TOKYO — Japan is often seen as a global innovator in many fields, yet e-commerce hasn’t been one of them. But as the habits and preferences of Japanese consumers change, companies need to offer new and creative shopping experiences — or get left behind.
A decade or so ago, as e-commerce boomed in other countries, it was only slowly gaining a foothold in Japan because many consumers didn’t feel comfortable shopping online. As the market has become more competitive and shoppers have become even more discerning, this has changed. Yuiko Mitani, a research analyst at Euromonitor International, said that the Internet is now one of the most common ways for Japanese consumers to shop.
“Consumers benefit from the lowest prices offered online for products, such as consumer appliances and electronics, as the Internet enables instant comparison of prices from multiple retailers. Alongside prices, it is common for consumers to check reviews from fellow consumers, with review Web sites proving popular,” Mitani said, adding that Japan’s elderly population and those with young children also benefit from buying heavy or bulky items online, thanks to the ease of delivery.
Japan’s online retail market grew 84.3 percent between 2009 and 2014, and is forecast to grow a further 60.6 percent by 2019, according to data from Euromonitor. In 2014, the overall market was valued at 7.03 trillion yen, or $57.37 billion at current exchange. The country’s online market for apparel and footwear hit 888.7 billion yen, or $7.25 billion, last year, having grown 70.4 percent since 2009. Apparel and footwear is the second-largest category online, trailing only that of media products, which includes everything from books and DVDs to digital apps and games. Apparel and footwear is expected to grow another 41.3 percent by 2019.
The companies that dominate Japan’s e-commerce market are primarily ones that sell exclusively online, according to Euromonitor’s research. Rakuten, the Internet marketplace that allows individuals and small shops to sell their wares for a reasonable fee, had an overall market share of 20.7 percent in 2014, followed closely by Amazon, with 19.3 percent. The same two companies dominate online sales of apparel and footwear, with shares of 21 percent and 19.9 percent, respectively. Start Today, which runs Zozotown, Japan’s foremost online fashion boutique, comes in third with 12 percent.
Traditional retailers are starting to up their e-commerce games as well. Seven & I Holdings, which owns the Sogo and Seibu department store chains, as well as 7-Eleven convenience stores and Ito-Yokado superstores, has increased its share of the online apparel and footwear market from just 0.7 percent in 2011 to 5.8 percent in 2014. That may not seem like huge growth, but it has brought the company’s rank in the market from 20th to sixth in just four years.
This fall, Seven & I will launch a new omnichannel retailing site, which will allow shoppers to place orders for items sold by the group’s multitude of chains, and then either have them shipped to their homes or pick them up from their local 7-Eleven convenience store. As reported in March, Seven & I has tapped Jean Paul Gaultier to design a special apparel collection that will be part of the product offering on the new site.
Mitani said that, as in the U.S. and Europe, the omnichannel concept is becoming a central part of Japanese retail. “In response to the rapidly emerging trend, an increasing number of retailers focused particularly on the integration of their bricks-and-mortar and online channel strategies,” he said. “Previously, many brick-and-mortar retailers…saw Internet retailing only as a threat, especially with the showrooming trend where consumers visit stores to see products but purchase them online, seeking the lowest prices. However, in 2014, there was a shift in their paradigms, now seeing Internet retailing as an opportunity not only for the Internet specialists but also for themselves.”
Japanese department stores have been slow to embrace e-commerce, but those that have experimented with new channels are seeing rapid growth and high levels of success, signaling that more cross-platform projects may be on the horizon.
In November 2009, Sogo & Seibu launched a beauty and cosmetics e-commerce site named Ikesei Kirei as part of its broader e-commerce platform. The name plays off the Japanese word for beautiful. According to Nobuhiro Noritake, senior officer of the company’s e-commerce promotion department, the site’s sales have grown by 30 times over the past six years.
In addition to traditional e-commerce, the company offers an in-store Ikesei Kirei Station at its Seibu Ikebukuro flagship in Tokyo. Customers can visit the counter to try out products from a variety of brands, use a computer screen provided to perform a 10-minute self-counseling session, or book a full 20- or 50-minute professional counseling appointment. Those who have purchased beauty products online from Sogo & Seibu can also pick up their orders at the Ikesei Kirei Station.
Noritake said that cosmetics is both one of the largest and fastest-growing product categories for Sogo & Seibu’s e-commerce business. Moving forward, he said the company plans to strengthen its online sales of fashion products as well.
“I think an omnichannel initiative that blends Internet and traditional retailing will spur the growth trend [of e-commerce] even more,” Noritake said.
Isetan Mitsukoshi Holdings, Japan’s largest department store group, is also making efforts to develop stronger e-commerce programs. In May 2014, the company integrated the online shopping sites of Isetan and Mitsukoshi into one platform, allowing shoppers to buy items from both stores in a single transaction. A spokesman for Isetan Mitsukoshi said that this move led to increased online sales starting from the second half of last year, although he declined to provide specific figures. Still, he said online sales only accounted for 1.5 percent of Isetan and Mitsukoshi’s total sales last year, meaning there remains lots of room for growth.
Fast Retailing, which owns the Uniqlo and G.U. fast-fashion brands, last month unveiled a partnership with Accenture that will enable the development of new and innovative consumer services. The company is also building a new logistics center near Tokyo Bay. These two initiatives are expected to eventually offer a more user-friendly shopping experience both online and offline, with services such as same-day delivery in some areas, more intelligent and customized product recommendations and more.
Mitani said that innovations within retailing, such as better utilization of big data and innovative logistics systems, may contribute to the further development and possibly revolution of omnichannel strategies in Japan. However, because of the investment required to realize these strategies, innovation is likely to be led by a handful of large retailers, such as Seven & I Holdings, Rakuten, Amazon and Fast Retailing.
“More innovation brought by such large retailers could mean the diminishing competitiveness of small [and] independent retailers, which may potentially accelerate consolidation and the acquisition of smaller businesses into these giant retailers, dramatically changing the retailing landscape in Japan,” Mitani said.