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This article is the third part of the FT series that examines the future of retail
Japanese billionaire Hiroshi Mikitani likes the agreements that are burning his reputation as the biggest evangelist for e-commerce in a country that has taken it more slowly than many.
Rakuten, a company founded in 1997 by Mikitani and incorporated into Japan’s largest online store, has taken over Viber messaging apps and shares of Ebates to refund US coupons and money.
It’s a record that explains why his latest deal has sparked interest. At the end of March, Mikitani decided to sell Rakuten’s 8% stake to Japan Post, a former state postal service and a powerful symbol of its role in the country’s $ 5 million economy instead of investing money in late March.
It has been more than a year since a pandemic hit the retail sector in decades, and the deal has been confiscated as proof that the role of a network of physical stores in reaching Japanese consumers is imminent.
Along with the investment, Rakuten will expand its delivery network tremendously and put its brand in front of old buyers who use post offices. Japan Post, on the other hand, can touch the online retailer’s knowledge of customer data payments and uses.
“The essence of this agreement is that Japan Post, which has the largest retail branch, is partnering with Rakuten, which is doing the biggest digital business,” CEO Hiroshi Takasawa told the Financial Times.
If the agreement reminds us that the country’s brick and mortar retail roots are deeper than in other major economies, no one doubts that the pandemic has changed the way stores in Japan.
Akio Yoshida, Aeon, president of Japan’s largest supermarket chain, was no doubt present when he addressed investors last month.
“The expansion of Covid-19 has changed a lot in consumer behavior, thinking and value,” he said. “Digital technology is now embedded in every part of our lives.”
Oin zapala
This poses a radical challenge for the sector, which employs 7 million people, and over the last decade the distribution of customers has been significantly divided: the elderly population makes physical purchases and younger buyers are more digitally savvy.
Hiroshi Mikitanik Selling Rakuten’s stake to Japan Post is a symbol of the power of the brick and mortar retail trade © Keith Bedford / Bloomberg
Demography is one of the main reasons why a country that is synonymous with technological innovation is taking a slower e-commerce.
The network will account for nearly 11% of Japanese retail sales by the end of this year, according to a study by eMarketer. In contrast, the consultancy predicts that online sales will account for 52% of total China by the end of the year, 15% in the US and 13% in Western Europe.
But while Japan is setting another state of emergency in an effort to keep the Covid-19 infection rate ahead of the Olympics, traders don’t know how far the effects of the pandemic will go.
There are some signs that torment is catching on as new habits become permanent. Nowhere is it clearer in the case of Isetan Mitsukoshi, a 348-year-old big-store operator who sells luxury handbags and bedroom furniture and regular candy.
FT series: the future of retail
The articles in this series will examine the following:
Walmart vs. Amazon: The struggle to dominate food
How China shapes the future of shopping
Can online markets live their way?
When the government 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 on the Line in April to meet the many requests from customers who wanted to be able to buy backpacks online on time for the start of the school year.
The group has developed its own smartphone app that theoretically makes all 1 million products sold in the main Shinjuku store available online. The app also allows customers to virtually consult sales staff.
“We think we could offer services that aren’t available on Amazon or Rakuten to customers who are looking for encouragement that our stylists can offer that advice before making a decision to buy something. [online]Said Tomohide Sanbe, a senior executive at Isetan Mitsukoshi.
“We are at a time when we need to reconsider the meaning of our existence,” he added.
Yuko Shimomura, who works for a brokerage firm in Tokyo, said the Covid-19 crisis has changed the way we shop.
“I don’t mind physically going to the big stores, but I find better deals online,” said Shimomura, who is in his forties.
Near the end game
It’s not hard to find skeptics who think the effort of people like Isetan is too little, as it’s too late for the network to spread to consumers.
“Management has underestimated the pace of digital change because they have confidence in physical stores,” said Shetan Kawano, head of Japanese equity research at Goldman Sachs, Isetan. “The situation would have been completely different if Isetan had stepped up digital efforts 10 to 15 years ago. It’s close to the final game.”
Isetan Mitsukoshi’s regular department stores were forced to adapt to the demand for school backpacks last year © Noriko Hayashi / Bloomberg
Prior to the pandemic, they created an open mix of reluctance and irresponsibility on the part of some traditional retailers, such as Zozo fashion sites and Mercari flea market applications. Since the crisis, they have gone even better.
Shares of Mercari, released in 2018, set a new record earlier this year for the younger generation of Japanese consumers who used the app to sell second-hand clothes, bags and other accessories. Revenue rose 41 percent in the first three months of the year to a record $ 28.6 billion ($ 261 million).
The popularity of the Zozotown fashion empire of Japanese internet operator Z Holdings has also exploded.
Unlike these online specialists, physical stores remain in the heart of Ito-Yokado, one of Japan’s largest supermarket chains. In the wake of the crisis, however, the company is testing a new approach designed to bridge the gap between its 132 stores and e-commerce operations.
In September, when Yoshihide Suga took office as prime minister with a promise to revive the economy, the company began supplying 400 varieties of vegetables, fruits, meat and fish directly to the homes of the elderly in response to its orders. by phone.
“We will see more of the world connecting with the offline and there will be a lot of coordination between online supermarkets, delivery services, Ito-Yokado physical stores and shopping stores,” said senior executive Futoshi Shibata. he said in an interview.
As the crisis disrupts traditional trade, there is a business that is pushing.
Record earnings
Fast Retailing, the owner of the fashion chain Uniqlo, has been hailed as the only example of a company capable of growing online sales, now using technology to properly operate ubiquitous stores..
Uniqlo’s in-store internal sales rose 5.6% year-on-year from September to February, while online sales rose 41 percent. Fast Retailing, with a market capitalization of $ 86 billion, expects record profits this year.
Researchers say the result is unlikely to be the result of Uniqlo’s efforts in online and physical operations. Robots now dominate their warehouses, accelerating the selection of goods for delivery. He launched the cashless payment app, a recent effort to gather more valuable customer data.
“Whether online or offline, customers ultimately want to buy the products they want,” said Xiaozhou Wang, head of global e-commerce efforts at Fast Retailing. “People want to try on clothes and we need a physical connection to our consumers. But the network also has its merit because it’s open 24 hours a day and you have more information about customers.”
Few doubt that in the long run Japanese consumers will switch to more online shopping. But as the industry faces the worst losses in decades, the message to shoppers about the future success of shoppers is unforgivable: improve your network and stores if you want our business.
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