Opportunities are growing as Japan follows the global trend to solutions, however with insufficient knowledge of IT, implications arise for product driven companies who are struggling to keep up. The time is now to venture in Japan’s security market as service and solution providers are needed in Japan.
Even though Japan is a mature security market, the country is still much slower than others to adopt global trends toward solutions. Only in the past few years has Japan moved towards IP, with IP cameras owning a market share of approximately 56 percent, compared to analog camera's less than 40 percent as of 2014. The gap will continue to widen as several research centers have forecasted total shipments of IP cameras will total to 480,000 this year, compared to 260,000 analog cameras. Apart from ongoing market demand, the government's plan to postpone raising the consumption tax rate to 2017 may also be a factor of end users' move from analog to IP before the 10 percent tax is implemented.
When the industry moves to IP-based security products, the demand for more integrated systems or solutions also arises. Japan is now starting to catch up to the global trend for solutions. A more recent and notable example of this is the employment of video content analysis (VCA), which is an upcoming trend this year in Japan, being able to fulfill end user's demand for functionality beyond security. In the retail sector, businesses are quite interested in adopting VCA for monitoring customer behavior, which will assist them in providing the best strategies for marketing, and in turn increase their sales. Many industry experts think the retail sector in Japan will probably be the earliest adopter of security solutions.
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Several challenges confront the country as Japan's security industry steps into a new era of technology, which turn into opportunities for foreign players.
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Take a Piece of the Action Challenges arise for a majority of Japanese companies who are product driven. At the moment, most of Japanese companies have yet to catch on to the trend, with companies opting to continue selling hardware in order to save time and labor, resulting in lack of technical service. Furthermore, a number of products on the market are only compatible with products of the same brand and do not allow for seamless integration with products of other brands, which limits customer choice. As a result, price competition is heavy in Japan, with companies struggling to beat competitor's prices to prevent losing business. In some cases, manufacturers even go as far as to ignore business etiquette and compete with their sales partners by going over their heads to sell directly to end users. Although this allows the company to make more sales, this strategy depletes the trust out of the business partnership, and will be detrimental to the company in the long run.
As big and long-established companies gain more market share, and if other small and new companies don't change their business tactics, it is assumed in a few years, only some of the big companies will stay standing in Japan's security industry. The implications that Japan currently possess will likely drive customers away to look for solutions elsewhere. Now might be a great time for foreign players who can provide solutions and services to join the market. Companies with strong IT background, such as AVNET, Buffalo, IO Data, Logitec, and Microsoft Azure, have taken the opportunity to join the competition, due to Japan's lack of IT knowledge to satisfy customer demand.
Recognition, Quality, Price
Many companies have taken to alter their market strategy in order to adopt to the market change. Some good examples that some companies in Japan have set are worth taking note before venturing in Japan. Primarily, understanding customer demand as well as providing a wider selection of quality options is essential. For instance, Canon plans to broaden their product selection, with nine new products expected to roll out this year. Especially after the acquisition of Milestone Systems and Axis Communications, Canon now has higher potential to offer solutions to end users.
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It is suggested that players should establish a relationship with a partner and gaining a certain amount of market share before launching their own branch office in Japan.
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It is important to build up reputation and brand recognition, as end users and projects will not choose to use products of brands unheard of. Hikivision Digital Technology partnered with Digital Max Japan and Security Design, and has established a support and service center and ensured five weeks' worth of inventory ready to be shipped to customers. The partners have also established a one stop shop solution for Hikvision products, creating a wider range of options for customers and support when they encounter problems.
Companies such as Axis Communications organize educational seminars and training programs for their partners, enabling them to promote awareness and education to end users. Axis is successful in this case as their brand is widely known, and has a variety of products, introducing more than 20 new products every year.
However, some other big brands who also organize educational events still have difficulty gaining market share in Japan due to the higher price of their products. It is important to remember, brand recognition, quality products, and price is the key to being successful in Japan.
The Time is Now
Turn challenges into opportunities as now is the time to jump in Japan's market. For foreign companies who already have a head start on providing solutions and services, Japan is an ideal investment opportunity as solution providers are needed in the market.