As the saying goes, 苦あれば楽あり- March winds and April showers bring May flowers. The same is true with Japanese consumers, if you scale the efforts to understand the peculiarities of their market and their changing needs, you get higher rewards. Although the Japanese people are known as obedient tradition keepers, the country stands as an example of economic trend setters. Japan represents 10% of world’s economy, with the third largest GDP and a population of 125 million. The total amount of market sales surpassed $4098 billion in 2017 (with retail industry making up to $1,281B following the whole sale with its $2,817B). It’s the home country to a great number of technology inventions and stands for 25% of the world’s high-tech products. The country’s economy is driven by its vast middle class consumers, although its aging population influences the economic trends in many ways, especially affecting the top retail sectors and their development.
The Retail Serving Mindset of the Past
Japanese consumers are like no other consumers in the world. They combine features distinctive to both European and Asian buyers. Ten to fifteen years ago, the Japanese mindset served the retail industry well. Constant novelty seeking encouraged the creation of technical gadgets followed by high electronics retail. You could simply walk by the Akihabara area to prove the point. Japanese consumers, being Asian consumers, tend to see shopping as an entertainment supporting small retail and catering to industry. Their willingness to buy things at wide prices range ensured the survival of both expensive brands and 100JPY shops. Notably, in their choice of luxury items, Japanese people are likely to pay extra costs granting the desired ‘highest quality and service.’ Moreover, Japanese consumers proved to frequently choose imported goods over the local items. By doing so, they could demonstrate their social status by buying luxury shoes, handbags and clothes from European designers, rather than from local manufacturers who could have provided qualitative products. In some cases, they supported the common opinion a product is the best if the country is famous for it like Swiss watches, French wines, Italian pastas, etc. For some of them, it was a way to feel a part of the popular mass culture frequently promoted by Hollywood movies.
Years Go By; Changes Come Along with Them
However, within the last fifteen years, the retail market situation has undergone significant changes pushed by consumer behavior. A variety of factors have affected customer mindsets. Among them are the technology boom, changes in the population’s buying capacities, and the millennials emergence. It should be mentioned, Japan has gone though some critical changes in social arenas like abolition of lifetime employment and a growing disparity between regular and non-regular employees. As a result, the population feels somehow insecure and has taken up money-saving tendencies, like less ‘status’ buying, searching for discount offers, and buying online. The market size of E-commerce grew about 1.8 times over five years. Statistics also proves online retail industry rapid growth:
- B-to-C e-commerce market was around $148.3B in (YoY +9.1%) with a percentage of e-commerce channel ratio for all revenues in the field being 5.79%;
- In 2017 the market size of internet auction market was around $32M (YoY+3.2%),
C2C marketplace market size — $43M（YoY+58.4%). The market evolved from zero to over $40M market from 2012.
Not to mention, Amazon is taking market shares with its $119.7M（YoY+10.3%) in 2017.
This can be partly explained by the diversification of online channels: e-commerce, chat commerce, live commerce, etc. Retailers, at the same time, face difficulties and issues in their inventory control endeavors for omnichannel. As if to add to the retailers hardships, profit margin of grocery supermarket in Japan is around 0~5%, making it difficult to raise salary or spend extra funds on advertisement.
The emergence of the new millennial generation marks a turn to a less materialistic consumer world with the focus shifting to a fulfilling lifestyle, rather than random shopping. This new generations is more inclined to spend money on services and technology instead of products. With these new trends, the problem of overstocking and understocking is rising to the surface. Product supply, if not fit to the product demand, affects retailers revenues not to mention creates long lasting chaos in product strategy.
This chaos can be evaluated in numbers, with the Food Loss total amount of 28.42M ton in 2015. Notably, the amount of edible food thrown away was 6.46M tons and more than half of it was food discarded before consumers could have purchased it. This problem then appeared as the agenda in SDGs (Sustainable Development Goals) adopted by UN. Increasing shipping costs also contributes the growth of E-commerce market size. Over the five years, the amount of shippings grew at 18% while the total amount of shipping cost in Japan increased by 25.19% over the same period.
