In August 2018, Isetan Mitsukoshi and Fujitsu began testing their sharing service called CARITE, a smartphone app-based rental service for apparel, at Mitsukoshi Ginza Store.
By integrating "customer service" and "stores," which are the strengths of leading department store Isetan Mitsukoshi Ltd., with the digital technology of Fujitsu, the objective of this co-creation project is to offer customers a new shopping experience through an app.
We asked about the CARITE project and the future of the retail industry in an interview with the four people working together to create the "Japanese Version of New Retail Service" while overcoming business hurdles between major companies.
What a Department Store Can Do for Customers As the Trend Shifts from Owning to Using
Kamitani: The sharing economy became a strong interest of Isetan Mitsukoshi about three years ago. What kind of impact would the behavior of renting items when they were needed, instead of buying and owing them, have on the department store business? Both buyers for Isetan Mitsukoshi and shop clerks were feeling from their experiences that customers were becoming familiar with the concept of "paying to use items" instead of "owning them."
Hayashi: We felt that the frequency of customers saying, for example, that "I will wear this dress only once" or "I can't buy new clothes unless I reorganize my closet" was gradually increasing. In the previous era, the act of purchasing itself held value and symbolized affluence. The trend, however, has shifted to "value-oriented consumption" in which people place importance on what they want to do with the items they purchase. I think, we, the department store, need to accommodate such changes in customer value perspective and needs.
"Customer Experience at Real Stores" and "Storytelling Skills of Experienced Clerks" are the Strengths of Department Stores
Yamada: Fujitsu was also closely watching how the waves of digitalization started to reach the retail industry. One such wave is the spread of sharing services.
Another is the use of technology at real stores. EC (internet shopping) has already grown to account for 10% of global retail sales, and now EC companies are trying to reach real stores. This trend is prominent in the US and China. EC companies are opening "digitalized real stores" one after another. Alibaba in China calls such a fusion of online and offline business the "New Retail" strategy.
At the same time, it's true that in recent years companies that had developed their business primarily at physical stores have been left with no choice but to withdraw from the market or go bankrupt. According to a news report, in the US approximately 3,800 retail stores will close their doors in 2018.
Kamitani: Bricks-and-mortar stores have features that online stores are missing. Direct contact with customers and understanding of their needs in detail are a couple of examples. EC companies that grew online are now expanding their business to physical stores because they've come to understand the importance of such stores. We, department stores, have knowledge acquired from many years of experience with store operation, and I think we can meet customer needs comprehensively by integrating real and digital businesses while taking advantage of our strengths.
The New Clothes-Sharing Service "CARITE" Digitally Connects Offline and Online
Hayashi: For Isetan Mitsukoshi, everything about the CARITE project was new. It was a bold, adventurous endeavor. There were opinions both for and against it, including objections such as, "If a department store designed to sell products starts renting them, the number of purchasers may decrease."
Kamitani: An American study, though, has reported that a rental service operated by a physical store does not necessarily affect the purchase volume. Our view agrees with the study; we predict that the customers may "choose purchasing and renting according to the occasion" and "use the rental service as an extra option while purchasing remains as a choice."
Yamada: In this era, we can use a smartphone to check information anytime and anywhere. This means customers are gaining control over product selection. In a business like that of a department store in particular, how well we can satisfy the diversified needs of customers now in power is crucial. I was wondering what Fujitsu could do with our digital technology to meet their needs.
The CARITE project began in December 2016. When I joined an open innovation gathering, I met a buyer for Isetan Mitsukoshi and on the spot suggested a clothes-sharing service. I know it was a busy, year-end period, but the buyer contacted me shortly afterward and the idea started to take shape.
Kamitani: At that time, we had issues in the digital area. Many of them couldn't be solved if we tried to deal with them internally. IT is not our main field and we lack know-how. So we asked for the cooperation of Fujitsu, who are the professionals in the field.
Yamada: For a company not specializing in digital technology, it is indeed difficult to keep developing and hiring human resources who can keep up with the latest trends of digital technology and introduce it. Meanwhile, companies like amazon and Alibaba are making trillion-yen-level investments in digital technology. The gap between these companies keeps widening.
Retail offers good-quality Japanese products and IT features Japanese technical skills, but these good qualities are not fully taken advantage of. That frustrated me but then motivated me to make full use of them through co-creation.
This CARITE project has been made possible by the co-creation of three companies. Isetan Mitsukoshi takes care of customer service, stores, merchandizing, and promotion. Fujitsu is responsible for digital tasks, back-end development, security, system operation, the IoT, AI, and big data analysis. Then, the startup company ARCHECO Inc. takes part in the project by carrying out front-end development including design, user experience (UX), and UI development.
Matsunae: More specifically, our system seamlessly acquires online and offline user behavior data based on their app account ID and produces analysis results as feedback. I believe we can visualize each user's potential tastes or preferences and realize optimally personalized customer service by using AI to analyze not only chat scripts, but also app-based behavioral data including item data acquisition via QR codes at stores, registering them as favorites, adding them to the cart, and paying for them.