Introduction.
The most important part of entering the European market is gathering accurate information and marketing data in the early stages.
Successful experiences in Japan are not directly applicable to European business, and strategies must be developed based on an understanding of diverse countries, languages, regulations, and cultures.
This article summarizes the points to keep in mind when entering the European market, from the circumstances in each country to specific business plans and operational aspects.
The European market is different in each country.
THE TERM "EUROPEAN MARKET" IS A CONVENIENT GENERIC TERM, BUT THE REALITY IS THAT EACH COUNTRY - FRANCE, GERMANY, ITALY, SCANDINAVIA, EASTERN EUROPE, ETC. - DIFFERS IN ECONOMIC CONDITIONS, AVERAGE SALARIES, GDP, PURCHASING POWER, CULTURE, AND EVEN RELIGION.
For example, the Nordic countries have good social welfare and high incomes, but they also have a large tax burden and are highly price-sensitive markets.
On the other hand, Eastern Europe attracts attention as a manufacturing base because of its inexpensive labor force, but its maturity as a consumer market varies.
In France, the median monthly income is between 2,000 and 2,500 euros, while in Germany it is slightly higher at 2,500 to 3,000 euros. On the other hand, in Poland and other Eastern European countries, the range varies from 1,000 to 1,500 euros.
If we develop products in the same price range without understanding these figures, failure is inevitable.
Responding to consumer laws from different languages in different countries.
One of the major characteristics of the European market is the presence of multilingual nations.
Switzerland in particular has a very different linguistic culture depending on the region, with French, German, and Italian being the official languages. Belgium is also a tri-lingual country with Flanderen (Dutch), Walloon (French), and German regions.
In addition to language, laws and regulations such as consumer protection laws and labeling requirements differ from country to country, requiring localization of packaging and marketing strategies according to local conditions.
We cannot proceed in a uniform manner as in Japan.
Business plan, correct market and marketing data
When entering the European market, many companies consult with Japanese government agencies and support groups.
It is important to note, however, that you should not rely on the information provided.
In many cases, the advisors are retired employees of major trading companies or manufacturers, and their advice is based primarily on past experience.
Outdated information on the European market, advice based on this knowledge, and business strategies are off the mark.
Without a real-time understanding of the current situation in Europe, strategies based on knowledge from the 1980s and 1990s may be recommended and may miss the mark.
FOR EXAMPLE, IN AN AGE WHEN STORE SALES-CENTERED STRATEGIES AND THE OLD PRICE NEGOTIATION MODEL, WHERE EVEN EXPENSIVE JAPANESE PRODUCTS CAN BE SOLD, ARE NOT COMPATIBLE WITH THE CURRENT D2C MODEL AND SNS-UTILIZING MARKETING.
Trade knowledge, misconceptions about tariffs
JAPAN AND EUROPE ARE ESSENTIALLY TARIFF FREE DUE TO THE 2019 EPA (ECONOMIC PARTNERSHIP AGREEMENT). SETTING IMPORT/EXPORT PRICES WITHOUT KNOWING THIS WILL RESULT IN A MAJOR PROFIT/LOSS ERROR.
HOWEVER, LOCAL VALUE-ADDED TAX (TVA) IS ANOTHER MATTER.
The rate is as high as 20% in France and 19% in Germany, but is refundable if the transaction is business-to-business. Even if you have to pay in advance, there is no real burden if you understand how it works.
Failure to understand European business rules
ARTICLE 101 OF THE TREATY ON THE FUNCTIONALITIES OF THE EUROPEAN UNION PROHIBITS RESALE PRICE MAINTENANCE PRACTICES (TOP-SETTING). IN OTHER WORDS, IT IS ILLEGAL FOR A BUSINESS TO SPECIFY, 'THIS PRODUCT SHOULD BE SOLD AT XX EURO.
IN JAPAN, THE EXPRESSION "THE LIST PRICE IS 50 EUROS, BUT THE WHOLESALE PRICE IS 25 EUROS" IS NOT ACCEPTABLE IN THE EUROPEAN MARKET, WHICH REQUIRES "OPEN PRICING," A MODEL IN WHICH THE DISTRIBUTOR IS FREE TO SET THE PRICE.
European Regulations
THE PRODUCT ITSELF, PACKAGING, AND OUTER PACKAGING EACH HAVE EU-SPECIFIC REGULATIONS.
FOR EXAMPLE, WHOLESALERS (DISTRIBUTORS) WILL REFUSE TO HANDLE THE PRODUCT IF IT FAILS TO DISPLAY THE RECYCLING MARK, OBTAIN THE CE MARK, OR COMPLY WITH RAW MATERIAL LABELING REQUIREMENTS.
If violations are discovered, there is a risk of sales injunctions, fines, and in the worst case, suspension or confiscation at customs.
In addition, the more attention a product attracts, the more calls it receives from competitors and consumers, and there are many instances of missed business opportunities. To avoid this, it is essential to work with a specialized company with a local presence.
DIGITAL REGULATION, SOCIAL NETWORKING STRATEGY
The advisor's greatest difficulty is in the digital field.
SOCIAL NETWORKING STRATEGIES AND ADVERTISING OPERATIONS ARE NOW ESSENTIAL FOR SALES CHANNEL EXPANSION, BUT KNOWLEDGE SPECIFIC TO EUROPE IS REQUIRED, SUCH AS GDPR (GENERAL DATA PROTECTION REGULATION), COOKIE APPROVAL, AND TAX TREATMENT OF FOREIGN TRANSACTIONS.
In order to reach a European audience, especially on TikTok, it is advantageous to transmit from a local account or IP, and there are limits to what can be done from Japan.
IT IS ESSENTIAL TO STRATEGICALLY SET UP A SOCIAL NETWORKING DISSEMINATION CENTER AND LINK IT TO THE SALES STRATEGY.
International remittance flow, accounts receivable measures
IN THE EUROPEAN MARKET, IT IS COMMON TO SEND MONEY USING IBAN NUMBERS AND SWIFT CODES.
HOWEVER, JAPANESE BANKS DO NOT HAVE IBAN, AND MONEY TRANSFERS ARE TIME-CONSUMING. AS A RESULT, PROBLEMS SUCH AS REMITTANCE ERRORS AND DELAYED PAYMENTS CAN OCCUR.
This has led to delays in payments even after a contract has been concluded, and in some cases has resulted in a breakdown of the trust relationship. Confirmation of the remittance method is an important part of the initial contract.
summary
The European market is not monolithic and is a complex market where circumstances vary greatly from country to country. To be successful, it is necessary to understand the latest economic, legal, and cultural backgrounds, and to take appropriate marketing and strategic approaches. The key is to take a pragmatic and flexible approach, working with specialized firms based in Europe, rather than acting solely on information available in Japan.