Pricing your product for Japan: from your door to the Japanese shelf

One of the most common surprises for Australian exporters is how much a product costs by the time it reaches a shelf in Japan. Understanding how that price builds up helps you set an export price that works for you and for your Japanese partners.

Start with your export price

Your export price is what you charge your Japanese buyer. Be clear about what it includes, using standard trade terms (Incoterms):

• Ex works (EXW): the buyer collects from your premises and pays everything from there.
• Free on board (FOB): you deliver the goods onto the ship or aircraft at an Australian port. This is common for exports to Japan.
• Cost, insurance and freight (CIF): you also pay freight and insurance to the Japanese port.

Whatever you choose, make it clear in every quote.

The layers between your price and the shelf

From your export price, these costs and margins are usually added:

1. Freight and insurance to Japan, by sea or air, including any cold chain costs.
2. Import duty, if any. Australia's trade agreement with Japan (JAEPA) has reduced or removed duty on many products, but rates vary, so check yours.
3. Customs clearance and import costs, including inspections, storage and local transport.
4. The importer's margin, which covers their risk, stock holding, labelling, sales effort and service to customers.
5. A wholesaler's margin, if the product goes through one before reaching retail or food service.
6. The retailer's margin.
7. Consumption tax, added at each stage and included in the price the shopper pays. Japan's standard rate is 10%, with a reduced rate of 8% for most food and non-alcoholic drinks.

An example of how it builds up

The numbers below are made up to show the structure only. They are not typical margins, which vary widely by category, channel and partner.

In this example, the shelf price is about two and a half times the export price. Your own numbers could be higher or lower. The point is to do the calculation before you quote.

Work backwards from the shelf

The most useful exercise is to start at the shelf and work backwards:

1. Find similar products in Japan and note their shelf prices.
2. Decide where your product should sit: premium, mid-range or value.
3. Work back through the layers above to estimate the export price that shelf price allows.
4. Compare that with your costs and the margin you need.

If the numbers do not work, look at pack size, format or channel before you look at cutting quality. A smaller pack, a gift format or a food service channel can change the picture.

Currency and payment terms

Decide whether you will quote in Australian dollars or Japanese yen. Quoting in yen can make you easier to buy from, but you take on the exchange rate risk. Quoting in Australian dollars moves that risk to your buyer. Agree payment terms early and put them in writing.

Leave room to grow

Your first price will be referred to for a long time. Japanese buyers value stable pricing and do not welcome frequent changes. Build in enough margin to cover the costs of supporting the market, such as samples, promotions and visits, so you are not forced to raise prices soon after launch.

Want a second opinion on your Japan pricing? Book a free call, or start with our Japan Export Readiness Checklist.

This guide is general information only, not legal, tax or regulatory advice. Requirements change, so check them with the relevant authority or your importer before acting.