The slow rise of the sharing economy in Japan
The sharing economy is gaining a great deal of focus globally and is seen to be one of the fastest growing business sectors in most developed economies. However, in Japan, despite continued and steady growth in recent years, it is still in its infancy when compared to other major economies of the world. In a recent report by the Yano Research Institute, it was estimated that the size of the sharing economy market in Japan in 2015 was US$285m and predicted to grow to US$600m by 2020. Whilst this represents a compound annual growth rate of 17.1% (12 times greater than the growth rate of the overall Japanese retail sector), it barely represents 1.9% of the global sharing economy. In 2015 this sector was valued at US$15bn and is projected to reach US$335bn by 2025. One may wonder why the size of the sharing economy market in the world’s third largest economy is still relatively small.
If the sharing economy can be broadly defined as an economic system based on direct sharing of goods, or underutilised assets between individuals for free or against payment, it’s perhaps no surprise that such a system faces major cultural barriers in Japan. There has always been a strong preference to buy new, rather than used products; a tendency which can be seen across the spectrum of consumer goods. From fridges to chairs and cars, the trend may also extend to houses. This is largely due to the general expectations for quality: newly purchased items should be “pristine” and flawless. Additionally, in many cases, there is a commercial framework which makes the purchase of new items more attractive than that of second-hand items. Cars, for example, hold their value for the first three years of use, until the “shaken” (a combination of expensive taxes and inspections) is due, after which the value plummets. Furthermore, there have been regulatory systems which have virtually inhibited the market of used products. For example, until very recently, arranging a mortgage for a used house was extremely difficult and even when possible, the interest rates and deposit requirements for used houses were much higher than those for new ones. This was partly due to the fact that the expected life span of a house was relatively short because of the fundamentally weak wooden structures, compounded by the effects of frequent earthquakes. In addition, this fiscal arrangement was used by the Japanese government to stimulate the economy.
Largely as a result of changes in economic circumstances in recent years, attitudes have evolved. Stores selling used products, Recycle Stores, are now prevalent across the country and there are online platforms for individuals to sell their goods, such as Yahoo Auction or Rakuten. Used car shops and online markets are now common place. In addition, after recent major earthquakes (especially the 1995 quake which hit the Hanshin region) building standards regulations have been considerably reformed, which has resulted in the lengthening of the useful life span of residential building, and more recently, banking facilities for the purchase of used houses have become much more accommodating.
In addition to these cultural, legislative and commercial norms, there are other reasons for the relatively slow development of the sharing economy. In a white paper issued by the Ministry of Internal Affairs and Communications (MIC), analysis of a survey conducted in 2015 highlighted that lack of trust, or concerns about safety were significant factors contributing to the slow pace of growth.
The survey was sent to 2,000 consumers (ages ranging from 10 to 60 years, living in variously sized cities – small to large). People were asked about their current use of shared services and how likely they were to use such services. If those questioned were reluctant to use shared services, they were asked what their concerns were. The results showed that less than 23% of respondents were likely to use vehicle-related sharing services, and only 26% of respondents would consider using space-related sharing services, such as rooms and apartments. For those who responded that they were unlikely to use shared services, over 60% indicated that they were concerned about safety and trustworthiness. This may seem surprising, given that Japan is known for having an extremely high record of safety. However, it is reflective of the general attitude towards risk: Japanese people tend to err towards caution and are meticulous in their consideration of the unfamiliar. An English summary of the white paper can be found here.
An article published by @IT which reviews the MIC white paper surmises that the results indicate that the majority of Japanese do not yet fully recognise the merits of shared services, with the apparent risks of dealing directly with consumers, rather than well-established companies, outweighing any benefits.
Despite this somewhat cautious approach to change, there are signs that growth and interest in the sharing economy may be increasing in Japan. One such indicator is the recent growth of online platforms for shared services, which are now starting to gain in popularity. Some examples include:
- Socueus, established in July 2000, is one of the earliest examples of a Japan-based online sharing platform, which enables the exchange of a wide variety of items and services, including books, CDs, clothing, furniture, electronics, artwork, vehicles, etc. Users advertise their products or services for sharing , and payment is made using the platform’s own online currency, ‘Nets’. Through sharing an item or service, a user will receive a quantity of Nets, which can then be used to pay for utilising another user’s item or service.
- Wire Mama Network was started in 2001 as an online marketplace for sharing baby products that have only been used a few times and are in good condition, free of charge.
- CaFoRe, established in April 2009, is an online platform for the sharing of vehicles aimed primarily at individuals. Users register on the site as either a lender or borrower and the site provides the necessary legal and contract framework, plus an online reservation system.
- Anyca (pronounced “Anycar”) is an online platform set up by DeNA K.K. in September 2015, for private individuals to offer their cars for rent to other members. The service includes an online payment system and a review system for both renter and lender.
Another sign of growth in the shared economy is the realisation by established companies that there is a significant business opportunity to be exploited. Having been led by the Consumer-to-consumer platforms, larger companies have recently established “pseudo sharing services” which are essentially modifications of standard rental service models such as:
- Mechakari, operated by Stripe International Inc., was launched in September 2015 to offer branded clothing for rent, via a member-only online platform.
- airCloset, launched in July 2014, offers a clothing storage service which is available to members via an online platform and includes a delivery and pick-up service (leveraging one of Japan’s largest door-to-door delivery services, Yamato).
- Modified “Car Sharing Services” are based on a regular car rental model but cars can be rented for as little as 15 minutes at a time. The process involves no complicated forms, cars are opened using electronic membership cards, and app-based online reservation systems have recently been introduced by companies such as Times and ORIX.
Furthermore, in December 2015, the “Sharing Economy Association” was founded to support the growth of the Sharing Economy in Japan, with three stated objectives:
- To ensure that all people can participate in the economy in various ways
- To help develop the Japanese economy through stimulating new economic activities
- To establish a support and protective business environment for platform businesses.
The association’s original founding member companies include:
- Gaiax (online media company)
- Space market (online platform for renting/leasing space for various uses)
- AsMama (support network for working mothers)
- Anytimes (online platform for offering/procuring “life services” – such as housework)
- Coconala (online platform for offering/procuring skilled services)
- Crowdworks (online platform for offering/procuring crowd services)
- CyberAgent Crowd Funding (online crowdfunding service)
A little over nine months since the association was founded, there are now 100 association members. One of which, Tokio Marine, has now introduced an insurance programme which is specifically tailored to service participants of the shared economy. The service is available to both provider and user, covers personal injury and property damage and is only in force for the duration of the service instance (fees are charged for each specific service instance).
It is these latter advances by well-known and trusted companies, and the formative beginnings of institutional frameworks to support the shared economy, that may serve to allay the public’s concerns about trust and safety, and act as a catalyst for the growth of Japan’s shared economy.
Alternatively, as speculated in the @IT article, what may develop faster in Japan could be a hybrid sharing economy, which comprises traditional companies offering “pseudo” shared services within a more conventional B2C model. This would offer leverage to existing regulatory frameworks, which are already trustworthy, rather than the C2C model that is now developing at a rapid rate in other developed countries. It wouldn’t be the first time that a development has been adapted in Japan, resulting in a distinct variant being implemented, successfully – in many cases. Only time will tell.