Amazon embodies "the company that values its customers most on Earth."

Japan's e-commerce market has now grown to exceed 13 trillion yen. This series interviews key figures in Japan's e-commerce sector to understand how they plan to engage consumers with their strengths moving forward. This time, we visited Amazon Japan, which has steadily enhanced its Prime membership service and gained significant user support. We delve into the philosophy underpinning their service development.

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Over 90% of Japan's population represents potential customers

Kamino: Since its establishment in 2000, Amazon Japan has steadily expanded its services and arguably set the standard for e-commerce in Japan. Mr. Ichikawa, I understand you've been with the company for a long time. Could you first tell us about your background and current responsibilities?

Ichikawa: I joined in 2005, so it's been 11 years now. As the company expanded its services, the number of employees grew, so I consider myself someone who has been here a long time. Previously, I spent a significant period working at distribution centers, including during their initial setup. I was involved in starting operations for handling items like perfumes, which are classified as hazardous materials, and watches, which have detailed regulations. After that, I served as the head of the consumer goods division, which included food products, and was also involved in developing services like "Amazon Family" and "Subscribe & Save."

After that, I worked on the Prime business and now oversee it. Prime members enjoy various benefits, and since it closely involves the divisions responsible for each service, I'm constantly collaborating with other departments.

Kamiya: Prime has become such an attractive service for users that it's practically synonymous with Amazon.

We'll discuss Prime membership strategy later, but first, could you share your current perspective on the e-commerce market? E-commerce is becoming increasingly mainstream, with each player pursuing efficiency through aspects like product selection and speed of delivery. Given this, to gain further support going forward, I believe diverse services addressing more granular needs will be required. What are your thoughts?

Ichikawa: Compared to a little while ago, the base of e-commerce users has certainly expanded. However, according to the Ministry of Economy, Trade and Industry's market survey on e-commerce, the penetration rate in Japan is still only 4.75%. In other words, over 90% of potential customers remain untapped.

Therefore, based on our company philosophy of "the world's most extensive selection" and "the company that values its customers most," we intend to pursue the expansion of our product range and services. This applies not only to physical goods but also to digital content like movies and music. Aiming for a state where "there is nothing we don't have" means there is still so much we can do. Our corporate philosophy states "Every day is still Day One," and that is precisely the case.

Reference: Amazon's Vision http://amazon-jp-newgrads.com/company

How does Amazon identify latent needs?

Kanno: How will you expand your product selection and services going forward?

Ichikawa: I see two main directions here. Responding to customers' explicit needs and identifying and fulfilling latent needs.

The former is straightforward: responding as quickly as possible to expectations for improved convenience—like product selection, pricing, or site usability. Thoroughly executing this is key to capturing the remaining 90% of non-e-commerce users. Capturing latent needs, of course, is not easy. Customers won't simply tell us these needs. It's an area where we must drive innovation, incorporating insights from analyzing user behavior data on the site, observing societal trends, and considering various other perspectives.

Kanno: Indeed, take Amazon's recent cloud storage services—customers don't typically specify such concrete needs. The fact they've expanded into these services shows how deeply e-commerce has permeated daily life.

Ichikawa: It's no longer traditional e-commerce. AWS usage is indeed growing, and purchasing digital content beyond books has become commonplace in customers' lives.

Kanno: When expanding services, do you ever consciously consider other providers?

Ichikawa: Of course, we gather information about competitors, but it's more to understand the environment our customers are exposed to. We don't consciously follow other companies' services. We focus solely on what we should provide to make things more convenient for our customers or to encourage non-e-commerce users to use our services.

The Prime membership strategy is "eliminating friction."

Kanno: Now, I'd like to ask about Prime membership, one of Amazon's signature services. Could you briefly outline the service again?

Ichikawa: Prime membership in Japan is a program where customers pay an annual fee of ¥3,900 to experience enhanced Amazon services. It originally started with next-day or same-day delivery as its key benefit. Today, it includes eight benefits, such as "Prime Video" for unlimited streaming of movies and TV shows, and the "Kindle Owner's Lending Library" which allows members to borrow one eligible Kindle book for free each month.

Our department is responsible for ensuring these benefits operate smoothly while simultaneously developing strategic services that address both customers' explicit and latent needs.

Kamiya: So it's about services that go beyond expectations?

Ichikawa: That's part of it, but we also place great importance on the concept of "eliminating friction" for customers. It's about creating systems that minimize dissatisfaction and stress, making the experience more effortless. Same-day and next-day delivery were born precisely from this perspective.

Unlike physical stores, e-commerce doesn't provide immediate access to products, but customers naturally want them delivered quickly. If express shipping were charged per item, customers might hesitate based on their order contents. But with Prime membership, they always get the fastest delivery. That makes using express shipping effortless. In fact, this fast delivery service has consistently received high praise since its launch. Similarly, for movies and music, being able to enjoy them fully without worrying about the price per item makes the experience more convenient.

