How RFID can save Japan from its '2018 issue'

The retail industry is suddenly interesting again. Amazon Go, Amazon Echo, smart checkout, AI customer service. These are services that, especially in Japan, are riding a wave of structural change in society: the increase in double-income and single-person households, as well as the retail industry’s talent shortage brought on by the declining birthrate.

You may or may not be familiar with the term ‘The 2018 Issue’. That's the year Japan's under-eighteen population, which has remained flat for a number of years, will begin to drop. This will be a blow to convenience stores, the traditional place of employment for high school and college students. They are the stores’ core workforce and have, until now, supported the industry’s growth.

Faced with such a gloomy prospect, the sector is of course not standing still but has already started to adopt a ‘manpower conservation’ policy. In April 2017, the Ministry of Economy and Industry reached an agreement with five major convenience store chains (7-Eleven, FamilyMart, Lawson, Mini Stop, New Days) to tag all their products with RFID tags by 2025. RFID is often talked about in the context of saving checkout time, but it offers many other benefits to retailers, such as streamlining product inspection and inventory, preventing shoplifting and reducing disposal loss.

This brings to mind Amazon Go, launched in the US in December 2016 as a revolutionary retail innovation. I’m sure I’m not the only one on whom the launch movie has left an unforgettable impression. It is, however, still limited to Amazon employees and not yet available to the general public. Amazon Go does not employ RFID. Instead it tracks shoppers using sensors and cameras, a system with limited ability to distinguish individual customers during busy periods. This makes it less appropriate for this market, where the retail space tends to be smaller and especially crowded during commuting and lunch hours.

There are various advantages to the RFID tag: for example, by placing tag readers on the shelves, inventory can be monitored in real-time to allow for full automation of stock replenishment and order placement. For advertising agencies, an obvious appeal is the potential for sales promotional activities.

Perhaps some time in the future when the product shelf rails are replaced by LCD panels, product prices and sales messages will be automated to not only eliminate the burden of printing large quantities of POP and delivering them to each store which the staff need to set up and display, but also to easily customize messages by time, day and geographical area.

Most exciting, though, is the thought of the system helping to track and analyse every shopper’s in-store journey. The conventional POS system only provides purchase history data, meaning the fine details of shopper behaviour have so far been kept in the dark. The upcoming system should be able to uncover every shopper’s product engagement time, journey distance, the order in which multiple products are placed in the cart, etc. which will all have a major impact on optimising in-store layout and message contents.

All this means we will soon gain the power to precisely understand shopper behaviour and be able to tap into a much more diversified range of sales promotional possibilities. So it’s not an overstatement to say that in this new world, shopper behaviour analytics and solutions will be the dictating factor in marketing. Many companies and businesses will be drawn to the potential of future retail marketing, but the foreign manufacturers are likely to have a head start, because of the expertise they have built in this field since the concept of shopper marketing started to spread in the early 2000s.

The wealth of knowledge and best practices these global companies have accumulated over the years in the US and other markets, combined with the renewed insights into the Japanese consumer behaviour in this unique market, is bound to trigger a new chemical reaction.

We have a plan in place for next year to conduct an RFID test in a physical store with whom one of our clients has a partnership. The purpose of this trial is twofold: to proactively prepare ourselves with new measures before the big wave of change hits the retail environment in Japan; and secondly, to leverage the in-store purchase behaviour data for strategic planning and creative development. Our commitment is to devise new approaches to tackle the marketing issues and challenges that are becoming more complex and sophisticated every day.

As Japan plunges into an unprecedented era of low birthrate and aging society, the need to conserve manpower and streamline retail is urgent. Anyone involved in marketing cannot afford to ignore the potential of these developments in shopper marketing.

Masaki Miyazawa is the shopper strategist at Beacon Communications, part of Publicis One in Tokyo.