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

An Insider's comments on Japan's high tech business world
* * * * * * * * 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.
(http://www.terrielloyd.com)

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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+++ WHAT'S NEW

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
Yamato's.

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
more.

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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Prizes:
Grand prize - 100,000 yen x 1 person
Silver prize - 50,000yen x 2 persons
Bronze prize - 30,000 yen x 7 persons

http://bit.ly/2mfoJzF
-----------------------------------------------------------

[...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 for customers
(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
non-existent.

...The information janitors/

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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)

http://bit.ly/2ph8R1m

=> 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)

http://bit.ly/2oP0VYS

=> 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)

http://s.nikkei.com/2oeTZTn

=> 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)

http://bit.ly/2ntV9fj

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.

***------------------------****-------------------------***

+++ UPCOMING EVENTS

---------- 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
-----------------------------------------------------------
***------------------------****-------------------------***

+++ CORRECTIONS/FEEDBACK

No corrections or feedback this week.

***------------------------****-------------------------***

+++ TRAVEL DESTINATIONS PICKS

=> 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.

http://en.japantravel.com/tokyo/shin-%C5%8Dkubo-korea-town/36903

=> 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.

http://en.japantravel.com/shizuoka/the-green-tea-fields-of-shizuoka/36189

***------------------------****-------------------------***

***********************************************************
END

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+++ ABOUT US

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