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backASIAtalk August, 2008

Inside the Japanese Automotive Aftermarket

As we enter an era of unprecedented turbulence in the automotive industry in North America, it has become imperative for automotive suppliers to diversify their customer base to minimize the impact of relying too much on one or two North American car manufacturers. This has led to extraordinary interest in securing business from the Ã¢â‚¬Å“New Domestics.Ã¢â‚¬Â While this renewed enthusiasm in Japanese car manufacturers is understandable, it is important to note that another avenue of generating revenue is generally not pursued - the automotive aftermarket in Japan.

The very thought of trying to sell automotive parts in the Japanese aftermarket may seem formidable enough to dissuade even big American companies. However, the potential of aftermarket sales in Japan merits a detailed analysis to evaluate the pros and cons of a foray into the world`s second largest economy. Consider the uniqueness of the Japanese market compared to other markets in Asia. Japan, with its affluent and loyal customers, is an ideal market for companies that have globally recognized brand names. Customers pay premium prices for premium brands. In addition, an extremely good legal infrastructure and respect for rule of law make it conducive for companies to invest a lot in marketing their brand without the fear of piracy. The number of automobiles on the road Ã¢â‚¬â€œ about 70 million Ã¢â‚¬â€œ also makes it an attractive market. However, it is important to understand that there are challenges that need to be overcome in order to be successful in the Japanese aftermarket.

First of all, it is important to understand that Japan needs to be treated as a unique market with its own needs. Success in the US does not guarantee success in Japan. Most companies would struggle to find the right partner or distributor for their product.

Fundamentally, there are four channels that most companies could pursue for selling aftermarket automotive products in Japan: independent aftermarket, mass merchandisers, OES (dealers) or gas stations. Depending on the type of product, an American automotive supplier can hope to sell its products through one or more of these four channels. Each channel comes with its own challenges and its own advantages.

Independent of which channel is pursued for meeting sales objectives, it is important for companies to avoid common mistakes: not understanding the strengths and weaknesses of their potential distributors, not attaching adequate importance to Japanese sales personnel in the field, underestimating the importance of marketing, lack of effort in training, inadequate dissemination of information and ignoring the unique needs of the customer or the end-user. All the problems could be exacerbated by lack of understanding of the Japanese way of doing business and by lack of clear communication. Language is only one of the barriers that needs to be overcome. Meeting the expectations of Japanese customers and business partners is indeed one of the bigger challenges.

American companies can solve a lot of communication problems by establishing an office in Japan that has Japanese sales and engineering personnel who can discuss all issues related to specifications, marketing and customer support. While an office in Japan will immensely improve the ability of a company to support its Japanese customers, it requires an initial investment of time, effort and money. Before making an investment it is also important to spend some time understanding the different issues related to brand positioning, local competition, warranty and marketing. There is no substitute for due diligence and good preparation.

Source: JETRO - GAI

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