predict that, as more women access the Internet and people do more cyber-shopping, on-line revenues will grow faster than the increase in users.
     Companies wishing to benefit from the Japanese on-line marketplace must be mindful of the cultural and social factors that affect what Internet users buy, how they pay for on-line goods and services and what will motivate return visits.
     Japanese -Internet users are predominantly in their 20s and 30s, but the average age is increasing.
     They access the Internet much more at their work places than in the home. Indeed, about 70% of on-line time is spent at the office using the corporate Internet connection. Because of the high cost of local calls in Japan, most find it too expensive for large-scale home use.
     Users who shop on-line spend an average of about 35,000 yen per year now and are expected to more than double that amount by 2001.
     Like on-line' shoppers in the United States, they have concerns about information security, merchant trustworthiness and the price and service competitiveness of on-line stores.
     Moreover, Japanese on-line shoppers tend to use traditional Japanese payment methods rather than credit cards. But they also want a wider assortment of possible payment methods compared with Internet shoppers in the United States.
     Japanese on-line shoppers consistently cite easy access to foreign products as a key reason to shop on-line. This means non-Japanese businesses have an opportunity to reap rewards. But only those e-commerce vendors that fully understand the market will be able to fully exploit these and other trends.

Rachel Howe is managing partner of a subsidiary of Dynamic Strategies Asia, DSA Analytics, a business research company focusing on East Asia. This article was distributed by Bridge News.