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Amazon's Strategies in Japan's Book Market

The Saihan system in Japan establishes fixed prices for new books set by publishers, prohibiting price competition among booksellers. This system protects independent booksellers but acts as a barrier for Amazon, whose business model relies on offering low prices. To overcome this, Amazon launched a marketplace for third-party sellers to offer books below fixed prices, used a points system providing discounts, and offered free shipping to compete with physical retailers. These strategies helped Amazon gain popularity in Japan's unique market conditions.

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Lance Pasahol
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90 views1 page

Amazon's Strategies in Japan's Book Market

The Saihan system in Japan establishes fixed prices for new books set by publishers, prohibiting price competition among booksellers. This system protects independent booksellers but acts as a barrier for Amazon, whose business model relies on offering low prices. To overcome this, Amazon launched a marketplace for third-party sellers to offer books below fixed prices, used a points system providing discounts, and offered free shipping to compete with physical retailers. These strategies helped Amazon gain popularity in Japan's unique market conditions.

Uploaded by

Lance Pasahol
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

Answer:

The main cause of difficulty for Amazon emerges from the different geometric framework of the
Japanese bookselling market. Since 1980, laws have allowed publishers to set prices for new
books and newspapers. In other terms, not editors, the Saihanbai Kakaku-Fiji Seido ('Resale
Quality Management System'), widely regarded as the Saihan system, practically outlaws
bookstore market competition.

Saihan System is a protectionist market management mechanism that imposes regulations that
enable publishers to establish their product's fixed prices to promote optimal competitiveness and
prevent monopolies. Japanese booksellers are price-taking; they are not permitted to fix their
desired rates. Saihan system protects independent booksellers from getting pushed out of the
business by allowing illegal offers against bigger firms.

Saihan system has been a key roadblock, the core strategic advantage of which depended on the
ability to offer the lowest prices. The Saihan system is the institutional barrier which prevents
Amazon from flexing its muscle in Japan.

How is Amazon using its resources in Japan to resolve structural barriers?

1. Amazon Marketplace

Amazon Japan launched a Japanese edition of the widely popular "Online Store" late 2003,
where third-party customers trade both fresh and used goods. That allowed Amazon to sell books
and music indirectly as third-party customers, not Amazon, rendered the transaction at prices
below mandated rates. Amazon obviously gained from paying a fee on the transaction.

2. Point system

Lastly, Amazon used a scheme that allowed consumers to earn points depending on the sales
price of products that could be exchanged for a gift certificate — essentially providing a discount
in disguise. After a disappointing start, as Amazon tailored its approach to Japan’s particular
institutional climate, its revenues took off and allowed the business to achieve the same
popularity as it had experienced in its home market. When the Saihan scheme is dismantled,
Amazon is geographically in a good place to reap any future windfalls.

3. Offer free shipping

Amazon promised free delivery over 5,000 yen (about $45) on orders. The total price was
subsequently reduced to 1,500 yen (around $13)—less than even the total of $25 sold by its
online shop in the US (as of 2007). Free shipping placed Amazon on an even basis with its
brick-and-mortar competitors which gave it an edge over other online retailers who did not (or
could not) provide this service.

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