Ebay Japan had always been a critical turf for ebay. In fact, the world’s premiere internet auctions company failed majorly in its primary business expansion plans in Japan. Their then main competitor Yahoo Japan auctions always managed to take the lead among Japanese participants of the online auction trade. Ebay Japan remained solely operational in Japan only for a short period during the dot-com boom (2000-2001). In March 2002, Ebay Japan completely withdrew from the Japanese market, by accepting a $1.2 billion charge and completely closing any business transactions in the Japanese market. This seemed the only option left for ebay Japan as the world’s second largest e-commerce geography in Japan only allowed a meager 25, 000 listings to the company, a number far less than the listings of Yahoo Japan Auctions.
For ebay Japan, two prime factors mainly contributed to this humiliating Japanese debacle of the online auction giant. The first factor was a launch-time-lag of 5 months and the second factor was Ebay Japan decided to charge a commission of 1.25% to 5% on each transaction, which Yahoo Japan auctions never bothered to do. Corporate gossips attributed the then CEO of ebay Japan, Merle Okawara, of being insufficient in understanding the criticalities of the internet market. Ebay Chief executive and President Meg Whitman summarized the Japanese debacle of ebay Japan when she confessed, “We’re definitely in catch-up mode.”
Yahoo Japan auctions on the other hand always maintained a considerable lead in the Japanese e-business. Yahoo Japan auctions started operating in 1999, with only initial staff strength of 120 people. Within June 2001, Yahoo’s site found 2.2 million Japanese users buying and selling various different items. Ebay Japan found itself perplexed and trying different business tactics to gain the audience attention, none of which succeeded to show business results.
Moreover, ebay Japan’s usual policy of word-of-the-mouth advertising also did not see any profit, because the site failed to understand the general Japanese psyche. By the time ebay Japan incorporated the changes in its website, Yahoo Japan had already overleaped it. Yahoo Japan auctions had by then secured its presence by a 95% share of the Japanese market, leaving only a meager 3% for ebay Japan.
Yahoo Japan auctions is immensely popular in Japan, in absence of any competitors and is nicknamed YAFU OKU by the Japanese. Yahoo Japan started the operations in September 2009 and was rewarded with a monopoly success in the Japanese market. This Japanese success was so overwhelming, that the Santa Clara company decided recently to make the Yahoo Japan site available only in Japanese language from September 30, 2009.
Although people outside Japan often refer to Yahoo Japan Auctions as ebay Japan, yet it is an ironical misnomer as ebay Japan had to withdraw from the market in the face of a monopoly Yahoo market. Nevertheless, ebay also tried to get their business done by building in affiliations with Yahoo!. A CNBC news of 2001 reported that Yahoo! and Ebay Japan were discussing a 50/50 merger in Japan, but that never took shape understandably because Yahoo Japan had enough dominance not to consider any merger of any sort.
However, things took a different turn in 2006 when ebay (not ebay Japan) and Yahoo Japan started a common Japanese site called Sekaimon or the ‘gateway to the world’ to assist Yahoo! Japan users to bid for overseas ebay items. Yahoo! auctions reasoned that this step was directed to bring in more ‘cross-border trading’ of the online auctions scenario. Ebay CEO Meg Whitman resounded this business excitement and asserted that this deal will let the ‘localized site’ offer more ‘ease and convenience’ to the Japanese buyers and sellers. Apart from Yahoo! and Ebay, another company called the Shop airlines also participated in the deals, offering services of site management, payment transparency and item shipping.
This 2007 alliance of Yahoo! and Ebay in Japan actually followed from a similar 2006 alliance in the US. According to this 2006 San Francisco deal the two companies agreed to aid each other in online advertising, payment transactions and business communications. The acquisition of paypal inc. by ebay added as an additional business reason for Yahoo! to get into the business deal with ebay. However, since paypal is not so much popular with Japanese customers, the joint business site ‘SEKAIMON’ lets the customers buy the items using credit card.
SEKAIMON mainly serves as a platform for the US seller to sell their items to the Japanese buyer. The regulations of this site require the Japanese buyer to pay a commission for the ‘handling cost’ of the item over the usual cost of the item. Like Yahoo! Japan auctions, SEKAIMON is also solely available in Japanese and the only way for a non-Japanese customer is to use the web translation tool from Japanese to English or other languages.