Business

Virus pandemic pushes Japan’s shoppers to finally buy online

by Lisa Du

BLOOMBERG

Now that the government is urging consumers and businesses to step up efforts to contain the coronavirus outbreak, shoppers may finally have no excuse but to embrace e-commerce and wean themselves from brick-and-mortar stores.

Prime Minister Shinzo Abe declared a state of emergency for Tokyo and other metropolitan areas earlier this week. In response, Uniqlo clothing owner Fast Retailing Co., department store operator Isetan Mitsukoshi Holdings Ltd. and other retailers are temporarily closing shops or cutting hours, while grocers and other essential services will remain open.

Online shopping got a boost in the U.S., China and the rest of the world as more people turned to the web to buy essentials and shop for clothes, gadgets and other discretionary items. In Japan, it’s been a different story — the archipelago has so far avoided the severe shutdowns that have crippled other nations, and e-commerce penetration has long been among the lowest of developed markets. Only 7% of transactions were online in 2018, according to government statistics.

“There could be first-time users during this time who see the merits of e-commerce,” said Takeshi Mori, a researcher at Nomura Research Institute. “After the coronavirus outbreak calms down, more people will be online in Japan.”

That would be welcome news for the government, which has been promoting cashless payments and pushing businesses to embrace new retailing technology. More demand for web shopping could also nudge traditional retailers to invest in digital infrastructure to attract customers. Japan’s web shopping rate lags well behind the U.S. and even more so compared with China, where a fifth of retailing is now online.

One early convert is Shun Iwata, 51, who before the outbreak used to eat out during the week and shop in stores. Concerns over privacy also kept him away from web shops. Now, he considers it an essential service and signed up for an Amazon.com Inc. account a month ago. He initially sought to buy masks and disinfectant because stores were sold out, but now browses for knick-knacks, including a hard-to-find case for his car keys. “There’s a lot of things you can get online that you can’t find in the stores,” he said.

Rakuten Inc., the Japanese e-commerce company, said its online marketplace sales in recent months are higher than they were a year earlier. A spokeswoman for the company declined to provide figures, but said daily essentials were selling well. A spokeswoman for Amazon, which has been in Japan for two decades, declined to comment.

“There’s a big chance for e-commerce right now,” Takeshi Okazaki, Fast Retailing’s chief financial officer, said at the company’s earnings news conference this week. “We haven’t seen any declines in e-commerce demand, and we’re having trouble keeping up with with shipping and logistics.”

Even so, rising digital sales aren’t likely to make up for lost brick-and-mortar sales, not to mention the chilling effect the economic downturn is having on consumption. Most large retailers have said they are bracing for hard times ahead.

Ryuichi Isaka, chief executive officer of Seven & I Holdings Co., said the convenience store operator is considering new services, such as a system that would shorten shopping times in stores. “Consumers will change their shopping behavior,” he said at an earnings call.

The question is whether people will stick with web shopping once things settle down, according to Mori. A survey conducted by the researcher in mid-March, when stay-at-home measures were still relatively relaxed, showed only 10 percent of respondents in their 20s to 60s shopped online. That number probably increased in April, he said, as coronavirus cases started rising more rapidly, especially in Tokyo.

Infections in the capital make up about a quarter of the total of about 4,000 reported cases in Japan. Most people pick up groceries and other essentials near the stations where they live, which means that it’s often quicker and easier than shopping online. Before the virus outbreak, the busy commercial areas of Shibuya, Shinjuku and Ginza often teemed with people looking for clothes, books, gadgets and other products.

While local authorities lack the legal right to force retailers to close, many businesses had voluntarily shuttered storefronts on weekends or cut their hours. Retail traffic fell 63% from normal in Tokyo last month, according to mobility data analyzed by Google.

Even before the state of emergency, department store operators saw double-digit drops in sales during March, but were reporting higher online revenue, with beauty products selling particularly well. Apparel seller United Arrows Ltd. saw its online sales climb 24 percent in the same month, while store sales slumped 39 percent.

Takahiro Kazahaya, an analyst at Credit Suisse, wrote in a recent report that previous disruptions in Japan, such as the 2011 earthquake in eastern Japan, had changed consumer behavior and increased e-commerce market share.

There’s also some speculation that cashless payments will gain more momentum. Although Japan has long been known for having cash-preferring consumers and businesses, there are now people seeking to take advantage of promotional discounts. And there are some who are shunning bills and coins for fear of becoming infected; some 12% are concerned about cash hygiene, according to a March survey conducted by two local tech consultancies.

Meanwhile, Iwata, the newly minted online consumer, has been on an e-commerce shopping spree. He bought a laptop cover online from electronics retailer Yodobashi Camera Co. and discovered a site for rare tequilas, which he collects. “Really, it’s thanks to the coronavirus that I found out about all this.”

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