The importance of EC based on the domestic EC rate

What is the EC rate?

First, let’s check the definition of EC rate. The EC rate refers to the percentage of the amount and market size of all types of commercial transactions that are accounted for by EC. Forms of commercial transactions other than EC include telephone, fax, email, and face-to-face sales.

EC has both broad and narrow meanings, so let’s sort them out as well. Broadly defined, EC refers to a mode in which commercial transactions (orders and orders) with fixed amounts are carried out via computer network systems. The computer network system here includes not only the Internet but also a dedicated line called EDI. EDI automates BtoB transactions such as order acceptance/placement, shipping/delivery, billing/payment.

On the other hand, EC in a narrow sense refers to the manner in which commercial transactions are conducted via computer network systems using Internet technology. A familiar example is online shopping.

EC rate and market size in Japan

On May 16, 2019, the Ministry of Economy, Trade and Industry announced the results of a survey on the domestic e-commerce market and e-commerce rate in 2018. According to the report, the market size of BtoC-EC (consumer electronic commerce) is 17,984.5 billion yen, an increase of 8.96% from the previous year, and the market size of BtoB-EC (business-to-business electronic commerce) is 8.10% compared to the previous year. Both increased to 344.23 trillion yen.

The EC rate was on the rise at 6.22%, an increase of 0.43 points from the previous year for BtoC-EC, and 30.2%, an increase of 0.8 points from the previous year for BtoB-EC. We can see that there is still room for growth in BtoC-EC. Furthermore, the EC rate for BtoB-EC remains at 30.2%, and it is thought that the trend toward EC will continue in both markets.

Japan’s BtoC-EC market size and sector

Let’s take a look at the BtoC-EC market size and EC conversion rate by field. According to the Ministry of Economy, Trade and Industry’s report, there are “product sales” represented by online shopping, “services” including ticket sales and travel services, and “digital systems” including e-books, paid music distribution, online games, etc. It is divided into three areas. The market size for each of these fields is 9,299.2 billion yen, an increase of 8.12% from the previous year for product sales, 6,647.1 billion yen, an increase of 11.59% from the previous year for the service sector, and 2 trillion yen for the digital sector, an increase of 4.46% from the previous year. The total amount was 38.2 billion yen. The EC rate was reported only for product sales, and was 6.22%, an increase of 0.43% from 2017. These fields can be described as growing markets.

The market size of BtoC-EC in the product sales category by category is, in descending order, “clothing/fashion accessories, etc.”, “food, beverages, alcoholic beverages”, “household appliances/AV equipment/PC/peripheral equipment, etc.”, and “household miscellaneous goods, furniture”. , Interior,” and “Books, Video/Music Software.” All of these categories form a market worth more than 1 trillion yen, and together account for 85% of the market size in the product sales field.

In the category of “Clothing/Accessories, etc.,” measuring apps and coordination apps seem to be lowering the hurdles for using e-commerce. In addition, one of the reasons for the expansion of the market size is that the two sales channels, physical stores and e-commerce, are integrated to accumulate customer information and utilize it for marketing.

On the other hand, the EC rate, in descending order, is “office supplies/stationery (40.79%),” “home appliances, AV equipment, PC/peripheral equipment, etc. (32.28%),” “books, video/music software (30.80%),” The result was “Household goods, furniture, interior (22.51%)”.

The largest BtoC-EC market in the service field is “travel services.” The market size was 3,718.6 billion yen, an increase of 10.27% from the previous year. This was followed by “financial services (7.9% decrease),” “ticket sales (6.34% increase),” “food and beverage services (41.61% increase),” and “hairdressing services (17.67%).” Among the service sectors, food and beverage services had the highest growth rate. This is due to the rapid increase in the number of restaurants that allow online reservations. BtoC-EC for hairdressing services refers to online reservations for hair salons, nail salons, etc., and the market for this category has also expanded in recent years. The growth rate in 2018 was a high level of 17.67%.

In the digital field, the largest BtoC-EC market is “online games” (3.0% increase), with a value of 1,449.4 billion yen. This was followed by “electronic publishing (up 7.57%)” at 278.3 billion yen, “paid video distribution (up 12.0%)” at 147.7 billion yen, and “paid music distribution (up 12.51%)” at 64.5 billion yen. Although the growth rate of online games is low, the market itself accounts for 70% of the digital field.

