In recent years, purchasing behavior has expanded beyond physical stores to include the widespread use of online shops. This has resulted in a broad diversification of Japan’s shopping landscape.

In particular, the COVID-19 pandemic made online shopping platforms, including ecommerce malls, an even more integral part of customers’ daily lives. For many people, the convenience of shopping online from home or the workplace has now become a natural process.

However, while online shopping has seen rapid growth following the COVID-19 pandemic, many people still value the sense of security and reassurance of physically handling products in brick-and-mortar stores, as well as the experience of face-to-face customer service and payment interactions. Taking this into account, a key way to further enhance customer satisfaction and improve sales is effectively integrating both online shops and offline stores in a way that aligns with customer preferences.

In this article, we’ll explain why integrating ecommerce sites with physical stores can be useful for Japanese businesses. We’ll go over the benefits and points to consider, along with examples of businesses that have successfully integrated online and physical stores.

What’s in this article?

• The size of the online shopping market
  
• Comparing physical store and online store utilization rates
  
• The importance of integrating online shops with physical stores
  
• The advantages of integrating online shops with physical stores
  
• Points to consider when integrating online shops with physical stores
  
• Examples of businesses that have successfully integrated online shops with physical stores
  
• Sales promotions that overcome the barriers between online and offline
  
• How Stripe Terminal can help
  

The size of the online shopping market

According to data from Japan’s Ministry of Economy, Trade, and Industry (METI), the market size for business-to-consumer (B2C) ecommerce in Japan in 2023 was 24.84 trillion Japanese yen (JPY). This was a 9.23% increase compared to the previous year’s figure of 22.74 trillion JPY.

Additionally, METI’s comparison of market sizes in 2022 and 2023 across three sectors—product sales, services, and digital—revealed the growth of all three. However, the services sector stood out with a growth rate of 22.27%, indicating particularly strong expansion and a significant increase in customer activity. According to the survey, the travel services market, specifically, was 3.19 trillion JPY in 2023, a very sizable share of the overall services sector (7.51 trillion JPY). This is thought to be influenced by the easing of COVID-19 restrictions and the return of the ability to travel more freely.

Comparing physical store and online store utilization rates

Let’s look at data from the Distribution Economics Institute (DEI) of Japan on the utilization rate of physical and ecommerce stores. A 2021 customer trend survey from the DEI titled “Shopping Locations in the Past Three Months” explored four shopping categories: food, daily necessities, clothing, and home appliances.

Food

For the food category, the utilization rate of physical supermarkets was overwhelmingly high at 85.9%. Brick-and-mortar convenience stores ranked second after supermarkets, with a utilization rate of 50.9%. Meanwhile, the top ecommerce sites (e.g., Amazon and Rakuten Ichiba) had a utilization rate of only 30.0%.

In Japan, there is a deeply ingrained habit of purchasing food at nearby supermarkets and convenience stores. Therefore, the high utilization rate of physical stores for food purchases reflected in the survey makes sense.

Daily necessities

For the purchase of daily necessities, brick-and-mortar drugstores led with a 76.0% utilization rate. Ecommerce sites were in second place, with a significantly lower utilization rate of 33.6%. Similar to food, daily necessities can be purchased immediately at nearby drugstores, and so there’s typically no need to make an effort to buy them online. The low rate suggests that people frequently pick necessities up while out shopping for groceries.

Clothing

For clothing, ecommerce sites led with a utilization rate of 58.1%, followed by brick-and-mortar apparel specialty stores at 35.1%. The ecommerce sites used included clothing brand ZOZOTOWN.

When purchasing clothing, the high convenience of ecommerce sites that offer a wide range of apparel is appealing to many customers, which is likely a factor in their utilization rate.

Home appliances

For home appliances, ecommerce sites ranked the highest with a utilization rate of 58.8%, but physical electronics retailers also boasted a high rate of 49.4%. Similar to clothing, ecommerce sites can offer an extensive selection of options for home appliances, which contributes to their high rate of utilization.

The utilization rate of online shops operated by electronics retailers was 16.8%, significantly lower than that of brick-and-mortar stores. This makes sense; home appliances can be fairly expensive depending on the product, and customers tend to prefer purchasing them at physical stores where they can handle the actual item in-person and check its details before buying. That kind of peace of mind isn’t possible when purchasing online.

The importance of integrating online shops with physical stores

As previously mentioned, there is a clear trend in Japan in which certain purchases, such as food and necessities, are made in physical stores. For this reason, some business owners might think that just having a physical store is sufficient.

However, as lifestyles change with the times, demand for ecommerce is steadily expanding. Having an online shop can help businesses reach a wider range of customers. Implementing unified commerce that can transcend the boundaries between online and offline channels has become key to success.

