The advantage of physical stores is being able to provide an experience that appeals to all five senses
According to a survey by the Ministry of Economy, Trade and Industry, in 2019, the size of the B to C market in Japan was approximately 19,360 billion yen, and the e-commerce conversion rate was 6.76%. Although it is low compared to the e-commerce conversion rate in the United States, which is about 10%, and about 35% in China, e-commerce has been growing rapidly in Japan as well since the COVID-19 pandemic in 2020.
The reason behind this is considered to be reduced shopping frequency because of the so-called stay-at-home recommendation. Still, e-commerce was growing already before COVID-19 outbreak; therefore it seems fair to say that it was rapidly made more visible by the pandemic.
Yet, it is also true that there are some consumers who are anxious about online shopping. This is due to what is called perceived risk, the doubts about whether the online product is in the correct size, in the same color seen on the screen, or has expected quality.
E-commerce companies are trying to reduce consumer uncertainty by using different types of information technologies including AI, still it is hard to eliminate it completely.
Take fashion products for example, customers can make a selection as they touch the actual products at the store, try them on and take advice from the store clerks.
As such, the needs and value of physical stores do not seem to diminish with the growth of e-commerce. Yet, it is also reasonable to say that it is not easy for them to survive if they stay unchanged.
This is because e-commerce sites are making all sorts of efforts in addition to technical improvements to provide even more customer-friendly service.
For instance, there is a system that takes you to the shopping site when you tap a picture of an item or a model wearing it posted on a fashion brand site or the SNS.
Those who visit the site have low-risk perceptions as they generally are fans of the brand in the first place, so they welcome the system that lets them purchase the items they like on the spot.
If the number of such customers increases, it will mean less customers visiting physical stores. In other words, rather than just keeping their displays up to date, it is absolutely necessary for physical stores to craft new strategies in order to stay relevant.
So, what kind of strategies should they consider? I believe the keyword is “customer experience”.
For example, the advantage of the Internet is that it is visually and auditorily appealing. With close-up or 360-degree views, it offers virtual viewing of the product. Likewise, sounds can be processed in various ways.
With their senses of vision and hearing, the users can experience the virtual reality of the product.
Nevertheless, the Internet cannot provide the sensations of touching, smelling, or tasting. On the flip side, they can be offered at physical stores. Customers can get a feel for the texture of the product by touching it, or smell and sample the products of perfume or food manufacturers.
Being able to provide a customer experience that appeals to all five senses is one of the advantages of physical stores.
As virtual reality technology advances further, I think that people will find it increasingly exciting to shopping experience with their five senses.
The reason why actual music festivals are still popular in the Internet age is probably because you can enjoy not only listening to the music but also the ambience of the venue, the excitement of the people who gathered there, the wind and atmosphere, and how drinks tasted, which altogether make you feel alive.
Comprehensive integration of online and physical stores
Physical stores can offer more than experience that appeals to the five senses. Most of the time, people purchase something for some sort of problem-solving. We wish to dress smartly, feel comfortable, and fill our stomachs. We purchase something to satisfy our needs.
Although, to take moms who struggle with parenting as an example, not all of them know what exactly they need to buy to start with. They often need information and advice on how to make their children sleep and eat well.
Surely those moms would rather have someone who can offer some expertise face to face with them and their children than search the huge amount of data on the Internet. It leads to the purchase of what they are satisfied with, which also means problem solving to them.
The capability of providing such moms with space where they can consult with and obtain advice from store clerks or experts adds to the advantages of physical stores.
I think it will also be important for physical stores to make efforts to work in tandem with e-commerce sites rather than viewing them as a rival.
Buying patterns are becoming increasingly diverse. For instance, consumers may purchase products at physical stores after checking them online, and vice versa. Since companies need to keep pace with this.
Some of them have been taking this approach known as omni-channel for a while, though not many have achieved comprehensive integration of the online and physical stores.
An example of major obstacles they face is where a store clerk at a physical store delivers great customer service and motivates the customer to purchase, but then the customer makes the purchase online at a later, which does not give credit, encouragement or a sense of achievement to the clerk. It also means that he or she cannot reach the sales quota.
As such, some companies have established a system where they lock in customers on each channel – for instance, they collect and manage customer information for online and physical stores separately.
In such case, the company cannot provide customer relationship management both online and physical stores all together, making it hard to provide services as an omni-channel.
It is relatively easy online to obtain detailed customer information such as personal data of customers, what products they viewed and purchased. If this information can be shared with the clerks at the physical store, it will be easier for them to provide the service that suits the customer.
Now that more customers make online reservations before visiting the store, some companies have in fact adopted an approach where the clerks are given iPads to share customer information before serving the customers.
Building an incentive system that satisfies the clerks or a customer information sharing system is only possible when the company clearly comprehends its own vision, and then works out what is needed to promote it.
This enables the company to achieve comprehensive integration between the e-commerce site acting on behalf of the physical store and the physical store serving as a medium, promoting effective operation of each channel.
It is important the company’s attitude is not like “DX (digital transformation) is trendy, we have to do it too”.
“Otagaisama” between customers and the store for a sustainable relationship
In the future, more manufacturers and companies will certainly promote direct contact with consumers. This is a strategy called direct-to-consumer (D2C), which is expected to expand with the use of pop-up stores (stores opened temporarily) as well as e-commerce sites.
Rather than for the purpose of selling products, I believe that pop-up stores will be set up to offer customers’ highly entertaining experiences that stimulate their five senses or enjoyable events that enhance their knowledge and curiosity.
In other words, it aims to attract customers by providing consumers with various hands-on experiences that cannot be offered online, so that the company can establish and organize its fanbase and build a customer database. A pop-up store is there to serve this purpose.
Some department stores in Tokyo have already started to rent out retail space to pop-up stores or showroom stores for the purpose of attracting customers and becoming more like shopping malls.
From the consumer perspective, this means that stores will give us more opportunities to enjoy experiencing various fun events, meeting designers of our favorite brands, or talks by brand ambassadors and experts.
While these experiences will surely be very enjoyable and informative, we should not visit stores with a notion that the customer is king and stores do anything for a king.
The demographic trend in Japan is a declining birthrate and aging population. It means that in the future, we will face labor shortages in many business fields. In such a circumstance, working in retail, where you are pressured by customers, may not be seen as something many people want, which can add to the labor shortage at physical stores.
In suburban towns that prospered during the period of rapid economic growth, the shopping streets are already becoming increasingly deserted. This is due to consumers choosing new large shopping malls over local stores.
Then again, these shopping malls are also withdrawing from the suburbs owing to the declining population. Where should those left in the town go for their daily shopping?
In Japan, there is a word “Otagaisama”. It is an expression that suggests placing yourself in another person’s position and act with consideration, so that you can sustain a good relationship. I think the same can be said about stores and customers.
Just as stores are making efforts to look at things from the consumers’ perspective and offer different ideas, consumers should also adjust their consumption behaviors with consideration for the store’s point of view. This will create mutual benefit and help sustain the relationship. I believe this is the wisdom for wise consumers.
* The information contained herein is current as of May 2021.
* The contents of articles on Meiji.net are based on the personal ideas and opinions of the author and do not indicate the official opinion of Meiji University.
* I work to achieve SDGs related to the educational and research themes that I am currently engaged in.
Information noted in the articles and videos, such as positions and affiliations, are current at the time of production.