The E-Commercialization of Japanese Fashion Retail Brands

The Japanese e-commerce industry for fashion retail is worth more than $100 billion. As the fashion E-Commerce market expands, more brands are optimizing their online shopping sites; for example, some brands launch their own shopping applications for smartphones so that users can order items on-the-go, such as during their commute to and from work or school.

According to the Japanese e-commerce market report by Fuji-keizai, the Japanese fashion retail e-commerce market has grown by 10% between 2012 and 2013. In order to further expand, Japanese retail companies must have effective and efficient marketing, followed by a well-built online store to sell not only their main products but also complementary retail goods.

One good example of a successful e-commerce business is SHOES.COM (US company). Their online-based business with free shipping and free returns has worked in the US, so it may be possible to apply this business model in Japan. Japan’s land mass is small, so fast shipping is definitely very possible. If more companies implement the free shipping and free returns system, it would accelerate a their venture into the Japanese e-commerce market.

More About The Japanese Fashion E-Commerce

Naturally, with the rise of the e-commerce presence of fashion retail brands, physical storefronts such as department stores have been shrinking in market share.

One reason for the development of the Japanese e-commerce market is that people who own smartphones are increasingly from suburban or rural areas where it is physically difficult to buy directly from retail stores. They can now easily shop online via their smartphones and get the products shipped directly to them.

Another reason is that the Japanese e-commerce market includes not only Japanese retail brands, but also North American and European companies that launched their business in Japan. E-commerce rapidly developed in Japan after the 2000s, and international fashion retailers such as Forever 21 and H&M also launched online in Japan in that period.

Social Media Promotion

Regardless of what country the brand is operating in, the company’s marketing plan is bound to include social media promotion, using social networking services such as Facebook and Twitter.

Brands increasingly rely on word-of-mouth marketing on social media, choosing to take a more organic approach. This type of promotion can be accelerated through what is known as “viral marketing” for new user acquisition.

Additionally, some Japanese fashion retail companies combine several marketing channels together, or work with partners for a comprehensive internet marketing strategy. For instance, ZOZOTOWN is the largest Japanese online fashion retail store and their customers are mainly in their 10s and 20s. ZOZOTOWN works with T-SITE, which has the biggest share in the point-card market, so customers can earn points (called T-points) when they buy clothes or accessories.

Case 1: Uniqlo

Uniqlo is a global fashion retailer that has been a wholly owned subsidiary of First Retailing and has the third highest apparel sales in the world with about 1,500 stores. Uniqlo’s strength is a well-managed, vertical integration system, which means merging together different manufacturing stages so that a company can gain control over its supplier or distributors in order to increase the company’s influence over the market. Integrating vertically makes it possible to manufacture low-cost products.

The average percentage of sales coming from e-commerce for Japanese apparel companies is between 3 and 5% of total sales. In fact, Uniqlo’s e-commerce rate is 3.3%, so we can say that Uniqlo’s performance is average. In other words, Uniqlo does not focus heavily on their e-commerce strategy because their main focus is on their offline channels. Therefore, Uniqlo’s e-commerce strategy is not their main strategy, but one that supports their direct marketing channels.

Case 2: United Arrows

United Arrows is a fashion retail company in Japan that focuses heavily on their e-commerce strategy. United Arrows’ e-commerce sales is more than 10% of their total sales, which is two times higher than the industry average e-commerce rate of 5%. United Arrows’ online revenue alone is over $1 billion in 2014.

Interestingly enough, there are three times more customers who shop both online and offline than customers who shop exclusively offline. To add to that, customers who shop both online and offline spend 2.5 times more than customers who only shop offline. For example, if the spending by customers who only shop offline is $100, then the spending by customer of spending who shop both online and offline would be $350.  In other words, customers who shop both online and offline are the main targets for United Arrows.

To expand their core target and reinforce leads from online to offline, United Arrows introduced a stock search system so that customers can look online for a product they like and make sure it is in stock in stores before physically going to the store. United Arrows used to update the system once a day, but with increased demand, they now update it once every 1.5 hours. This update frequency reinforces customer confidence in committing to a purchase and increases the likelihood that an online lead will turn into an offline conversion.

Also, United Arrows is in the process of planning an online clothes fitting reservation service. In this service, customers can make reservations to try on reserved clothes in stores. Thus, United Arrows aims to sync their physical store locations with their online store.

Case 3: ZOZOTOWN

ZOZOTOWN is a 100% e-commercialized apparel retailer in Japan and is owned by START TODAY. According to the internet consumer survey service, NetView, provided by Nielsen, ZOZOTOWN’s total web visitors reached 400 million in January 2012, which was 1.4 times more than that of 2010. In fact, the web visitors in January 2010 was approximately 284 million. Also, ZOZOTOWN’s customers are mainly teenagers and young adults. The percentage of teens was 24% and adults in their 20s was 36% in 2011.

One significant characteristic of ZOZOTOWN’s strategy its social community. ZOZOTOWN has its own social networking services, ZOZOPEOPLE and WEAR.  On these social networking websites, users can post their favorite fashion photos, tagging each fashion item with a product page on ZOZOTOWN’s website. Since there is a huge fashion community and the community makes it easy to navigate to the product pages, visitors flow into ZOZOTOWN’s website via the community. Potential customers are fed into ZOZOTOWN through their fashion social networking websites, which helps increase traffic and sales on the main site.

Conclusion

Currently, many Japanese apparel companies regard e-commerce as a way to lead customers to offline stores. However, the situation is changing as online store fronts increasingly become a main focal point for retail sales.

The more the e-commerce market develops and evolves, the easier potential consumers can access the products they want any time, anywhere. Although around 80-90% of sales for many Japanese companies still comes from offline shopping, it is becoming increasingly common to see companies where 100% of their sales comes from e-commerce. This is a trend that will continue on the rise as more and more people move to shop online.

Photo by: Tee Vo