New Zealand retailers should look to the e-commerce success story of Japan, where retail stores are saying goodbye to the high street and hello to the online marketplace, says a digital marketing expert from the University of Waikato's Management School.
"In the past two years, Japan has emerged as an international leader in e-commerce, on an equal footing with the United States," says Dr Roy Larke, a senior lecturer in marketing with
27 years' experience working with retailers in Japan.
"Japan boasts one of the fastest growing and most ‘frictionless’ online retail markets in the world, with around 10% of all retail transactions now online. With consumers eager and willing to shop online, even retailers in a much smaller market like New Zealand should be looking to embrace this digital future,” he says.
Dr Larke was one of 50 global experts invited to speak at this year's CLSA Japan Forum in Tokyo, held 21-24 February, where he presented his latest research findings, published by JapanConsuming and CLSA.
Hosted by CLSA, one of the largest brokerage companies in the world, the forum attracts more than 650 investors from 23 countries looking for insights into the major global trends impacting on markets and investment decisions.
Many Japanese retailers have only recently come to accept that having an online presence is essential for their survival, says Dr Larke.
"2015 was a watershed year, with several of the top chains in Japan finally moving away from a high street business model towards one that integrates online sales more closely.
"Consumer electronics are already a top-seller for e-commerce websites, because the Japanese love their gadgets even more than New Zealanders do. But it's the more mundane categories such as food and fashion apparel that have experienced the fastest growth in online sales, and these are really set to take off in the next few years."
The mobile shopping revolution
Mobile shopping is the second critical factor in Japan's e-commerce revolution.
The near ubiquity of smartphones in Japan - seven in 10 people own one -- including more than half of those over 65 -- has dramatically changed people's shopping behaviour, Dr Larke says. Japan now leads the world in mobile transactions, with just over half (53%) of all online purchases made on a mobile phone in 2016.
In fact, mobile conversion rates are twice that of the United States.
"The main reason is that Japanese retailers are set up with the right technology to receive customers' mobile orders in the first place. No doubt it's also been boosted by government backing for an ultra-fast wifi network in every major city."
New Zealand businesses need to ensure customers can easily find and buy from them through their mobile phones, and the experience should work seamlessly, he says.
“If your competitor is 'mobile responsive’ and you’re not, that’s a big problem best avoided."
Finding new ways to reach customers
E-commerce retailers also face the logistical challenge of getting their products into customers' hands; known as the 'last mile problem', says Dr Larke.
About 2 billion parcels were delivered in Japan last year, yet a quarter of them arrived at empty homes due to Japan's long working hours and large number of single-person households.
"Here Japan has come up with an ingenious solution. It's one that is ideally suited to a large, urban, densely packed population, but could also be emulated in New Zealand cities such as Auckland, Wellington, Christchurch or Hamilton,” he says.
A number of top retailers such as Seven Eleven and Amazon Japan have rapidly transformed Japan's network of 56,000 convenience stores into distribution centres for online orders, giving customers the option to collect parcels on their way home from work.
"This is a fast, convenient solution that reduces delivery costs significantly, and very often leads to additional sales at the stores," Dr Larke says.
The lessons of Japan for New Zealand businesses are clear: the best e-commerce companies provide multiple delivery options and let customers make their own choices, he says.
"Building those options into existing distribution networks and having the customer do part of the work by picking up their own packages works just as well as -- if not better than -- delivering packages directly to customers' homes."