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  • Business-to-business E-Commerce to Gain Momentum in Japan
  • June 29, 1998 (TOKYO) -- Full-fledged electronic commerce (EC) will soon gather momentum in Japan, following the advent of business-to -consumer EC.
    Expectations are running high for business-to-business EC, industry sources said.

    Two main types of business-to-business EC are apparent. Client companies use EC to purchase various items including office equipment. And users can procure products through EC so as to boost their efficiency.

    Competition in MRO Market Heats Up

    On the suppliers' side, business in maintenance, repair and operations (MRO) has been gaining momentum, just as in the United States, where the business of MRO has grown rapidly. It is the leading type of EC in Japan, too. In the office product market, for example, manufacturers, wholesalers and retailers are preparing to enter the EC business.

    In the stationery industry, Ginza Bungu will create an exclusive home page for Japan Airlines Co., Ltd. (JAL) to sell stationery and other items from July.

    Through the system, JAL employees will register stationery items on the home page, and a purchasing manager will collect orders to make a bulk order through Ginza Bungu's home page. The ordered goods will be delivered in one day. Ginza Bungu has received inquiries from about 20 companies, and it plans to create such home pages for other companies as well.

    In July, Kokuyo Co., Ltd., a leader in the stationery industry, will establish Net Kokuyo to start Internet sales of stationery. However , in this case Net Kokuyo won't engage in direct sales to client companies, but instead will supply the system to stationery shops that aren't able to implement EC by themselves.

    As an example of a simple EC shop style, Askul K.K., a subsidiary of Plus Corp., has been marketing office products to customer companies since April 1997. And from December 1997, K.K. Asahi Shokai, a stationery wholesaler, has offered similar services.

    Companies are launching MRO businesses in other sectors.

    Since January 1997, Kinokuniya Co., Ltd., a leading bookstore, has been generating sales online almost in the same fashion as Ginza Bungu and Net Kokuyo. University libraries are listed as its main users, and five client companies also are on its customer list.

    Japan Air System Co., Ltd. (JAS) started sales of air tickets to companies as part of its MRO business in April 1997. Employees of client companies can reserve air tickets via the airline's home page for their business trips. The tickets are issued by a proprietary terminal installed at the companies' administrative departments. The reservations can be changed up to one hour before flight departure.

    Large Companies Employ EC Beyond Group Boundaries

    EC is becoming a means of moving the entire Japanese industrial community beyond the confines of the traditional "keiretsu" business groups.

    In April, Nissan Motor Co., Ltd. established a "Group Intranet" operation to connect more than 250 affiliates and partner companies . It uses a Web-electronic data interchange (EDI) system to process order receipts and other paperwork for parts.

    Nissan's intranet system based on business-to-business EC was recently joined by Aisin Seiki Co., Ltd. and Denso Corp., both of which are leading parts makers in Toyota Motor Corp.'s group.

    Nissan plans to disclose details of sales results and production schedules to the member companies from October, to build an order receipt/placement system with more flexibility.

    Daiei Inc., a leading supermarket chain, has been wrestling with development of an electronic conferencing system for negotiations with distributors. Distributors store their new product information with images in an intranet server, to improve the efficiency of business negotiations (See chart ).

    Daiei plans to supply system integrators and others with software that it has developed, in the hope that the software will be used widely by various companies, including competitors. If the software is used by many retailers and becomes a standard EC tool of the distribution industry, it will result in higher efficiency for Daiei.

    Many leading companies also use EC to procure parts and materials. An increasing number of companies are opening their EDI systems, which use conventional leased lines, by applying Internet technologies.

    Brother Industries Ltd. in April switched its EDI system for parts procurement to a business-to-business EC service based on an extranet of Hitachi Ltd.

    Suntory Ltd. will soon begin using EC to procure cans, packing materials and other items. The company plans to connect 400 material suppliers over a network.

    Successful U.S. EC Companies Coming to Japan

    Advanced U.S. companies have started business-to-business EC operations in Japan. In June, Dell Computer Corp. of Japan began selling PCs with specifications tailored for client companies over its "Premier Page," a home page for such client companies.

    Dell supplies order status information, and it will commence support services by the end of 1998. In response to the requests of user companies, it provides services to add special functions to the Premier Page, such as a feature to print a ringisho (a special corporate request form) for internal use.

    Nihon Cisco Systems K.K. intends to migrate to a thorough business -to-business EC system in July. Because the company is not engaged in direct marketing in Japan, it plans to construct an EC system to connect 20 sales agencies. Its EC-based transactions do not exceed 25 percent of its total sales.

    "Companies that fully accept the EC system are limited to NEC Corp., Itochu Techno-Science Corp. and Softbank Corp.," said an official at Nihon Cisco Systems.

    When additional expenses are incurred by sales agencies as a result of not using EC for a transaction, Nihon Cisco Systems plans to charge the expenses from support costs to be paid to them, starting in August. The company intends to take such a decisive step in order to achieve a full-fledged EC operation.

    Virtual Market Business Yet to Come

    Suppliers and customers are promoting business-to-business EC systems in Japan in the same way as in the United States. With the emergence of business-to-business EC, the "Virtual Market" has debuted. It provides both parties with opportunities to meet over the network.

    Trading houses are conducting various trials of virtual markets. For example, Itochu Corp. aims to set up virtual markets in textiles and rice, Tomen Corp. for tires, and Kanematsu Corp. for transactions related to pets.

    Since April, Seino Information Service Co., Ltd. has attempted to attract MRO-related vendors via an electronic mall constructed within an extranet. And since November 1997, Orix Rentec Corp., a rental company, has been working on an Internet auction for used PCs and other items. A total of 50 vendors have joined it, and more than 400 items are traded in each auction.

    Chart: Daiei's conferencing system and intranet scheme
    (1) Store products with images.
    (2) Employ a product and put a code on the product.
    (3) Input detailed information in the product master file.
    (4) Approve the product master file and create a contact route with stores on the screen.
    (5) Confirm new product information.

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    (Nikkei Multimedia)

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    Updated: Fri Jun 26 15:20:43 1998