Temu and SHEIN are popular in Japan. How can Chinese sellers break into the market?

The Japanese market has attracted the attention of many cross-border enterprises with its huge consumer base, strong purchasing power and unique consumer culture. In particular, with the craze of Temu and SHEIN in Japan, it has provided valuable market opportunities for Chinese enterprises, who can actively expand into the Japanese market and meet the diverse needs of local consumers by relying on China's profound advantages in manufacturing and supply chain management.

Temu's rise in the Japanese market

In Japan, a land full of challenges and opportunities, Temu quickly attracted consumers' attention with its outstanding performance.

Temu's performance in the Japanese market is particularly impressive. According to Japanese media reports, its number of users is rapidly approaching that of e-commerce giant Amazon.

Data shows that as of August, the number of Temu's application users ranked third among major e-commerce platforms, reaching 91% of Amazon's users, and it is expected to surpass Amazon within the year.

In addition, Temu's monthly user growth is as high as 2.2 million, and its product strategy featuring daily necessities has attracted a wider consumer group. According to the current order volume forecast, Temu Japan's annual GMV sales have exceeded US$1 billion, fully demonstrating its huge potential in the Japanese market.

Temu's "cut one knife" marketing strategy has set off a wave of enthusiasm in the Japanese market. This unique marketing method has not only made Temu quickly popular among Japanese users, but also triggered a series of social topics. For example, in September this year, a male police officer in his 50s was addicted to the overseas version of Pinduoduo (Temu) and forced 21 subordinates to help him "cut one knife" in order to get 5 free gifts.

SHEIN targets Japanese female market

Compared with Temu, women's fast fashion brand SHEIN also performed well in the Japanese market.

Since entering the Japanese market in 2020, SHEIN has quickly won the favor of Japanese consumers with its fashionable designs, cost-effective products and innovative marketing strategies. Today, the number of SHEIN users has climbed to 8.04 million, surpassing the number of online users of UNIQLO in Japan, becoming the new favorite in the Japanese women's market.

The competition between SHEIN and Uniqlo is still going on. Earlier this year, SHEIN was sued by Uniqlo, accusing it of infringing intellectual property rights by selling counterfeit products. The verdict has not yet been announced, but this incident has not affected SHEIN's expansion in the Japanese market.

SHEIN continues to consolidate and expand its share in the Japanese market by opening offline stores and optimizing online experience.

In January 2022, SHEIN opened its first physical store on Cat Street in Harajuku, Tokyo, adopting a "display only, no selling" model, aiming to eliminate consumers' concerns about product quality through physical display and promote the promotion of the APP.

Faced with UNIQLO's price increase strategy at home and abroad, SHEIN has attracted the favor of Generation Z consumers with more cost-effective products.

Challenges in Japan's potential market

Although the Japanese market has huge potential, Chinese companies still face many challenges in their entry.

Japanese consumers are known for being picky and detail-oriented, and have extremely high requirements for product quality, appearance, packaging and after-sales service. Therefore, Chinese sellers need to invest more resources in logistics, packaging, customer service, etc. to meet the high standards of Japanese consumers.

Communication barriers caused by cultural differences are also a major challenge for Chinese sellers. Japanese culture emphasizes politeness, details and customer-first service concepts. Sellers must be equipped with a professional Japanese customer service team to ensure timely and polite responses to customer needs.

At the same time, Japanese consumers prefer implicit and indirect communication methods, which also requires Chinese companies to avoid being too blunt and direct in advertising output and customer service communication.

Japanese consumers value brands, and Chinese sellers need to establish a brand image through high-quality products and excellent services in order to win the trust of Japanese consumers.

Japanese Trademark Registration Process and Information

(1) Trademark search: Before submitting an application, check the Japan Patent Office (JPO) database to see if the trademark has been registered or if there is any conflict;

(2) Prepare and submit an application: Prepare necessary materials, such as applicant information, trademark image, classification of goods and services, etc., and submit an application for trademark registration to the JPO;

(3) Examination stage: The JPO conducts a formal and substantive examination of the application to determine whether the trademark meets the registration requirements;

(4) Registration and Certificate Issuance: After the announcement period, if there is no objection, the JPO will officially register the trademark and issue an electronic registration certificate.

(5) Announcement and opposition: Trademarks that pass the review will be published in the official announcement and will be subject to public opposition. If there is no objection or the objection is rejected, proceed to the next step;

(6) Renewal and maintenance: The validity period of a trademark registration is 10 years, and renewal procedures must be completed before expiration. At the same time, it is necessary to ensure that the trademark is continuously used to avoid revocation.

If a foreign company registers a Japanese trademark, it needs to provide the following information:

(1) Trademark image: provide a clear and standardized trademark image, including the color designation (if it is a color trademark) or a statement that it is in black and white (no color limitation);

(2) Goods/Services Classification: Clearly list the categories of goods or services covered by the trademark registration (15-20 categories, otherwise evidence of actual use or a description of intended use must be provided);

(3) Company information: full name and registered address of the applicant company (valid correspondence address for receiving relevant notices and documents);

(4) Business license/registration certificate: copy of business license or ID card

(5) Accelerated review: Provide real and effective evidence of use, but it does not necessarily pass the review and requires official review.

Japan Tax Compliance

In cross-border business, tax compliance is also a major challenge for sellers. In particular, the compliance of consumption tax (JCT) is directly related to the legal operation and long-term development of sellers in the Japanese market.

Japanese Consumption Tax (JCT) is a tax that Japanese consumers need to pay when purchasing goods, similar to the Value Added Tax (VAT) in Europe. Under the compliant invoice retention system, sellers need to issue compliant invoices with JCT tax numbers in order to apply for tax deductions.

Regardless of whether the company is located in Japan or not, it is required to register for a JCT tax number as long as one of the following conditions is met:

(1) The taxable sales during the base period exceeded 10 million yen;

(2) Taxable sales during the base period did not exceed 10 million yen but taxable sales in the first half of the previous base year exceeded 10 million yen;

(3) Japanese companies with registered capital of 10 million yen or more are required to register regardless of their sales volume.

(1) Obtain Amazon traffic tilt

JCT sellers will receive special marks from the Amazon platform, which will enhance their competitiveness in orders and increase customer transaction rates and exposure.

(2) Input tax deduction

Sellers who have registered for a JCT tax number can apply to deduct input JCT bills during the taxable period, including import consumption tax collected by Japan Customs through reverse calculation, local purchases in Japan, and Amazon FBA fee consumption tax input bills, effectively reducing sales costs.

(3) ACP mode customs clearance is essential

Last year, Japanese Customs officially implemented the ACP customs clearance method for overseas companies. Sellers use the ACP+JCT model for customs declaration and customs clearance, which can offset the high import consumption tax under reverse calculation and reduce operating costs.

Cross-border operations are becoming more and more formal. For sellers who have been deeply involved in the Japanese market, in addition to actively applying for Japan Consumption Tax (JCT) to achieve tax compliance, the first and most critical step is to register a Japanese trademark. This is not only the basis for brand protection, but also a necessary step to build trust and enhance competitiveness in the Japanese market.

To gain a foothold in the Japanese market, branded operations are essential. Registering a trademark of your own is the first step in branding in the Japanese market, and it is also a necessary guarantee for the long-term development of Chinese sellers in the Japanese market. Due to the perfect intellectual property system in Japan, trademark registration is complex and important, requiring companies to fully comply with laws and regulations, refer to official data, and learn from actual cases.