It is critical for Japanese retailers to shift to a conversion-centric approach to store management that leverages digital technologies to optimize sales and improve the customer experience.
（Although awareness of domestic digitization is high.…
Ministry of Internal Affairs and communications*1）
The retail industry in Japan has been slow to adopt digital transformation compared to other countries, putting Japanese retailers at a disadvantage in a rapidly evolving market. While many Japanese retailers have focused on bringing in more store traffic, there is a danger that this approach will no longer be effective as the population continues to decline in the coming years. It is critical for Japanese retailers to shift to a conversion-centric approach to store management that leverages digital technologies to optimize sales and improve the customer experience.
A recent report by Forbes Insights*2 "The Future of Retail: Shifting to a Conversion-Centric Approach," supports the idea of a conversion-centric approach to retail management. The report highlights that retailers need to focus on driving conversions and sales, rather than just bringing in more store traffic, as this will lead to increased operational efficiency and customer satisfaction.
One of the main challenges facing Japanese retailers is the need to adapt to a shrinking market. As the population ages and the birthrate continues to decline, the pool of potential customers is becoming smaller, making it more difficult for retailers to maintain their sales. This is why it is so important for Japanese retailers to embrace digital transformation and adopt new technologies and processes that can help them better serve their customers and optimize their operations.
The importance of digital transformation in the retail industry has been widely recognized and supported by numerous studies and research reports. A recent study by Accenture*3 highlights the significance of adopting a customer-centric approach in retail, stating that "customer-centric retail experiences that use data and technology to enhance the shopping journey will be key differentiators in a market where population growth is slowing and competition is increasing."
To be successful in this new market environment, Japanese retailers must focus on creating a customer-centric shopping experience that leverages technology to make the shopping experience as seamless and enjoyable as possible. This can include things like mobile checkout, in-store digital displays, and real-time product recommendations based on customer preferences. These technologies can help retailers to better understand their customers and provide them with a more personalized shopping experience, which can increase conversion rates and drive sales.
Another research report by McKinsey & Company *4 also supports the importance of data-driven decision making in retail, emphasizing that retailers need to "invest in technology and data analytics to gain the necessary insights to understand their customers’ behaviors and preferences." The report further states that retailers who lag behind in digital transformation risk losing market share and revenue to competitors who are more agile and better equipped to meet changing customer needs.
Another key aspect of digital transformation in Japanese retail is the need to embrace data-driven decision-making. Data can be used to gain insights into customer behavior, sales trends, and operational efficiency, and to make informed decisions about product offerings, pricing strategies, and store layouts. However, many Japanese retailers are still struggling to make effective use of data, and they need to invest in the development of a data strategy that is aligned with their overall digital transformation initiative. This will require the development of clear goals and objectives, a defined process for collecting and analyzing data, and a plan for using the data to make decisions and drive change.
Finally, it is important for Japanese retailers to understand that digital transformation is not just about technology, but about cultural change as well. Retailers must engage employees at all levels and encourage them to embrace new technologies and processes. This can be achieved through effective communication, training and support, and recognition programs that reward employees for their contributions. As employees become more comfortable with new technologies and processes, and as they develop the skills and knowledge necessary to make use of data, they will become more confident and capable in their ability to drive change, which will result in faster and more impactful transformation.
In conclusion, digital transformation in Japanese retail is critical to the success of retailers in a shrinking market. Japanese retailers must focus on creating a customer-centric shopping experience, embrace data-driven decision-making, and engage employees at all levels in the transformation process. Those that invest in these principles and prioritize digital transformation will be well-positioned for success in the rapidly evolving retail landscape.
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Reference
*1: Ministry of Internal Affairs and communications「令和4年版情報通信白書」（Jan/2023）
*2: Forbes “You’re Probably Not A Customer-Centric Company Yet, But New Research Shows How To Change That” (May/2022)
*3: Accenture「変わりゆく顧客行動に対する企業のあり方～アメリカ先進企業の取り組み事例に学ぶ」（Aug/2022）
*4: Mckinsey & Company「マッキンゼー緊急提言 デジタル革命の本質: 日本のリーダーへのメッセージ」（Sep/2020）
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