This article is the third part of the FT series, which explores the future of retail.
Hiroshi Mikitani, a Japanese billionaire, loves trading to improve his reputation as the greatest e-commerce evangelist.
Founded in 1997 by Mikitani, Rakuten is one of Japan’s largest online retailers, investing in the messaging app Viber and the US coupon and cashback site Ebates.
A record explaining why his recent transactions have created such interest. Instead of investing in a new app in late March, Mikitani took an 8% stake in Rakuten, a former state-owned post office, a strong symbol of the role of physical stores in the country’s $ 5 trillion economy. I agreed to sell it to a certain Japan Post.
As evidence that it’s too early to come to a pandemic that has had the biggest impact on the retail sector in decades and cancel the role of physical store networks in reaching Japanese consumers. This transaction has been confiscated.
In parallel with the investment, Rakuten will dramatically expand its delivery network and place the brand in front of older shoppers who use the post office. Japan Post, on the other hand, can take advantage of its familiarity with online retailer payments and the use of customer data.
“The essence of this deal is that Japan Post, which has the largest retail store, is affiliated with Rakuten, which operates the largest digital business,” Managing Executive Officer Hiroshi Takasawa told the Financial Times. ..
If the deal reminds us that brick and mortar retail roots are deeper than in other major economies, no one now argues that the pandemic has changed the way Japan shopns. No.
Akio Yoshida, president of Aeon, Japan’s largest supermarket chain, was clear when he spoke to investors last month.
“The expansion of Covid-19 has changed the way consumers behave, think and value,” he said. “Digital technology is now pervasive in every part of our lives.”
This is a fundamental challenge for the 7 million-employed sector, straddling a rapidly split customer base over the last decade. In short, it’s a cohort of many older people who grew up in physical shopping and younger digitally savvy shoppers.
Demographics are one of the main reasons countries, which are synonymous with technological innovation, are delaying the adoption of e-commerce.
By the end of this year, the web will account for nearly 11% of Japan’s retail sales, according to an eMarketer survey. In contrast, consultancy forecasts that online sales will account for 52% of China’s total, 15% in the United States and 13% in Western Europe by the end of the year.
However, retailers are not sure how serious the pandemic’s impact will be, as Japan imposes another emergency before the Olympics to keep Covid-19 infection rates low.
As new habits become permanent, there are signs of fear of getting caught in flat feet. It’s not as clear as Isetan Mitsukoshi, a 348-year-old department store owner who sells everything from luxury bags and bedroom furniture to traditional sweets.
When the government first declared a state of emergency a year ago, the company was forced to develop new habits quickly. Staff turned to the Zoom video calling and messaging app Line to meet the plethora of customers demanding that they be able to purchase online backpacks in time for the start of the April school year.
Since then, the group has developed its own smartphone app, theoretically making all one million products sold at Shinjuku’s flagship store available online. The app also allows customers to effectively consult with sales staff.
“I felt that if stylists could give advice to customers looking for such encouragement before buying anything, they could offer services that aren’t available on Amazon or Rakuten. [online]”Isetan Mitsukoshi, an executive of Tomohide Mitsukoshi, said.
“We are at a stage where we need to rethink the meaning of our existence,” he added.
Yuko Shimomura, who works for a securities firm in Tokyo, said the Covid-19 crisis changed the way she shopped.
“I don’t mind going to department stores, but you can find more deals online,” says Shimomura, in her 40s.
Approaching the end
It’s not difficult to find a skeptic who believes that too little effort is being made like Isetan. It’s too late as the web expands its grip on consumers.
“We underestimated the pace of the digital shift because management relies on physical stores,” said Sho Kawano, co-head of Goldman Sachs’ Japanese equity research. “If Isetan had strengthened its digital activities 10 to 15 years ago, the situation would have been dramatically different. We are nearing the end.”
Even before the pandemic, the mix of complacency and ruthlessness by some traditional retailers created openings captured by digital rivals such as fashion site Zozo and flea market app Mercari. They are getting better since the crisis.
Mercari’s stock, which went public in 2018, set a new record earlier this year as a younger generation of Japanese consumers used the app to sell second-hand clothing, handbags and other accessories. In the first three months of this year, revenues increased 41% to a record high of ¥ 28.6 billion ($ 261 million).
The popularity of ZOZO Town, an internet fashion empire owned by Yahoo Japan operator Z Holdings, is also exploding.
Unlike these online specialists, the physical store is located in the heart of Ito-Yokado, one of Japan’s largest supermarket chains. However, the crisis-stricken company is testing a new approach designed to bridge the gap between 132 stores and the e-commerce business.
Just as Prime Minister Yoshihide Suga took office as Prime Minister with a promise of economic recovery, a delivery service that supplies 400 kinds of vegetables, fruits, meat, and fresh fish directly to the homes of the elderly who ordered them in September. Started. on the phone.
“There will be more and more worlds where online and offline are fused. We will need to make various adjustments between online supermarkets, delivery services, actual Ito-Yokado stores, and convenience stores,” says senior executive Taishi Shibata. I said in an interview.
There is one company that provides encouragement as the crisis confuses traditional retailers.
Fast Retailing, the owner of UNIQLO’s fashion chain, is now regarded as a rare example of how technology can be used to operate ubiquitous stores smartly while expanding online sales...
UNIQLO’s domestic sales at the store increased 5.6% year-on-year and online sales increased 41% from September to February. Fast Retailing, with a market capitalization of $ 86 billion, expects record annual profits this year.
According to analysts, the unlikely result is due to UNIQLO’s efforts in both online and physical operations. Robots now dominate the warehouse and speed up the selection of products to deliver. We have launched our own cashless payment app. This is a state-of-the-art effort to collect more valuable data about our customers.
“Customers, whether online or offline, ultimately want to buy the products they want at their convenience,” said Xiaozhou Wang, executive officer of Fast Retailing’s global e-commerce efforts. .. “People want to try on their clothes and need a physical connection with consumers, but they also benefit from being open 24 hours a day and getting more information about their customers.”
There is no doubt that Japanese consumers will shift more online shopping in the long run. But the industry is facing the worst losses in decades, so the message from shoppers to retailers about future success is relentless.
How the pandemic raised the stake for Japanese retailers Source link How the pandemic raised the stake for Japanese retailers