Japan market

1. Introduction to Japan

Japan's population is estimated at around 128 million. The economy of Japan is a highly developed and market-oriented. It is the third-largest in the world by nominal GDP and the fourth-largest by purchasing power parity (PPP), and is the world's second largest developed economy. Japan is a member of the G7. According to the International Monetary Fund, the country's per capita GDP (PPP) was at $37,519, the 28th highest in 2014, down from the 22nd position in 2012. Regarding the market survey (in year 2016) of cooking appliances in Japan, with mini ovens and “other” standard coffee machines each seeing volumes rise by 7%, while bread-makers volumes fell by 8% and electric grills registered 6% decline. This picture reflects both the competition within small cooking appliances and the diverse impact of evolving market conditions. On the one hand, the limited space available in Japanese kitchens favors small appliances over larger ones and, indeed, freestanding hobs proved significantly more popular than built-in models, which are categorized as major cooking appliances, in 2016, accounting for 63% of total hobs volumes. Normally, Japans’ sale in the smart home market reached to $ 11.29 million in 2016, with a penetration ratio of 1.29% at home and is expected to reach 7.09% by 2020. According to statistics, the average sales amount of the wisdom family is 1,864.96 dollars. Comparative studies from a global perspective show that most of the revenue is generated in the United States. On the other hand, the pressures on space also intensifies competition between small cooking appliances categories, as consumers are forced to choose which appliances they consider most important in their daily lives. For example, Zojirushi maintained a trend of share growth in 2016, extending its lead in small cooking appliances as its volume share rose above 18%. Zojirushi has a wide-ranging presence in small cooking appliances, including leading sales in rice cookers, mini ovens, electric grills, and standard coffee machines. Mini ovens were the key driver of the company’s volume growth in 2016, though coffee machines also played a significant role.

The Japanese kitchen appliances market has declined noticeably in recent years as consumer spending has been squeezed by a poor economic outlook. However, a change in fortune is forecast, with moderate growth projected through to 2018. Table 1 shows the household appliance market value in Japan. The Japanese kitchen appliances market had total revenues of $5,708.2m in 2013, representing a compound annual rate of change (CARC) of -4.5% between 2009 and 2013. In comparison, the Chinese and Indian markets grew with compound annual growth rates (CAGRs) of 13.5% and 14.9% respectively, over the same period, to reach respective values of $45,669.0m and $4,842.8m in 2013. Market consumption volumes declined with a CARC of -0.3% between 2009 and 2013 (shown in Table 43), to reach a total of 46,970.2 thousand units in 2013. The market's volume is expected to rise to 51,308.4 thousand units by the end of 2018, representing a CAGR of 1.8% for the 2013-2018 periods. The refrigeration appliances segment was the market most lucrative in 2013, with total revenues of $2,441.8m, equivalent to 42.8% of the market's overall value. The washing appliances segment contributed revenues of $1,576.8m in 2013, equating to 27.6% of the market's aggregate value. The performance of the market is forecast to accelerate, with an anticipated CAGR of 3.8% for the five-year period 2013 - 2018, which is expected to drive the market to a value of $6,880.6m by the end of 2018. Comparatively, the Chinese and Indian markets will grow with CAGRs of 10.3% and 10.6% respectively, over the same period, to reach respective values of $74,555.3m and $8,021.2m in 2018. Small cooking appliances are expected to see volumes fall with a 1% CAGR over the forecast period to reach 22.6 million units in 2021 in Japan. Performances will continue to be varied, as some categories prove more compatible with developing conditions in the Japanese market than others. Mini ovens and coffee machines are expected to be the strongest performing small cooking appliances categories over 2016-2021, with both categories set to see 1% CAGRs.

2. WDIRC selling

The forecast of WDIRC selling can be shown in Table 3 during the first ten years since product launched. Here the assumptions of households, occupancy ratio, initial sale, selling price, and manufacture cost are 49,062,530, 0.0800%, 39,250, 350 and 200, respectively. The first year is set as the baseline for comparison with the following years, the sale volume, year penetration, revenue, cost and profit are 39,250 (sets), 800 (ppm), 13,737,508 (USD), 7,850,005 (USD) and 5,887,504 (USD), respectively. As we think, the growth rate with years will be 1, 2.19, 3.40, 3.98, 5.42, 8.90, 9.15, 12.26, 14.01 and 15 times over the first year. The year penetration of WDIRC will be from 800 ppm to 12,000 ppm at the end of tenth year, the totally ownership (penetration) is close to 60,248 ppm(6.02%), it still is a low penetration ratio in Japan even WDIRC listed in market for ten years. However the revenue, manufacture cost and profit these three also present an ascending trend, the profit earned from Japan is about $ 88.312 million at the tenth year in an exclusive market, it owns a huge market and profit in this market. Totally according to our prediction and assumption, the selling in Japan will be up to 2,955,916 sets, even this; the penetration ratio is still lower than other consumption electric products such as TV, Refrigerator, Air conditioner, and Wash machine.

