Direct sales in Japan via the Internet—estimated to total ¥12.6trn in 2014—are projected to double to ¥25.6trn by 2021. Nikkan Gendai (14 May), however, reports that there is a downside to this healthy growth.
According to a study by Tokyo Shoko Research, Ltd., 74 firms in the Internet and door-to-door sales sector filed for bankruptcy during fiscal 2015. In 2009, the number of similar bankruptcies was 18, a figure that has continued to increase year on year. Businesses selling apparel and consumer electronics are said to be particularly hard hit.
Just under 80% of those failures (58 firms), however, are those with five employees or fewer, indicating that smaller businesses are most likely to go under. Moreover, 20 of the business were established after 2010, indicating the difficulty in sustaining new firms.
Masashi Seki of Tokyo Shoko Research, Ltd. said: “The increase in failure of direct sales firms is conspicuous, considering bankruptcies as a whole have been showing a declining trend. While it’s easy for both individuals and businesses to enter Internet sales, expanded growth has led to intensified competition.
“In addition to rapid changes in consumer preferences, complaints by customers can have a major effect on a company’s sales. In a battle of ideas, businesses won’t thrive unless they can differentiate themselves from their rivals. In some cases, businesses have been hurt by increased costs resulting from the weaker yen”.
One side effect of the heavy competition has been incidents of employee foul play. According to Seki, in April 2015, a company was ordered to suspend business operations after it was discovered that an employee had misdirected accrued bonus points from shoppers into his own account. This example is a well-known recent failure because the business had previously been the recipient of a Shop of the Year award.