OSA DC with its AI real-time data analysis and processing combined with blockchain technology ensures a high level of efficiency in strategy and cash flow planning, elimination of collateral waste, increased consumers inflow and retention, as well as grants a high return of investment level. Scaling platforms are the winning substitute for online retail since it combines features of both traditional and online retail spiced with token reward programs.
OSA DC provides the solution for all parties involved. For vendors and manufacturers, it offers improved product display and verification and grants retailers compliance with set product pricing and display standards. The OSA solution enhances data processing to ensure the product strategy meets the demand, and thus, eliminates extra costs for extra products storage/transportation and monetary losses in cases of understocking.
Retailers gain benefits in the form of increased numbers of loyal consumers (and the overall number of consumers), cost optimization and ROI improvements, plus effective strategy planning based on the available analytical data and competitive advantages over other less technologically savvy retailer chains.
With the current wages falling in Japan, consumers pursue value, cutting unnecessary expenses and preferring lower, cheaper brands. In general, people buy things around 700 times in a year (Mr.Okimoto, Tokubai Inc.). 80% of total purchasing occasions happen in glossary supermarket. They have changed their whole routine significantly dropping many of their social interactions and reducing time spent outside and even giving a nickname to the homies — sugomori or ‘nest chicks.’ They spare time for shopping trips looking for better options, rather than simply buying it nearby as before. For the same reason, they prefer places offering both social interaction and catering to entertainment.
OSA DC comes in handy for this audience keeping retailers revenues high. Platforms grant the opportunity to find necessary products without physically looking for them (sometimes in vain) and thus save money and time for consumers.
Japanese consumers are truly considered to be most demanding audience. But, with these shifts, being in demand means being more scrupulous and paying attention to both quality and the price. Online shopping, provides the opportunity to conduct advanced product search and compare prices and takes more from the traditional retail pie, despite the initial unwillingness for this kind of purchasing. This is good news for reluctant online shoppers, as there is no need for them to do all the product-search-analyse-price-compare work themselves as OSA DC comes up with the best, most suitable option within seconds. Moreover, the platform grants transparency and easy data sharing beneficial for all, since transparency and control of every product life cycle stage eliminates additional costs, previously borne by either manufacturers, retailers and logistics agencies or consumers. This way the price gets lower and more competitive with no actual slash of the retailer’s share.
The Japanese people are the perfect audience for the expansion of influencer marketing since they strongly rely on product recommendations from their friends, family, colleagues and shop consultants. As for the latter, high service demands imply there should be an available assistant for every customer in a shop. This created certain difficulties in retail, especially with the current labor crisis some consider the worst in the past 25 years. The population of Japan is decreasing, with the declining number of young people as opposed to the increasing number of elderly population.
Moreover, around 50% of shipping cost is personnel expenditures, that makes a lack of available resources a more pressing issue in shipping, specifically. The human resources shortage requires unprecedented measures with massive technology involvement. BakeryScan’ introduced in 2013, is a step forward, but with its narrow, specific nature it solves only a fraction of a problem in one sector. This crisis has urged some companies to try IT and robots, while others have had to cut their range of services affecting their competitiveness. This is when OSA DC is a godsend, with its AI performing multiple tasks previously requiring numerous employees. It does more, performing personal assistant’s duties with access to the customer’s preferences list and coming up with product recommendations depending on the history off each consumer’s feedback.
Japan has always been one of the countries with the longest average lifespan, and it is not by chance with people giving preference to organic food and natural, eco-friendly products, keeping their diets and spending time and money on sports and recreation. This has not changed. In this case, the quality control and elimination of criminal product safety violations plays a vital role in the whole healthcare ecosystem. With OSA DC ensuring the reliability of all the parties and leaving no place for corruption at higher levels, the Japanese people can rest assured their health is in no danger.
Anticipating Japan Retail
With OSA DC taking careful steps towards the Asian markets, we are especially pleased with its recent encounter with the Japanese tech community. OSA DC has participated at Japan’s 2nd AI EXPO (the largest Artificial Intelligence Exhibition Conference) where it introduced AI and Machine Learning integration in Retail. It’s only the beginning of OSA-Japanese relationships. A little patience goes the long way; Japan get ready as OSA DC is coming to you.
