Between 2015~2019, mostly the 3 years period of 2016~2018, we were trying to find products that we can bring from Japan to Saudi. During those years, I think I sat down with roughly 150 companies and listened to their product pitches and gotten their pamphlets.
We ended up with around 4 projects related to Saudi-Japan, one was exporting but it didn’t go through, 3 others were translating. We wasted a lot of time but learned great lessons in the process.
We iterated our methods a few times, tried to organize things, but nothing worked out. I doubted myself for a very long time. In the end, I came up with the following conclusions.
- My understanding of the sales process was not mature enough at the time
- Our workflow was not correct. Although we were heading in the right direction.
- Our setup was not correct. We didn’t have a strong backbone of buyers in Saudi. Too much supply, very scarce demand.
- We didn’t set up a good filter. Too much noise was wasting our time vs. good deals that.
When trying to get products outside of Japan, there are 2 business models:
[A] Find interesting Japanese products, and try to find a buyer in X country (extremely time-consuming unless you know your market really well)
[B] Find an interested buyer, with a specific type of product or product category in mind, then go find a Japanese manufacturer with that product. (A little less time consuming)
We tried both and faced problems with both.
Today I’ll assume you are doing [A].
I’ll take a stab at what things you should be aware of if you are interested in getting into a similar business so that you don’t fall in the same mistakes we did.
The Unseen Market
From the beginning of time (i.e rise of “made in Japan”), Japanese companies have almost always paired with trading companies when they tried to explore markets outside of Japan. (There is a special term in Japanese for 7 trading companies in particular that are well known for such work; Sogo Shoshi 総合商社)
The Japanese system allowed this. Panasonic, Sony, Hitachi, and all the other great companies are usually a front for 100s and 1,000s of micro-companies that make something very specific, like a certain type of screws or henges. Hence, these humongous companies go themselves or partner with such trading companies to explore overseas.
Inside of Japan though, you also have Small-Medium Enterprises (SMEs) competing for market share. The market is working for most of them. As one 3rd-generation trader put it down for me, some SMEs are not interested to go outside of Japan because the Japanese market in itself is enough for them.
But in recent times, as the Japanese economy starts to shrink slowly, big corporates are cutting down their businesses, and with such an aging population, many SMEs are considering finding customers outside of Japan. These companies though, do not want to deal with such trading companies, especially Sogo Shosha, because they are very expensive. (One reason is they add on a huge markup that makes the product expensive in the end)
So, there is a huge number of SMEs out there with many amazing products, but they remain undiscovered and are open to exporting their products outside of Japan.
Sell it like it’s the 90s
The people I met, most of them were in their late 60s. Or the “advisors” helping them were in their 70s or 80s. It crushed my soul that we couldn’t do business with them, as they are trying to help SMEs and in many cases helping out other not-so-flourished parts of Japan. Of course, there are people younger working with them from time to time, but the decision-makers are not really that young. They are also very VERY domestic. They “hear” and “imagine” things about other countries and base their decisions on such speculations.
This is a problem. Many of them don’t know how to use email properly. Their presentations are just texts in slides (will talk about this shortly), and their products sometimes have a very DIY feeling to it, it is hard to think of selling this.
The most prominent problem is that, mostly due to age and being in a domestic environment, the owners and their helpers think that just by having the product labeled as “made in Japan” it will be sold. I understand the pride in their work, but when it translates to attitude without much research, it becomes ignorance. There were a few cases of products that were presented as the best in specs in its field. We found similar products from a different country that surpass in spec and lower in price. Many other examples like that.
This mindset affects marketing. Not a lot of effort (sometimes none) is put into marketing (specifically, international marketing). Prices are expensive, and the product design doesn’t look promising, no English…etc.
60 Pages Text Presentations
No kidding. Product owners will throw at us 60-100 pages of “slides”, which are mostly text, that is all in Japanese, and ask me to go find a buyer. There was no willingness to even translated them into English.
This is related to the filtering problem mentioned above. Very few companies had their documents professionally translated and ready to show counterparts.
This equates to a lot of effort that has to be done from our side to translate those documents or make summaries of them in English or Arabic.
Hot potato & Budget Lifecycle
One thing people don’t understand about Japanese businesses is that the decision-making process is different. And the bigger the company is, the more complex it gets. There is a specific person that has to give the yes in order for things to go smoothly. Too often than not, no one wants to take responsibility. Responsibility is treated like a plague in some big companies. So it becomes a hot potato situation. Your job is to bring as much evidence and assurances as possible for the counter side to agree on moving with this forward.
Then you are also hit with budget lifecycles. There is a specific window of opportunity each fiscal year. If you lose that, you’ll have to work toward next year. The bigger the company, the more important this budge lifecycle is. It has been a tradition for Japanese companies to start their fiscal year in April. There are seasons for each industry. It is better to ask an industry expert about the budget lifecycles of that specific industry.
Not How Many You Buy, But How Many You’ll Sell
Amidst all of this, these SMEs are looking for the right partner. They don’t want you buying 10,000 units of their products and storing them up in your backyard. They want to make sure their product is actually sold. This has been iterated to me over and over by many owners. They care about their products and really want it to reach to the customers.
Aah, the love of track records (known as Jisseki 実績). This is one of those magic keywords that need an essay on their own to explain. Point is if you have a good track record of doing the thing you say you are doing, life becomes much easier. Companies start to open up their doors and inner secrets more. Deals go faster, and negotiation becomes much easier.
Free services, where is the contract?
Japan still has this trust culture in SMEs and being very blurry when it comes to contracts, that is until a contract is written. If you want to filter the noise, have a simple clear agreement upfront can make it much easier to refuse or accept things going forward.
See, the first few meetings and occasional consultations are sort of expected to be free. I feel I have been exploited so many times because of this (I was pursuing chances in the wrong way too, so kept falling in the same trap).
People would want to talk to you because they have some products. In my case, because I was from Saudi, all I was doing was giving free information, in the hope of doing business with them.
Be very explicit about your services and where the paywall is. Sing brief contracts that clearly show what each entity’s role is.
Word travels fast in many circles. If you talk and meet with enough people, you’ll end up finding people who know people around you, and your outer network circle will connect. If you were able to build a positive spiral, this could work in your favor.
Nothing is structured
If you go all in expecting people to give you appropriate documents to proceed with, boy you’re soooo wrong. You are going to be overwhelmed very fast. You’ll have to learn to
- Build a structure to organize information.
- Build a flexible workflow for how to proceed.
I can’t stress this enough. Focus on a market you really understand and build a backbone that can help you up.
Build a Strong Backbone
Know what your network is capable of, test them a few times. Be very clear about what products you are interested in.
Filter The Noise
Setup legit paywalls, be very explicit about how you run your business, and specific (if possible) about which type of products you are looking for.
Setup clear paywalls. Setup agreements that show specific roles and expectations.
Build a Database
I believe creating a database to funnel all of that is of utmost importance. We tried organizing incoming info by making a template to get information poured into (Word template). It didn’t work out as intended.
I wanted to make a more sophisticated web forum, but entering a web forum is not an easy task for the people who are more comfortable with fax.
This is not to discourage you from doing business with Japan, nor to complain about SMEs. The culture is what it is. Not everybody is like that, but you can expect these to help you understand some of the nuances when dealing with SMEs in Japan. We did many mistakes as well. I think there are huge hidden opportunities. The technologies they have the amount of specialization they are in are just stunning. I hope you succeed.