Japan’s BtoB-EC market size and sector

Let’s take a look at the BtoB-EC market size and EC conversion rate. The BtoB-EC market size in 2018 was 344.23 trillion yen, an 8.10% increase from the previous year. The e-commerce rate excluding the “Other” category was 30.2%, an increase of 0.8 points from the previous year. According to estimates by the Ministry of Economy, Trade and Industry, the industries whose market size expanded in 2018 are “industrial equipment and precision equipment (11.0% increase),” “construction and real estate industry (10.4% increase),” and “wholesale ( (up 10.5%),” and “ferrous and non-ferrous metals (up 8.9%).”

The expansion of the “wholesale” market is thought to be due in part to a simple increase in sales.

On the other hand, progress in the standardization of EDI, a dedicated line that automates transactions, mainly at general merchandise stores and supermarkets, also contributed to market expansion. EDI standards vary by industry, but in the distribution industry, EDI standardization, typified by distribution BMS, has progressed.

This standardization of EDI is having an impact not only on the “wholesale” market, but also on the growth in the rate of EC in categories such as “ferrous and non-ferrous metals” and “transportation machinery” in the manufacturing industry .

CtoC market size in Japan

In recent years, we have often heard the term sharing economy. This term refers to the manner in which places, vehicles, things, people, etc. are rented, sold, or exchanged between individuals on an Internet platform. Growth in this field is so remarkable that the Cabinet Office is considering how to include in the future a portion of the economic scale of the sharing economy that is not reflected in GDP (gross domestic product).

Representative examples of the sharing economy are online auctions and flea market apps that allow people to share goods. “Mercari” and “Yahoo! Auctions” are e-commerce services that everyone has probably heard of or used at least once. The CtoC-EC (person-to-person transaction) market is expanding year by year. According to a survey by the Ministry of Economy, Trade and Industry, the market size of flea market apps in 2018 was estimated to be 639.2 billion yen. Japan’s first flea market app is said to be Frill (now Rakuma), which appeared in 2012, so you can see that the flea market app market has grown rapidly in just six years. Factors that can be cited include the spread of smartphones and current trends such as the “elimination of waste” aimed at creating a recycling-oriented society. Additionally, such secondary distribution may affect BtoC-EC depending on the product.

On the other hand, the market size of online auctions in 2018 was estimated at 1,013.3 billion yen. However, online auction transactions are not limited to individuals; in fact, B2B and B2C transactions are also conducted. Please note that the market size estimated by the Ministry of Economy, Trade and Industry includes these values. The CtoC-EC market is also expanding in overseas countries such as China and the United States, indicating that it is a growing field.

Smartphone market size and future

In the BtoC-EC product sales field, purchases via smartphones continue to increase year by year. The market size in 2018 was 3,655.2 billion yen, an increase of 21.5% from the previous year. This amount is equivalent to 39.3% of the BtoC-EC market size of 9,299.2 billion yen.

According to the Ministry of Internal Affairs and Communications’ 2017 Telecommunications Usage Trend Survey Report (Household Edition), “Instead of a PC for online shopping” was ranked 4th as a method of using smartphones. In addition, looking at the types of devices used by Internet users as terminals, the highest percentage was “mobile terminals (mobile phones/PHSs, tablet terminals, and smartphones)” at 90.2%, followed by “PCs (67.5%)”. %)” and “Game consoles, TVs, etc. (18.5%).” Given this situation, it has now become common to use smartphones to collect information and engage in consumption activities.

Google’s “Mobile First Index” is a factor that symbolizes the expansion of the market via smartphones. This is a new website evaluation policy announced by Google starting in September 2020. Until now, Google’s search engine has evaluated the quality of content based on the content of computer sites and reflected it in search results. Mobile-first indexing is based on the evaluation of mobile sites.

According to Google’s announcement, the majority of sites displayed in search results are compatible with mobile-first indexing. Additionally, 70% of search results are websites that have already migrated to mobile-first indexing. Google’s policies are something that not only e-commerce businesses, but businesses in all industries, cannot ignore. Compatibility with smartphones can be said to be an urgent task.

The importance of EC will continue to grow

Based on the trends explained so far, the EC market will continue to expand in the future. “Live commerce,” which has expanded in China and involves influencers introducing and selling products through live streaming videos, may expand its market in Japan with the advent of 5G. The use of artificial intelligence (AI) is progressing in various areas such as logistics, customer service, and after-sales service, which are the backbone of e-commerce, and e-commerce is becoming a more convenient service. E-commerce is expected to become increasingly important not only to consumers but also to businesses in many industries, including retail.

summary

How to tackle the growing importance of EC will vary depending on the business type and type of business. First of all, let’s further research the keywords mentioned in this article that are compatible with your business and take advantage of them. It is also important to make efforts to compare e-commerce trends with other companies in the same industry.