We prioritize that ease of use, hoping that through its accumulation, shopping and entertainment like "watching, listening, reading" become increasingly part of everyday life. In fact, usage rates for each Prime benefit are rising, making us feel all these perks are becoming ever more integrated into daily routines.

Kamiya: "Eliminating friction" is incredibly clear, and it really highlights the power of daily accumulation. Once you get used to a frictionless state, I don't think you can go back. In a way, Amazon's Prime service feels like it's setting a new standard. I've also heard reports that in the US, despite raising membership fees, usage rates actually increased. Does this mean you prioritize customer service over the short term, focusing more on the medium to long term?

Ichikawa: Yes, that's something Jeff Bezos (Amazon CEO) has been consistently communicating internally and externally for years. We've also continued holding "Prime Day," the annual big sale for members launched last year. Fundamentally, our focus is on contributing to customers over the medium to long term, which ultimately maximizes cash flow.

Kanno: By the way, how do you measure the quality of your service?

Ichikawa: I can't go into specifics, but we certainly look at direct metrics like sales and usage rates. We also conduct general surveys like analyzing customer behavior data and questionnaires on an ongoing basis. The ultimate indicator is whether customers accept it, so we make comprehensive judgments based on these surveys and improve where necessary.

However, our company stance is not to release a beta version and then refine it based on customer feedback. Fundamentally, we build every service to a stage where we are confident it will satisfy customers before releasing it. This sometimes means delaying the launch to achieve that level.

The Human Touch Behind Efficiency

Kanno: Amazon has a strong image of prioritizing efficiency, from its website UI down to its packaging. It might be a bit of an oversimplification, but I used to feel like the company's human touch wasn't very visible.

Ichikawa: Amazon's site uses a global standard of one product per page, so that impression is perhaps intentional in a way. In reality, every employee constantly thinks deeply about what constitutes the best possible experience for our customers.

Kanno: Earlier, you mentioned Prime closely collaborates with other service divisions. Beyond video or storage services, there must be cross-functional interactions with procurement and delivery teams. How exactly does service development and improvement progress?

Ichikawa: As you pointed out, we collaborate with many different departments, so there isn't a fixed format. If I had to describe it, it's that each person constantly thinks about what ideal service would look like from the customer's perspective. So, when someone notices something or has an idea, they gather the necessary members, set a theme, and proactively explore it... that's the feeling. There are big ideas, but many are small ideas. However, I believe it's the accumulation of these that leads to customer satisfaction. Anyone can propose new services or improvements, and we regularly recognize good ideas internally.

Kanno: While it's fundamental to service improvement, faithfully continuing to drive it forward is the secret to steadily growing our membership.

Ichikawa: While getting many customers to become Prime members is important, enhancing their satisfaction is paramount—and we couldn't achieve that alone. It's like we've woven countless networks throughout the entire company, driving multiple initiatives to maximize synergy. In that sense, every employee is conscious of our Prime members. We're also rolling out various approaches to encourage more customers to use our diverse new benefits.

Kanno: Even so, with all these benefits, the annual fee of ¥3,900 feels almost too low. In the U.S., it's currently $99.

Ichikawa: Whether ¥3,900 is perceived as expensive or cheap ultimately depends on how customers perceive the value of the benefits. While Prime membership is certainly Amazon's flagship service and a major focus, as mentioned earlier, we also place great importance on getting people who haven't used e-commerce before to try Amazon. Our goal is to get them to sign up first, and then develop the service so that they think, "If I'm going to use Amazon, Prime is the way to go."

Expanding Prime Membership While Acquiring Non-EC Users

Kamiya: In February this year, Amazon announced its 2015 sales in Japan reached $8.264 billion, a 4.4% increase from the previous year, equivalent to approximately ¥1 trillion. Compared to when Mr. Ichikawa joined 11 years ago, I imagine Amazon's market presence and influence have grown significantly. Are there aspects that have become easier, or conversely, more challenging?

Ichikawa: I think both are true. Naturally, there are things we can do because of our current scale, but on the other hand, ensuring overall consistency has become more complex. We've also grown our team. However, having more people means we can consider things from more diverse angles, and the depth and richness of our talent pool is definitely a strength.

As mentioned earlier, while we try not to be too visible to users, the mindset of "Make History" – encouraging each individual to leave their mark – is deeply ingrained within the company. Transfers, including overseas assignments, are actively facilitated based on individual preferences.

Furthermore, while the term "work-life balance" has become commonplace in Japan now, our company has long championed the work policy: "Work Hard, Have Fun, Make History!" We offer robust club activities ranging from soccer to bouldering and kimono appreciation. We also prioritize systems like remote work to support employees with childcare responsibilities.

Kanno: I see! As e-commerce itself becomes increasingly commoditized, I think more people will choose where to buy based on a company's personality and image. It's valuable to see Amazon's corporate stance in this way.

Ichikawa: While there are aspects that can be streamlined or automated, I truly believe that the service that genuinely delights users is conceived by each and every one of our employees—who are human beings themselves. Our internal systems aren't yet perfect, but just like our user services, we're committed to continuously improving them.