WHY Japan only has 10 Apple Stores (and probably more on the way) — JAPANEUR

Is it competition with other electronics makers in Japan? I don’t think so. In a 1985 interview, Steve Jobs said something about Japanese competition in computer technology that turned out to be prophetic, and applies to the iPhone today:

Japan’s very interesting. Some people think it copies things. I don’t think that anymore. I think what they do is reinvent things. They will get something that’s already been invented and study it until they thoroughly understand it. In some cases, they understand it beer than the original inventor. Out of that understanding, they will reinvent it in a more refined second- generation version. That strategy works only when what they’re working with isn’t changing very much—the stereo industry and the automobile industry are two examples. When the target is moving quickly, they find it very difficult, because that reinvention cycle takes a few years.

– Steve Jobs

Playboy, 1985

Japanese companies began building smartphones in 1999. 13 years after the iPhone’s release in 2007, it’s still the most popular phone in Japan with no close second place.

What about geopolitical tensions?

What else could it be keeping Apple from opening more stores in Japan? Is it geopolitical tension? I don’t think so. Japan is a peaceful place. The economy may be down, but you wouldn’t know that living in Japan, and in the context of the world markets, it’s been a rather stable under-performer for years. Post WWII Japan doesn’t wage wars and generally focuses on its own house, not on other countries’ issues.

Compare this to China, where Apple has invested in 44 stores since 2008.

One year ago, Forbes ran an article, “Apple’s China Risk: $43 Billion” when Apple was under fire by the Chinese government for allowing a police tracking app called HKmaps, an app pro-democracy demonstrators used to track protests and police activity including roadblocks, to remain in the App Store in China. Privacy is basically illegal in China, and Apple is all about privacy.

Today, less than a year later, it looks like Apple’s investment in China is in bigger danger. Bloomberg reports in “Apple’s $44 Billion China Market Threatened by Trump WeChat Ban” that Trump’s ban threatens to turn iPhones into expensive “electronic trash,” because WeChat is perceived by most Chinese as one of the most essential apps on his mobile. This time, it’s not up to Apple to comply with Chinese policy. This time, Apple’s compliance with US law may put iPhone at a serious disadvantage in China.

The Profit Imperative

Sometimes the simplest answer is the correct one. If you ask almost any MBA student circa 2005 which country was talked about as the “biggest” opportunity, and they’ll tell you it was China. When I was in business school back in 2000-2003, no one talked about Japan, except for a few of my older professors who remembered the 1970s and 1980s with great fondness.

Apple appeared to have forgotten Japan around the time they started major investment in China. Seven stores were opened between 2003 and 2006, then only one throughout almost a decade. Now, as tensions rise with China, it appears Japan is getting some much needed attention and love, with four new stores and two original stores were closed down completely.

That Japan is underserved as measured by Apple Stores is an example of the danger that comes with focusing too much on markets just because of their size. 18.55% marketshare of a total market population of 1,439 million Chinese mobile phone users is a HUGE FREAKING AMOUNT OF $$$. It’s like 2.7 billion phones. Those numbers hurt my head. On the other hand 62.7% of 126 million people is only 79 million phones. Japan’s a teeny tiny market compared to China. When you manage by spreadsheet and live by the dividend, it’s tempting to look at 1,439 million potential buyers, despite some pretty big red flags.

I do wonder what kind of arguments came up 15 years ago against investing in more stores in Japan. It’s easy to look at 79 million people and think, they already bought our number one product. The Japanese market is fundamentally different from the US and almost any other market on the planet. You don’t just come to Japan and say “Let’s do this.” There is serious work involved in communicating and serving Japanese customers the right way. Business and operating models must be localized, not just translated. If you do it right, however, you build the kind of trust that transforms Japanese customers into loyal, lifelong fans.

Apple already has the foundational formula: Bring them into your stores and help them experience more of the magic that is Apple products. Something tells me Apple’s thinking about Japan a lot more recently. Warren Buffet is. So are other heavy hitters, like Sequoia Capital.

Apple, if you’re listening (or rather, reading) please open a store in Kobe. Motomachi is waiting.

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Also, check out this anime-inspired Apple ad made for the Japan market: