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One of Japan's big-three parcel delivery companies, Yamato, dropped a bombshell when an "inside source" told a major daily newspaper they would gradually end their same-day deliveries for Amazon Prime customers.

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" With Amazon down to its last possible major delivery partner [in Japan] one wonders where the company will go from here."
Terrie Lloyd, Long-term technology and media entrepreneur

Apparently the company is already negotiating with Amazon to raise its rates on regular deliveries and to completely phase out same-day ones.

Even as this development broke, Amazon Japan was scrambling to replace its second supplier in four years by cutting a deal with Japan Post to take over Prime deliveries.

What does Japan Post have that Yamato does not? Better national infrastructure, greater overall manpower, and a government exemption to park unattended - something illegal for private firms.

But even with these points, Japan Post's current home delivery capacity is only about a third of Yamato's. 


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This is a huge decision for Yamato, which took over the Amazon relationship from Sagawa in 2013 after Sagawa had a falling out with Amazon over wanting to increase prices.

The year after Yamoto's sales jumped 10 per cent to ¥150 billion while Sagawa's dropped by ¥60 million (no doubt picking up other clients in the ever-expanding online shopping sector to lessen the impact).

Rumour has it Amazon has been paying Yamato as little as ¥250 per delivery (drivers apparently get ¥150) and this coupled with the policy of giving customers the right to receive multiple visits until a delivery is completed has been the straw that broke the camel's back.

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There is no indication yet of what Japan Post is charging for the same service, but we can imagine it is going to be more.

This development with Yamoto is not a surprise to those in the online shopping industry

Sectoral sales have ballooned from ¥900 billion annually in 2010 to around ¥11 trillion last year, and will further swell to ¥20 trillion in 2020.

Yamato delivered roughly 1.8 billion parcels in FY2016. Yamato has already said in a statement about labor improvement measures it will probably introduce peak pricing as a way of spreading out delivery loads, as well as increasing the evening delivery window from just one hour (too tight for drivers) to two hours.

When we look at the multiplying ‘failed-delivery’ notices to our own address, we marvel at the inefficiency of the concept, and wonder why the whole scheduling thing isn't just simply put online, replete with auto-reminders to customers' mobile phones and penalties for not being home at the appointed time.

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As far back as two years ago (2015) Rakuten and Japan Post started a collaboration to improve delivery efficiency by setting up trial delivery lockers in public locations around Tokyo.

The problem has been while the lockers have been popular with single women who are reluctant to meet delivery drivers at their front doors, most online shopping customers still want home delivery and hours to accommodate their working hours and other commitments.


Perhaps not coincidentally to the Yamato news, Rakuten and Japan Post made a new announcement they would try expanding collaboration to reduce the number of repeat visits required to deliver a package. They came up with four key areas of logistics improvement:

  • Increasing third-party pick up locations so customers can (convenience stores, post offices, HAKO POST, and Rakuten Boxes);
  • Implementing client designated pick-up locations;
  • Expanding notification services, especially online; and
  • Providing incentives to customers who are present during their appointed place/time window, with Rakuten Super Points.

With Amazon down to its last possible major delivery partner, Japan Post, one wonders where the company will go from here in order to continue expanding its ¥1.16 trillion a year business?

Although Amazon is not commenting publicly, their losing Yamato forces them into the arms of a semi-government owned company which may lack the commercial commitment to keep Amazon deliveries as competitive as its Prime customers have come to expect.

While we can reasonably assume for now the two parties have come to commercial agreement on costs and service levels, we give it a year before Amazon is being pushed to accept higher fees and slower delivery times.

This may threaten Amazon's Japan growth and in fact, could strangle it if the company doesn't find another supplier.

Luckily for them, they recently have embarked on a China export business out of Japan which will make up the revenue slack temporarily, but which will become badly exposed if China-Japanese politics breaks out again.


No doubt Amazon is thinking to the midterm (five or ten years out). We believe delivery drones will be allowed in Japan as an early adopter country, and it's not inconceivable Japan will become a leader in this field, due to its declining population.

Whether airborne or self-driving drones will be the future is not clear at this point, although with the rapid increase in apartment dwellers, an airborne delivery system equivalent to a smart Roomba vacuum cleaner (those things are noisy but amazing) could mean veranda landings and better-than-front-door service.

Another midterm option would be to bring in non-Japanese to execute actual deliveries. Do they need to speak Japanese to hand over a parcel?

No, not really. A three-way Facechat with a Japanese-speaking call centre could solve any customer inquiries, while Google Maps is now sufficiently accurate a foreign delivery person could find most addresses while navigating in their own language.

There are already some foreign delivery people employed in Tokyo. We remember back in 2013 seeing one foreign guy on a Yamato three-wheeler delivering packages around Sakura Shimmachi (Setagaya Ward, a very conservative upmarket suburb). We saw him working in the area for some months, so obviously the locals were OK with it.

In the short-term, Amazon may decide to start its own delivery company or to invest in a second tier business.

There are plenty of regional trucking companies who'd love to compete with the three majors.

But to do this, Amazon would also have to invest significant effort into helping the new kid get technology and to rationalise the aforementioned delivery options.

Another short-term option would be to do away with delivery trucks altogether and move to light motorcycles (like Japan Post and Ricoh copier supply guys) or bicycles (like Uber Eats).

Bicycles are particularly interesting because coupled with a low-cost barrier to entry, the task of delivering parcels could be democratised and farmed out to a freelancer group of a much broader age range - like college kids who don't yet have a license.

The other great thing about bicycles is now you can rent them, so the parking fines are almost non-existent.

Terrie Lloyd is a long-term technology and media entrepreneur living in Japan. He blogs at Terrie's Take.

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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