Online shops and offline physical stores each offer distinct advantages for customers. For example, with online shopping, customers can shop anytime, anywhere, as long as there is an internet connection. They can also purchase items that aren’t available or in stock at nearby stores. In contrast, with physical stores, customers can actually pick up and examine products before making a purchase, and they’re able to buy and take home the items they want immediately.

Businesses that already have physical stores can leverage the benefits of those brick-and-mortar locations while integrating them with online shops. This is known as an Online-Merge-Offline (OMO) strategy, and it can help a business capitalize on the advantages and synergy of both channels. Furthermore, an OMO strategy provides an optimal shopping experience for customers, regardless of whether they shop online or in physical stores.

Businesses that have previously operated solely through physical stores can achieve synergy by integrating with online shops, and they can expect that this will enable them to promote their products and services to a wide range of regions and customer segments that were previously difficult to reach. Against this backdrop, many businesses in recent years have come to see the importance of integrating both sales channels.

The advantages of integrating online shops with physical stores

Integrating online and brick-and-mortar stores allows businesses to use the unique strengths of each channel, which can deliver certain benefits.

Advantages for customers

The ability to pick up items ordered from an online shop at a physical store

The ability to order online but pick up in a physical store creates a more enjoyable shopping experience for customers. This is particularly true if the customer:

• Wants to use online shopping, but they’re always busy and rarely home, and aren’t able to receive deliveries, making online shopping inconvenient.

• Feels that the high shipping fees make it less of a bargain when a product is delivered to their home.

As to the first point, for customers who are often away from home, being able to pick up items from their nearest physical store during their free time or on weekends is extremely convenient and feels more reassuring than shipping it to their homes. And as to the second point, there are usually fees for home delivery, and choosing in-store pickup eliminates those costs, significantly improving the customer’s sense of value.

Products that aren’t normally available in physical stores can be purchased online

There are products that might be for sale online and not in a physical store due to the store’s size or stock levels. Additionally, for clothing stores, it isn’t uncommon to see certain items designated as online-exclusive products on the basis of size or color.

In such cases, customers who primarily shop at physical stores might give up on making a purchase. However, if the business operates both a physical store and an online shop, customers can still purchase the products online that they couldn’t find in person.

Additionally, when a physical store has the right size but not the right color, customers can try the item on in the store to check the fit and comfort, and then order the desired color online. This is another benefit of the integration between an online shop and a physical store.

Items ordered from the online shop can also be returned at a physical store

If a customer wants to return an item they bought online, the ability to return it at a nearby physical store is extremely convenient. Customers who are hesitant about online shopping due to what they perceive to be complicated return procedures are more likely to develop loyalty to an online store if the business’s return process is well-established and handled by staff at a physical location.

Advantages for businesses

Online shops can drive foot traffic to physical stores

By using an online shop to announce any promotional campaigns being held at the business’s brick-and-mortar store and distributing coupons online that are usable at the real-world store, in-store consumption can be promoted.

Improved customer loyalty through a physical store’s social media activity

Recently, it has become common to see staff at physical stores managing social media accounts and even doing live commerce streams. When staff members who actually work in stores post on social media or do live commerce events about their company’s popular brands and recommended products, it increases trust and goodwill from customers. This trust transcends the boundaries between physical stores and online shops and can promote both sales channels. Furthermore, through social media and live commerce, customers and store staff can communicate directly with each other, which can increase customer loyalty.

Points to consider when integrating online shops with physical stores

Integrating online shops with physical shops can be beneficial for businesses and customers alike. However, there are some things that businesses need to consider before integration.

System integration requires careful execution at each phase of the process

Integrating online shops with physical stores requires large-scale development, such as linking and integrating core systems related to the management of inventory, production, sales, customer relationships, etc. When pursuing this integration, it is therefore important to proceed cautiously and smoothly. It is advisable to subdivide the process into phases and release each function incrementally as it is completed.

Furthermore, it’s important to remember that integration incurs costs, and system malfunctions might occur after release. Keep these risks in mind and consider the cost-effectiveness of performing advance testing.

Consider the balance between the online shop and the physical store

When customers focus on ecommerce sites and apps, it can create a sense of competition between a business’s online shop and its physical store. This can lead to decreased morale and motivation among physical store staff. To ensure business success across both online and brick-and-mortar stores, head office management should avoid focusing solely on the sales of a single channel, but rather maintain a balance between the two. At the same time, they need to strive to boost the motivation of physical store staff.

For example, when running a campaign in a physical store to promote the business’s app, setting a key performance indicator (KPI) such as “x number of e-shop and app introductions” might help improve a sense of unity and solidarity between the physical store and the online shop.

