AsianFin -- TikTok Shop has officially launched in Japan, bringing its social commerce model to one of the world’s most competitive and lucrative e-commerce markets.
The move marks a major expansion for the ByteDance-owned platform, which is already active in over 20 countries across Southeast Asia, Europe, and North America.
By integrating shopping functions directly into the TikTok app, Japanese users can now browse and buy products through livestreams and short videos, while brands, merchants, and creators can sell a wide range of goods—from cosmetics to home appliances—via native content.
The entry comes as Japan’s e-commerce market is projected to grow to $191.9 billion in 2024 and $206.8 billion in 2025, according to Statista. That makes it the third-largest e-commerce market globally, after China and the United States. But while the prize is big, so are the challenges.
Despite its size, Japan remains an underpenetrated e-commerce market, with B2C online retail accounting for less than 10% of total consumption—far below China’s nearly 50% penetration rate. Platforms like Shein, Temu, and now TikTok Shop are betting on that gap to drive their next wave of growth.
Japan’s low return rates and high average order values—around 5,000 yen, or $30—make it an attractive market for sellers looking to reduce operational friction. Return rates are just 5–10%, compared to 20% or higher in some Western markets. That minimizes cash flow stress and offers more reliable data for optimizing product strategy.
However, these upsides are tempered by some of the industry’s highest entry barriers. Strict regulations require compliance with Japanese standards like PSE and JIS, tax registration for sellers exceeding $66,000 in annual sales, and complex labeling rules. Delivery expectations are equally exacting, with consumers accustomed to same-day or next-day service and flexible scheduling.
Payment preferences also diverge from global norms. Despite digital adoption, Japan remains a “cash kingdom,” with e-commerce platforms needing to support credit cards, e-wallets like PayPay and Line Pay, and even in-store payment options at convenience stores.
TikTok enters a market long dominated by three giants: Rakuten, Amazon Japan, and Yahoo! Shopping, which together account for over 70% of total e-commerce GMV. Rakuten alone commands nearly one-third of the market and benefits from a vast ecosystem that spans fintech, telecom, and travel, deeply embedded in Japanese daily life.
Upstarts are gaining ground, too. Shein’s showroom strategy and fast fashion model have helped it surpass Uniqlo in app users, reaching over 8 million in Japan by September 2024. Temu, meanwhile, is leveraging ultra-low pricing and free shipping thresholds to attract frugal consumers. According to Nielsen, Temu now has 31 million monthly active users in Japan—its second-largest market after the U.S.
TikTok Shop hopes to differentiate with its content-led commerce model, targeting younger demographics through short video and livestream formats. Social media–driven shopping in Japan jumped 40% in 2023, and TikTok’s 20 million local users represent a strong starting base. Still, the app faces an uphill battle in converting Japan’s high-spending but conservative older shoppers, particularly those aged 35 and up.
Success in Japan won’t come quickly. Unlike its rapid rise in Southeast Asia, TikTok Shop must recalibrate its strategy away from GMV-first growth and toward long-term brand building and product trust. Japanese consumers are discerning, brand-loyal, and quick to leave critical reviews—even without returning products.
The local regulatory environment is also tightening. Starting in 2025, platforms like Rakuten and Amazon will be required to collect and remit consumption taxes on behalf of foreign merchants, further squeezing margins and raising compliance stakes.
For TikTok Shop, Japan represents more than just a market play—it’s a hedge. As geopolitical risks mount in the U.S. and Europe and pricing wars escalate in Southeast Asia, cross-border e-commerce platforms are looking for stable, high-value markets to diversify their portfolios. TikTok Shop’s recent expansions into Brazil, Mexico, and now Japan mirror similar moves by rivals like JD.com, Shein, and AliExpress.
Whether TikTok can win in Japan remains to be seen, but its entry signals a broader shift: the era of volume-at-all-costs is fading. In its place, platforms are betting on local expertise, operational finesse, and cultural fluency. In the battle for Japan’s e-commerce future, victory may not go to the biggest—but to those best equipped for regional combat.
