JIN-204 -- Shopping for the Nation

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J@pan Inc Magazine Presents:
T H E J @ P A N I N C N E W S L E T T E R
Commentary on the Week's Business and Technology News
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Issue No. 204
Wednesday, November 13, 2002
Tokyo

CONTENTS

++ Viewpoint: Shopping for the Nation

++ Noteworthy News
- Japan Jumps to 13th in Competitiveness Survey
- Country's Carmakers Post Impressive Bottom Lines
- NTT Communications Denies Role in IP Phone Pact

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++ Viewpoint: Shopping for the Nation

Brendon Hanna has been making regular pilgrimages to Costco for his
growing family since 1999, when the membership warehouse club opened
its first store in Japan outside of Fukuoka. "We would spend the
better part of a day and nearly 10,000 yen on the round trip to
Fukuoka," he recalls of his shopping treks from his home in Nagasaki.
"Although I enjoyed visiting, and we probably paid for every trip with
savings on our shopping, I wished there was an online service for the
times when I just wanted a few items."

Well, now there is. It's called TheFlyingPig.Com, and it's run by
Hanna and his business partner, programmer and Kyoto resident Robert
Spann. TheFlyingPig.Com has no affiliation with Costco. "Anyone can do
what we're doing ・theoretically," Hanna says. And the company will
ship anything on Costco's shelves (except alcoholic beverages) anywhere
in Japan.

What prompted Hanna and Spann to go shopping for other people's fresh
bagels, 5kg pancake mix packages and decaffeinated instant coffee?
After Hanna moved near Fukuoka, he spent two years commuting to his
job with a video company in Tokyo by plane, spending four days in the
capital and the other weekday working out of home. His trips to
Costco became more frequent, yet his shopping list continued to grow.
"I'd go out to Makuhari occasionally, and people would ask me to get
this or that thing for them from Costco," he says. "Sometimes I would
take stuff up with me from Fukuoka, since it was actually easier for
me to get to the warehouse there than in Chiba."

With every trip from Fukuoka to Tokyo carrying someone else's
breakfast cereal, Hanna's business plan grew. He talked to Spann about
the idea, and they decided that selling Costco groceries and goods
online had potential. Thus TheFlyingPig.Com was born; its Web site has
been up since October 8.

But with the Foreign Buyers' Club doing well in Kobe and more Japanese
grocery stores stocking their shelves with imported goods, does Japan
need another online grocery catering to foreigners? "TheFlyingPig.Com
is looking to stimulate the growth of the Internet-based shopping
sector in Japan for groceries, daily necessities and general
merchandise," Hanna says, adding that he is a big fan of FBC and wants
to emulate it when it comes to winning customers' trust. "In any
industry, competition tends to benefit consumers in terms of lower
prices and higher quality, as well as benefiting the businesses
involved in terms of creating a larger market for goods and services."

TheFlyingPig.Com charges margins of about 15 percent. Costco told
Hanna that it doesn't plan to build an e-commerce site for several
years; it plans to build name recognition and trust in Japan first.
That gives TheFlyingPig.Com a little wiggle room.

The company is "a permanent work in progress," Hanna says. "I've
talked to some of the more Net-savvy people who have seen our site,
and they say, 'Man, you have a lot of work to do.' But I've also
talked to people who check our site and say, 'You can get bagels for
that price? I'm there.'"

-- Bruce Rutledge

Link:
"Bringing Home the Bacon at the Foreign Buyers' Club" from our October
issue.
http://www.japaninc.com/article.php?articleID=918

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++ NOTEWORTHY NEWS
(Long URLs may break across two lines, so copy to your browser.)

** Japan Jumps to 13th in Competitiveness Survey

In Brief: Japan ranked 13th in an annual competitiveness survey of 80
countries released by the World Economic Forum on Tuesday. It was the
first time in four years that Japan had improved in the survey; it
ranked 21st last year. Japan ranked high in innovation, science and
technology, and low in public barriers to business and accounting.

The World Economic Forum is the organizer of the annual Davos,
Switzerland, meetings of the world's elite business and political
leaders.

Commentary: Japan was fifth in science and technology (up from 23 last
year), eight in Internet use, second in patents granted, fourth in
technological sophistication and fifth in corporate R&D. Not bad. But
then there's the other Japan: 54th in accounting standards, 25th in
efficiency of public institutions and 53rd in burdens posed by
public regulations. Ugh.

Sources:
From Nikkei Net (password protected):
http://www.nni.nikkei.co.jp/AC/TNKS/Nni20021112D12JF272.htm

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** Country's Carmakers Post Impressive Bottom Lines

In Brief: Toyota and Honda aren't the only carmakers improving their
bottom lines. Mazda and Mitsubishi Motors both posted profits for the
six months through September. Mazda's profit jumped to 5.5 billion yen
for the half year from 1.3 billion yen in the same period of 2001.
Mitsubishi posted profits of 6.6 billion yen, compared with a loss of
31.5 billion yen in the same period of 2001.

Commentary: But Toyota and Honda still make the best cars -- hands
down. The turnaround at Mazda and Mitsubishi is all about aggressive
cost-cutting and a weaker yen. As fears of an Iraq war depress the
dollar, the two carmakers will have to rely more on domestic demand --
and it just won't be that strong when drivers can buy a Honda or a
Toyota for the same price.

Sources:
From the BBC
http://news.bbc.co.uk/1/hi/business/2447023.stm

Link:
"Power, Style and (Cough) Smog," an article about new car ideas in
Japan from our January 2002 issue
http://www.japaninc.com/article.php?articleID=666

** NTT Communications Denies Role in IP Phone Pact

In Brief: NTT Communications has denied that it is taking part in
talks to form a 7-company alliance to provide IP phone services. The
Nihon Keizai Shimbun reported on Monday that NTT Communications,
Nifty, NEC, Sony Communication Network, KDDI, Japan Telecom Holdings
and Matsushita Electric Industrial were holding the talks.

NTT Communications told Reuters that it was talking with Nifty and
some other companies about the IP phone business, indicating that a
different alliance could emerge in the coming weeks.

Commentary: All this positioning in the IP phone business has been
sparked by Softbank's moves to corner the market. Again, Masayoshi Son
is shaking things up. Look for him to do for IP phones what the
company did for ADSL services when Yahoo BB started a price war last
year that helped spread the services throughout Japan.

Source:
Reuters report on Forbes Web site:
http://www.japaninc.com/article.php?articleID=666

Link:
"Broadband Wars," an article about Softbank's attempt to corner the
broadband market from our December 2001 issue
http://www.japaninc.com/article.php?articleID=528

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