Improving the online shop utilization rate requires effort

If the utilization rate of a business’s physical store is extremely high, such as 99%, the utilization rate of its online shop becomes virtually 0%. Consequently, there is little synergy between the physical store and the online shop. To get more customers to use an online shop, it’s not enough to simply set up an ecommerce site or app. It actually requires the implementation of a variety of strategies to attract customers.

To increase the utilization rate of online shops, it is most important to help physical store customers learn about the appeal of online shopping. Here are some ways to achieve this.

Methods to improve the utilization rate of an online shop specifically

• Offer online exclusives: Sell certain products and run limited-time sales as online-only.
  
• Create an app for ecommerce: Develop an app so that customers can shop online with your store.
  

Methods for integrating physical stores and online shops

• Advertise the ecommerce site in the physical store: Have staff in the physical store promote the online shop to customers.

• Integrate the business’s data: Synchronize member data between your online and physical stores using social media platforms (e.g., LINE).

• Perform customer analysis: Analyze your customers (e.g., demographics, purchasing behavior) and how they differ between your physical and online stores.

• Focus on interchannel collaboration: Actively incorporate physical store staff into online shop initiatives (e.g., creating a “Staff Picks” page on your online shop).

• Offer coupons: Distribute points and coupons that can be used both online and at a physical location.

• Have real-time inventory check functionality: Display the inventory status of any physical store locations on your online shop.

• Provide reservation and ordering functionality: Offer in-store reservation and order fulfillment services for your online shop.

• Allow in-store pickup: Let customers pick up online purchases at the physical store.

• Encourage in-store returns and exchanges: Establish an in-store return and exchange process for products purchased online.

Examples of businesses that have successfully integrated online shops with physical stores

Here, we’ll look at two successful examples of online and offline store integration.

UNIQLO

UNIQLO, recognized globally as a leading brand in the apparel industry, is a business that has successfully integrated its online shop with its physical stores.

UNIQLO customers can check the inventory status of their nearest store on the ecommerce site, pick up items purchased online at any store across Japan, and make in-store returns at physical stores.

Additionally, customers who’ve registered for UNIQLO accounts can receive coupons that can be used both online and in physical stores, allowing them to enjoy savings on purchases with the brand wherever they choose to shop. Furthermore, UNIQLO’s online shop features a “Staff Recommendations” page showcasing store associates’ styling ideas. This effectively captures the strengths of physical stores and incorporates them into the online shopping experience.

Customers who want to check a clothing item’s size before purchasing can visit a physical store to try it on first, then buy it online later along with online-only items and other products. UNIQLO’s efforts to combine online and offline shopping is evident in every aspect of the shopping experience.

Kohnan

Kohnan is a home improvement store that offers a wide range of products including daily necessities, gardening supplies, and pet items. The business proactively promotes cross-channel customer referrals between its online shop and physical stores.

For Kohnan’s online shop, the Kohnan e-Shop, registering for an account allows users to check the latest information and flyer advertisements for the store nearest them. Additionally, the online shop has implemented initiatives and efforts to attract customers to the company’s physical stores, such as distributing store-specific coupons via its app.

Further, Kohnan’s physical stores use point-of-sale (POS) displays and posters that promote online shopping, including tips for using the website and app. This helps foster synergy between the business’s physical and online stores.

Additionally, similar to UNIQLO, Kohnan allows customers to check inventory at their nearest physical store. It also offers a service where customers can pick up items purchased online at a physical location. If a customer purchases a bicycle from Kohnan’s online shop, staff at a brick-and-mortar store will inspect the bicycle and take the customer’s old bicycle for free.

Sales promotions that overcome the barriers between online and offline

As successful businesses like UNIQLO and Kohnan prove, integrating online and offline stores allows businesses to maximize the synergistic effects of each channel’s strengths. By doing this, companies have the ability to further expand their business opportunities.

Businesses selling products and services can enhance customer satisfaction and boost sales by providing an improved purchasing experience for each individual customer. Businesses that currently only operate physical stores but want to expand in the future can take inspiration from the successful case studies we’ve explored and seriously consider integrating their online and offline stores.

How Stripe Terminal can help

Stripe Terminal allows businesses to grow revenue with unified payments across in-person and online channels. It supports new ways to pay, simple hardware logistics, global coverage, and hundreds of POS and commerce integrations to design your ideal payments stack.

Stripe powers unified commerce for brands like Hertz, URBN, Lands’ End, Shopify, Lightspeed, and Mindbody.

Stripe Terminal can help you:

• Unify commerce: Manage online and in-person payments on a global platform with unified payments data.
  
• Expand globally: Scale to 24 countries with a single set of integrations and popular payment methods.
  
• Integrate your way: Develop your own custom POS app or connect with your existing tech stack using third-party POS and commerce integrations.
  
• Simplify hardware logistics: Easily order, manage, and monitor Stripe-supported readers, wherever they are.
  

Learn more about Stripe Terminal, or get started today.