Amazon (NASDAQ:AMZN) could face a formidable trio of competitors in Japan soon. A recent NHK report claims that telco Softbank (NASDAQOTH:SFTBY), Yahoo Japan, and retailer Aeon are teaming up to launch a new online business.

The partnership would reportedly merge Softbank and Yahoo Japan's customer base and analytics technology with Aeon's products and distribution network. Softbank, which makes the famous Pepper robot, could also supply robot labor to Aeon's stores to cut costs, according to NHK.

A smartphone with a shopping cart icon.

Image source: Getty Images.

It's unclear when this new platform will launch, but it could spell trouble for Amazon, which already faces tough competition in Japan from e-commerce giant Rakuten.

What Japan means to Amazon

Amazon entered Japan in 2000, but it remains slightly less popular than Japanese e-commerce leader Rakuten, which was founded in 1997. Last April, research firm DI Marketing found that 70.2% of online consumers used Rakuten, compared to 66.7% for Amazon Japan.

The following month, NTTCom Research and print publisher Toyo Keizai reported more encouraging numbers, claiming that 87.2% of Japanese internet users shopped on Amazon (without taking a poll of Rakuten users). However, that poll also found that just 7.9% of respondents shopped on Amazon at least weekly, while 27.8% shopped there every few months.

Amazon's Echo smart speaker.

Amazon's Echo. Image source: Amazon.

Amazon Prime also isn't a huge hit in Japan. NTTCom Research claims that just 16.6% of Amazon users in Japan are Prime members. By comparison, 63% of Amazon customers in the US are Prime members, according to research firm CIRP's latest numbers.

This makes it harder for Amazon to sell Prime ecosystem-building products like Echo, which it launched in Japan last November.

Despite those challenges, Amazon is still growing in Japan. Amazon Japan's revenue rose 10% to $11.9 billion in fiscal 2017, which accounted for 7% of the company's top line. That makes Japan the company's second biggest foreign market after Germany, which accounted for 10% of its revenues last year.

Why Amazon should pay attention to the competition

Amazon is trying to expand its ecosystem in Japan with original shows for Amazon Video, food deliveries across parts of Tokyo, and a new photography studio in Tokyo to complement its expansion into the apparel market. However, the combination of Softbank, Yahoo Japan, and Aeon could throttle that expansion.

Softbank is one of the three largest telcos in Japan, and it recently bought a majority stake in messaging app maker Line's (NYSE:LN) Line Mobile MVNO (mobile virtual network operator).

This partnership could give Softbank access to Line's new Clova smart speakers, which are similar to Amazon's Echo speakers but feature the ability to receive and send Line messages. If Softbank integrates its upcoming e-commerce platform into Line -- the most popular messaging app in Japan -- it could gain a social advantage against Amazon.

Line's Clova speakers.

Line's Clova speakers. Image source: Line.

Meanwhile, Yahoo Japan (which has been powered by Google since 2010) still controls 27% of the online search market in Japan, according to StatCounter. It's also the second most visited website in the country after Google's Japanese site, according to SimilarWeb.

Amazon ranks sixth, while Rakuten ranks seventh. If Yahoo Japan prominently promotes the new e-commerce platform on its portals, it could lure shoppers away from Amazon and Rakuten.

Aeon, which operates 626 general merchandise stores and 303 malls (including overseas locations), is one of the top brick-and-mortar retailers in Japan. If Softbank and Yahoo Japan use Aeon's brick-and-mortar network as fulfillment centers -- as Walmart (NYSE:WMT) is doing to counter Amazon in the US -- Amazon could struggle to match the trio's speed and reach.

But that's not all...

Softbank, Yahoo Japan, and Aeon aren't the only Japanese heavyweights with their sights set on Amazon. Last month, Rakuten announced that it would launch an online grocery delivery service with Walmart, which owns a majority stake in Seiyu, the country's top supermarket chain.

Seven and I Holdings, which owns 7-11 and the Ito Yokado general merchandise stores, also launched a fresh food delivery service with mail-order office supply retailer Askul last year. To counter these threats, Amazon may need to forge fresh partnerships with other brick-and-mortar retailers in Japan.

The bottom line

Amazon still has a strong presence in Japan, but new challengers could dent its market share. Slower sales in Japan won't sink its international business, but similar challenges could emerge in other overseas markets as local powerhouses unite to counter Amazon's growth.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Leo Sun owns shares of Amazon and SOFTBANK CP UNSP ADR. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy.