E-commerce Goes Postal

In one corner stands 7-Eleven Japan, the 800-pound gorilla of the convenience store industry. In February it set up a joint venture with seven companies to launch an e-commerce marketplace that offers everything from books to cars. The new company will open its site in June and place multimedia terminals in all 8,000 7-Eleven outlets by next spring. In the other corner stands the post office, hungry to sell just about anything online, using its 24,000 outlets for payment and delivery.

But -- the post office? It sounds so odd to Western ears, but in fact it's been selling online for some time, at www.furusato-tayori.or.jp. And its furusato yubin service (delivery of presents to parents or friends) has been live since 1983. This service offers 9,800 products, of which 2,000 are now purchased online. Payment is made by credit card, and the MPT (Ministry of Posts and Telecommunications) plans to expand the scope of merchandise. It's even more keen on the idea of financial services, with ATMs already in all its outlets.

Following are some of the e-commerce tricks the MPT has up its sleeve:

Postal Savings E-Com
It will let customers withdraw funds from their postal savings accounts to make purchases online. Last December, the post office signed agreements with 17 companies (such as Nomura Securities and the Japan Travel Bureau) to offer this ability. Online shoppers will be able to buy airline tickets and merchandise by transferring funds from their postal savings accounts.

J-Debit Cards
It will accept online payment from debit card accounts starting this month. In January 1999, the post office and eight commercial banks (Fuji and Dai-Ichi Kangyo among them) rolled out a debit card -- called J-Debit -- that allows retail consumers to pay for goods and services by having money electronically transferred from either their bank or postal savings accounts. About 100,000 retail outlets already accept the card, and soon it will work online as well.

IC Cards
It's rolled out an IC credit card, similar to American Express's Blue card. This kind of plastic uses a chip instead of a magnetic strip, and is thus more secure for online shopping. (One of the things holding back e-commerce in Japan is fear of credit card fraud. This might have something to do with the fact that Japan has immature security standards, and crime syndicates using sophisticated skimming technologies are very active.)

Financial Services
It will sell its own 401(k)-style pension plans, both in outlets and over the Internet. The government hasn't approved such retirement plans yet -- the Diet is still debating the concept -- but the bill in question should pass next spring. The PO will also offer a variety of other financial services, and consumers will be able to pay for them all by withdrawing funds from their postal savings accounts. One result: Online consumers in remote areas will be able to purchase stocks, funds, and life insurance policies without having to visit the branches of brokerage houses in big cities. More than 30 financial institutions have signed on for the program, including big players like Citigroup and Sumitomo.

Why is the post office so eager to bulldoze its way into e-commerce? An aggressive privatization plan, for one. In 1997, the Hashimoto cabinet recommended that the postal savings system be privatized. According to the reform timetable, next January three postal businesses (savings, insurance, and delivery) will be split from the MPT, to be reorganized as the Postal Agency under the General Affairs Ministry. In 2003, the three postal entities will be shifted to the Postal Public Corporation, with a business structure more akin to that of a private company. (Outright privatization was aborted because of vehement opposition from local post offices -- in small towns the post office is often the focus of the community.)

Banks, for their part, have long felt that the post office has an unfair advantage, and now they fear it getting a leg up in e-commerce as well. In the past, the post office was permitted to offer 10-year term deposits paying compound interest, and was given privileges denied to commercial banks, such as exemption from corporate and other taxes, and freedom from requirements to build up reserves or pay dividends to shareholders. Thus the postal saving system was a magnet for individual assets.

The postal savings system's new status as a public corporation, however, will deprive it of the privileges given to governmental organizations, such as exemptions from corporate and fixed-asset taxes and insurance premium payments to the government-backed Deposit Insurance Corp. The new expenditures will amount to an estimated ¥700 billion a year, a significant extra burden for the Postal Public Corporation.

What's it all boil down to? In 2003, the Postal Public Corporation will vie with convenience stores, numbering 30,000 nationwide, on an equal footing. It'll be a fun battle to watch.