Retail Leading Digital Transformation; Japan 2017

Pantacles (Asia) Consultancy

This article builds on my previous post which examined attitudes and awareness about digital transformation among Japanese corporations, and, due to its leading role in the transformation, placed a closer look on marketing functions. I decided to further examine efforts by businesses directly interfacing customers and how these efforts are reflected in customer satisfaction. I would like to highlight reasons behind the gap and outline opportunities that may go beyond the reach of individual IT or marketing departments and involve a reevaluation of corporate strategy, structure and allocation of resources.

According to FUJITSU’s survey on digital transformation among Japanese companies, customer behavior trends prove that both businesses and individual consumers have already embraced digital procurement-shopping concepts. 61.5% of customers check information on goods and services online. 31.6% of them now prefer making enquiries by email or through a web platform. 21.3% will check price and specifications online before making a contact. Above all, 17.5% of customers prove to be more knowledgeable about products then the vendor’s counterpart!

Lacking in the same awareness, no more than 35.3% of responding businesses answered with an affirmative to the questions whether digital marketing is utilized. When checked by industry, businesses directly interfacing end-users were leading in the survey, nevertheless their leading share accounts for barely over half of retailers and food service providers (57.6%) and customer service businesses (52.9%). Businesses that employed digital marketing were asked about their objectives and close to half of them (44.6%) identified lead generation. Subsequent objectives were, “promoting customer communications and data mining” 24.3%, “repeat and cross sales” 17.5%, “branding” 10%. The retail and food service industry’s engagement in “repeat and cross sales” far overrode the average at 27.5%, while B2B trading houses and distributors’ priority was “promoting customer communications and data mining” at 46.4%.

Despite their high digital awareness and involvement, customers do not seem to be satisfied with their shopping experience and are switching service providers at a moment’s notice. Accenture’s global survey on customers’ cross-channel shopping experience underlines this sentiment, where Japanese customers both lead in dissatisfaction (56%) and are the least to be satisfied (2%). Accenture estimates the worth of switched budgets at as much as JPY25 trillion annually, equaling 6% of total personal disposal income. Looking at specific industries, revenue lost to switch totaled between 1 and 7%, with retail being the single most hit by 16% of lost revenues.

To go from bad to worse, Japanese customers also tend to leave their service providers without very little to no feedback as opposed to their global counterparts who leave a generous trail on SNS, miniblogs and in their personal communications.

Centuries old traditions have been enforcing a cult of the loyal customer in Japan, that produced the present day’s decidedly most pampered service experience in the world. Digital transformation provided additional value; shopping channels multiplied, real-time transactions and communications became possible and a great number of new entrants arrived eager to please. Why is it then, that customers are not pleased?

The customer service industries’ overreaching focus in digital marketing is placed on new lead generation and secondary priority on repeat customers. While new customer acquisition certainly brings in immediate and very tangible benefits, long-term strategic benefits would be made possible by returning to the time-honored tradition that cultivates loyal clientele first and strives to generate new demand on its strength. Challenges that lie ahead are further enhancing Big Data processing abilities to better anticipate and connect with preferences, addressing continuity of shopping experience across multiple channels as well as encouraging communications - “Publish or Perish!”. A seamless, “universal” integration of these three elements would then make “omnichannel” more than a buzzword, a true universal strategy.