Amazon.com Inc. today unveiled details of its plan to enter the Japanese book market--the world's second-largest--where it will be going up against established competitors and will be severely limited in its ability to offer discounts.
Amazon, which already claims to be the largest e-commerce company in Japan, said it hopes to boost sales by launching a Japanese-language Web site, amazon.co.jp., where it will offer more than 1.7 million Japanese- and English-language book titles and extensive editorial content to serve Japanese-speaking users around the world.
Amazon says it has enjoyed annualized sales of $34 million in Japan, thanks to avid readers who are willing to pay high shipping costs to import foreign books. Under the new setup, Amazon will work with a mid-size book distributor, Osakaya Co., to ship purchases within Japan.
Company officials said they plan to start with books and move toward selling other items, such as CDs and videos, later.
"I'd expect in the next three years, Japan will be our largest market outside the U.S.," said Diego Piacentini, senior vice president in charge of international operations.
Yet, some observers expressed caution, noting that the company will be competing with several established online retailers here.
"It's a bit late for Amazon to crack Japan," said Yuzuru Tanaka, a strategist at Netyear Group Corp., an Internet consulting company. Amazon offers a consumer-friendly site and a lot of well-thought-out features, he said, but that may not be enough to excel among established shopping sites.
Another potentially major problem is the Japanese law that bans the sale of new books at discounted prices, depriving Amazon of a key tool for luring new customers.
But Amazon chief executive Jeff Bezos, speaking at a news conference in Tokyo, brushed aside such concerns: "This is a big market. There's room for lots of winners."
Some analysts also voiced concern about Amazon's distribution partnership. Japan's book market is dominated by two distributors, both of whom have entered into alliances with Amazon competitors. Because a seller's ability to offer a wide selection depends largely on the volume its distributor handles, Amazon could suffer because its partner is smaller.
But some analysts said Amazon has a fair chance of winning a dominant position here because of its fun and friendly Web site.
"Japanese sites of online bookstore are so boring, and the information is just squeezed into their Web sites," said Masato Araki, an analyst with Wit Capital Securities. "In contrast, Amazon's marketing technique is by far superb. Amazon could fare really well."
In addition, Amazon's book reviews and heavy discounts on foreign books may draw customers.
Bezos declined to say when Amazon expects to turn a profit in Japan. He also declined to reveal the size of the company's investment here but said: "I approved it. Believe me, it was a lot."