How about the annual growth rate for selling WDIRC in Japan market is, Fig. 3 shows the result. Here the calculation of revenue can use this equation as “WDIRC’s Revenue = Annual growth rate * Year + Baseline”, the formula can be written in a mathematic equation in Figure. According to this regression by data simulation, the annual growth rate it take about 20M per year (r² =0.9753), in other words, by averaged the annual revenue is 20M in Japan market for selling WDIRC products during the first decade.

3. Rice selling

A ten-years forecast to WFR sale, after WDIRC launched in Japan market, is presented in Table 4. The first year since the marketing of WDIRC, online/offline deals for WFR sale are 229,277 kg, here the assumptions of population, rice consumption, sharing of WFR, online buying rate and market sharing are 126,323,715, 60.50, 0.10%, 10.00%, and 30%, respectively. How to calculate the WFR volume by online/offline sale, Eq. 1 is the equation for calculating the WFR sale volume.

Eq. 1 SaleVolume=Population x RiceConsumption x WFRratio x On/OffBuyingRatio x MSharingRatio

(eg. 229,277= 126,323,715 x 60.5 x 0.001 x 0.1 x 0.3)

The use rate of WFR is set as 0.0018 kg/person-year. Based on this, we can get the annual revenue is $ 229,277 (WFR priced as $1), and the profitability is set to 10%, so the profit that will earn $ 22,928. Changing with the time, the ratio of WDIRC in kitchens will increase and cause the use of WFR increasing. We assumed the series of growth rate (G.R.) by years is 1, 12.75, 25.01, 29.06, 39.03, 49.99, 57.92, 71.78, 76.13 and 87.62. G.R. it is based on the prediction of WDIRC’s growth. By this series of G.R., both revenue and profit, they will also be presented like this serial when the dealing cost of WFR through online/offline transaction is keeping constant. Whatever the cost of online/offline transactions depends on the volume of WFR’s selling, so if the volume with time is scaling up, the dealing cost will be significantly lowered, in other words, the profitability with time will increase more than our prediction. If all hypotheses are true, the profit in tenth year will approach to $ 2,008,896. Eq. 2 calculates the penetration of WFR which to be used in this country by people. From this indicator (URate of WFR), we can see the level of penetration of WFR, even at the tenth year, the level of WFR use rate in Japan is still underestimation, that’s meaningful for us to optimistically think, the use rate of WFR can be easy completed and it will be grew up more than our prediction.

Eq. 2 URate of WFR = SaleVolume of WFR / Population

(eg. 0.0018 = 229,277 / 126,323,715)

Regarding the revenue of WFR selling in Japan, Fig. 4 shows the result. This is a prediction by data simulation according to our assumption, the regression could be calculated as “WFR’s revenue = Annual growth rate * Year + Baseline”. The result shows the annual growth rate is 2M per year (r²=0.9951), in other words, the increasing of revenue of WFR selling in Japan is 2M dollar per year. This growth can help the company to maintain its team in the local market for servicing customers.

4. To summarize the revenue and profit

Here according to the estimations above, we summarize the incomes from sales of WDIRC and WFR in Japan. Both revenues and profits are presented in Table 5. In the first year, the products of WDIRC and WFR are unfamiliar with Japanese people; namely the recognition and acceptance aren’t well to local consumers, so on the beginning (1^st year) sales would be not good and the totally revenues and profits will be $ 13,966,785 and $ 5,910,431, respectively. Both of them will increase with years when selling with good experiences and promotions. Through our forecast, at the end of tenth year, the profits of WDIRC and WFR will be up to $ 88,312,500 and $ 2,008,896, and the totally profit will be $ 90,321,396, this is a huge profit which be created in Japan market by our novel products and services.

Totally the revenue of WDIRC and WFR (2W) selling in Japan market can be shown in Fig. 5. The 2W revenue in first year is 13.966 M dollars, after that the growth rate of revenue is 20M per year, this is a simple regression by mathematic model to predict the revenue on product selling. In practice, there are other factors that need to be considered much more, it could be higher than this or lower. Whatever by this calculation let us to trust that the market it always be there.