How is the retail industry changing in Japan?

newsonjapan.com -- May 10
Japan has found itself living in a state of emergency more than once during the last year. As Covid returns for second and third waves, it continues to affect business, industries, and regular everyday life.

Even as the Summer Olympics approaches, Tokyo and three other areas are once again having to take urgent measures to halt the spread of infections. At the time of writing, bars were closed, and sporting venues free from spectators.

Other businesses are also affected whenever there is a lockdown due to Covid, and retail is no exception. While many areas of retail are allowed to carry on operating, less essential businesses close.

These lockdowns and restrictions affect the revenue that stores and chains can make, and they affect employment levels and individual’s finances.

As other countries are attempting to return to normal, what is the future for Japanese retail?

How is ecommerce in Japan?

Japan has a very healthy approach to ecommerce as far as retailers are concerned. Just as ecommerce is growing increasingly popular in the States and elsewhere, Japan has also embraced this trend.

Although Japan has a lower level of social media use than other countries, and the average time spent on these platforms is a third of the global average, ecommerce is popular. In fact, the ecommerce market in Japan is very fierce and competition is tight. The internet penetration rate in Japan has remained above ninety percent since 2015 and over 117 million people have internet access.

This means that there is a vast market for ecommerce retailers to market to.

Which companies are ahead of the game in Japan?

Perhaps unsurprisingly, Amazon is the number one ecommerce retailer in Japan. Amazon Japan sits atop a top ten list that is mainly comprised of Japanese and Chinese companies.

Alibaba took over Yahoo! Japan Shopping along with SoftBank and they are one of the top ecommerce retailers in the country. Rakuten is the biggest Japanese ecommerce retailer and currently holds the second position behind Amazon. It has around 500 million visitors a month which keeps it in very close competition with Amazon as far as traffic is concerned. When it comes to traditional retail, some foreign investors have fared much worse in Japan.

However, in Japan, traditional forms of retail are still running well.

Traditional retail in Japan during Covid

Just as the pandemic is hitting traditional shopping locations such as English high streets and American malls, Japan has also had its share of problems. The wholesale market has been stagnating for years and is in somewhat of a decline. However, the retail sector has actually seen slight growth in each of the more recent years.

Unfortunately, 2021 is looking slightly different for traditional, land-based retailers. As another state of emergency was declared on January 7th, retail revenues have shown signs of falling.

With shoppers reluctant to expose themselves to the risk of infection, or with restrictions stopping people from leaving their homes as much, trade has dropped.

The main reasons why this are happening are as follows:

  • Ecommerce is more convenient and gaining a larger share of the market
  • Internet usage is extremely common
  • Finances are becoming a concern in uncertain times
  • Restrictions and social distancing are making shopping difficult

How are finances affecting the retail industry?

Families and individuals are starting to be more concerned about the health of their finances and bank accounts. Covid caused unemployment in every country it hit to some degree, with some regions hit harder than others.

In Britain, they faced going into the worst recession ever and retail was the hardest hit. Out of approximately 170,000 jobs lost due to Covid, nearly 50,000 were in the retail sector. More jobs were lost from high street stores and shopping centers than from hospitality and aviation, despite both these industries being locked down for extended periods.

In Japan, consumers are starting to be more aware of making unnecessary purchases which means retail in certain areas has started to suffer. This is despite the fact that unemployment in Japan is actually dropping.

Even with a state of emergency declared in January and further restrictions in April, unemployment is down to 2.6% in March from 3.1% in October of the previous year. This has not prompted consumers to spend more in retail though.

Why might standard retail survive?

There are some areas where traditional retail still has an edge over ecommerce. Of course, with the pandemic, it will make a lot of sense to a lot of people to buy online. However, humans like contact and interaction with other people and so far, ecommerce has not found a way to replicate this. You also can’t try on clothes when you shop online.

If you want to understand why you would choose knit versus woven then you need to be in a store and physically feel and see the materials. There is no substitute for having tactile engagement with a garment or product.

Seeing products in stores can also let you understand much more about their background and how they came to be manufactured and sold. More consumers want to know about the carbon footprint of a product and reading hang tags in a store can divulge more information than a brief description on the internet.

Also, the Japanese have a different type of retail store, the konbini.

The Japanese shop differently to some other nations

While Amazon is doing its best to take as much of the ecommerce retail market as possible, there is a certain type of physical store that just cannot be replicated anywhere else.

The konbini retail store may be hard for some foreigners to understand. Perhaps the closest thing to it outside of Japan is the 7-11 franchise but this doesn’t compare when you start to understand the convenience of konbini.

Sure, the 7-11 will sell you magazines, soft drinks, beer, cigarettes, and even hot meals to go, but they are still missing something that konbini has.

These are the ultimate convenience stores and one of the reasons that traditional retail in Japan continues to remain generally steady.

What are konbini?

In Japan, the biggest retailer is Aeon. This giant retailer has 19,000 stores worldwide and most of them are in Japan. While this huge retailer dominates many areas of retail it can’t compete with the convenience of konbini.

Konbini is the ultimate convenience store and there are around 60,000 across the country. Not only can you do all things that you might in an American or Thai 7-11, but you can also do so much more in these Japanese stores.

Need to post a letter? No problem. Pay a bill? No problem. You can buy concert tickets, shirts, umbrellas, pick up parcels, use foreign ATM cards to withdraw money, make a bank transfer, and get some gloves and a pocket heater on a cold day.

Summary

Retail has hit a slight bump in Japan but considering the effects of Covid on this sector in the UK, they continue to do well. Some reasons for this are that konbini gives consumers a level of convenience that other stores including ecommerce cannot.

Also, there is still much room for human interaction and being able to inspect and try a product in person. If you want to know details about a garment then the custom iron-on label or hang tag will tell you more about the materials used than many online descriptions will.

If you are a tourist visiting Japan you will find there is a healthy retail sector and you might find yourself enjoying the convenience of a konbini in the early hours of the morning more than once.