How to B2B: A Look at B2B Partner Sales vs. Direct Sales in Japan
Here’s part 3 of the points covered in the Wahl+Case podcast episode with Bryan Rios, discussing how to do B2B sales in Japan, essential cultural aspects to learn, and practical tips based on my years both doing B2B sales as well as working adjacent to sales teams at Softbank Robotics and Ricoh.
Listen to the full conversation with Bryan here.
Subscribe to the Wahl+Case podcast for upcoming episodes where Bryan and myself will discuss, in-depth, how to B2B in Japan!
Partner sales in Japan is very important. And if you want to increase your company sales beyond a certain level, a certain size, I wouldn’t say it’s impossible to do without partner sales—but it’s very hard.
Even the seemingly giant companies like Softbank, which I can speak a lot about because I was working alongside B2B sales there for many years, believe it or not, they have more than 2,000 salespeople in Japan. Another example is Ricoh, and I also worked with them. They have more than 5,000 B2B salespeople in Japan—theirs is the biggest salesforce in Japan.
And you might think, “Okay, I’m sure they’re just doing direct sales.” But believe it or not, they have a lot of sales partners.
In Japan, there’s a long history of having a lot of middlemen. Since the middle ages, Japanese distribution has always been characterized by having many middlemen who would customize orders to the size you needed.
However, speaking especially in terms of IT solutions, you do need a direct sales channel because at the end of the day that’s the best way to get real customer feedback, even if it’s only at a small scale it’s definitely important to keep and have.
The pros and cons to B2B partner sales
Partner sales are also important but mostly to reach out to more customers. However, don’t expect them to deliver a lot of useful information to you. I think this might be the same in any country. The companies that are willing to do partner sales, their salespeople, with very few exceptions, are not going to learn your product. They don’t care. What they’ll likely say is, “Just give me a pamphlet. I’ll show that to the customer and if they say they want to buy it, then I’ll tell you so you can go close the deal. I’m not going to do much work.”
They’re not going to close the deal for you. In a way, they’re just a lead generator. But they still charge you a lot of money. We’re speaking about a minimum of 15% of the sales. Sometimes it goes up to 35%—and that’s just for introducing the lead to you.
But there’s another problem that you have to know about regarding partner sales in Japan, which is peculiar about Japan. That is, the incentive structure of salespeople in Japan is based on revenue, and they’re not happy with a scheme that only has a kickback cash incentive. That’s not enough. What they want is to invoice the customer directly, where on the invoice itself it says their company name, not yours. They want to keep the transactional relationship with the customer. You push the product through them but they are the ones who charge the customer, making it challenging to come up with a good structure of partner sales in Japan.
When you’re selling IT or SaaS solutions through partners, who then is the customer support?
Say, for instance, the salesperson and support are two different companies—all the conversations that have taken place with sales, how is that passed on to support? And usually, there’s a lot of information that needs to be passed on.
It’s very inefficient but partner sales work because they’ve built this trust relationship that we spoke about with the customer.
When the customer buys a product, they’re not buying it because it’s a good product, they’re buying it because it was recommended by the salesperson with whom they have a long relationship. Maybe in Tokyo or city areas, it doesn’t matter that much anymore, but if you go to rural areas, residents will know a certain salesperson for more than 10 years. They’ve bought like all kinds of stuff from them. The printer, the PC, maybe even office furniture!
A lot of B2B sales companies in Japan sell everything. Even the companies focusing on IT, they’re also selling printers, PCs, chairs—really everything.
And so the way the customer does research is just by asking the head salesperson, “Hey, do you know this type of product? Which would you recommend?” And that’s how they make a buying decision.
Once they get the recommendation, the whole process of what we mentioned before is still there. And then the salesperson will ask you all these questions because they’re not going to learn your product. Instead, they’ll be asking you questions all the time. So basically you need a separate support team just for the partner sales team or the partner company. But, as of right now, it’s still a necessary evil. And it’s really hard to get around that.
Despite this well-established structure, the Internet has changed things and direct transactions are now possible. Even if you’re not in an urban area, if you’re IT literate, you can look it up and buy it.
So what’s happening right now in 2021, we’re still in a time where you need the middlemen. But all the baby boomers are going into retirement. And what you will soon start to see in rural areas, especially in family businesses, you’ll see the younger son or daughter taking over the business. And they are a lot more IT literate. And they’re totally okay with not going through the middleman or the salesperson. They are much more willing to Google things and buy stuff that makes sense for them.
Some of this sales stuff is generational. And I think within 10, 20 years, it’s going to look very different.
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