Since the COVID-19 pandemic began, purchasing behavior has become more diverse. In Japan, online shops—such as ecommerce sites and apps—have become popular alongside physical stores.

Currently, the apparel industry in Japan is facing various challenges, including labor shortages, oversupply of goods, and insufficient inventory. In light of these issues, initiatives that use online shop integration—such as online-merge-offline (OMO) strategy—are drawing particular attention.

This article explains the challenges Japan’s apparel industry faces and introduces some initiatives that could be implemented as solutions.

What’s in this article?

• Challenges in the apparel industry
  
• Potential solutions to challenges in the apparel industry
  
• How Stripe Terminal can help
  

Challenges in the apparel industry

In addition to the labor shortage that emerged before the COVID-19 pandemic, new challenges have arisen in the apparel industry in the post-pandemic world.

Polarization of customer needs

One of the main challenges is the polarization of customer needs. This is due to the significant lifestyle changes that occurred as the pandemic passed.

For example, many workers who had previously commuted to offices began working remotely from home during the lockdown. As a result, wearing suits or formal luxury brand clothing for work drastically decreased. With that decrease, the need to purchase clothing also declined. The apparel market shrank overall, which led to a shift in customer needs. Many customers now only purchase clothing when necessary.

On the other hand, some customers have rethought their approaches to clothing and are now buying more high-quality items. This is because they don’t need to replace these items as frequently. Some suspect that the pandemic caused a decline in the trend consciousness that makes some customers pursue cutting-edge fashion. In other words, there has been a shift in demand toward purchasing high-quality, premium clothing instead of disposable items or products that follow short-lived trends. The more expensive pieces can be enjoyed for years, transcending eras.

The current polarization of customer demand is a new challenge that companies in the apparel industry must address.

Spread of ecommerce

Driven by the pandemic, the increased demand for online shopping—including ecommerce malls—is also cited as a current challenge for the apparel industry.

For certain products, customers prefer online purchases over those made at physical stores. Companies that previously have conducted business through physical stores must now place equal emphasis on ecommerce sites to meet customer needs.

For example, it is now important to implement online-focused sales strategies—such as live commerce and social media events—that highlight the unique features of online shops. Business owners can also consider enhancing their businesses’ online payment options.

Unsold inventory

In the apparel industry, new collections are typically released each season. Merchandise is rotated accordingly. However, from the standpoint of sustainability, the industry’s current situation is considered problematic. For example, a large amount of unsold inventory is generated due to rapid turnover in short cycles.

To solve this issue, companies should consider and implement the following measures:

• Re-examine the sales cycle.
  
• Manage inventory with a focus on customer needs.
  
• Implement effective promotional campaigns to sell the previous season’s merchandise.
  

Low-price competition

Many customers don’t want to spend much on clothing or believe that they don’t need to spend much. This attitude has intensified low-price competition for products—both online and offline.

Many customers appreciate purchasing more affordable products. However, this reduction in profit margins can negatively impact business operations. Without increased revenue, it can become difficult to improve staff wages and benefits, which makes this a significant issue for the apparel industry.

Labor shortages

In a physical store, a small staff must be present for long hours. Additionally, during that time, store staff handle various tasks, such as inventory management, customer service, sales, and cash register operations. However, apparel store staff tend to earn lower wages compared to other industries.

This gap between expectations and workload could cause employees—even those who initially aspired to work in a clothing store—to leave. Therefore, it is necessary for owners of physical stores to re-examine staff wages and benefits and improve working conditions.

Potential solutions to challenges in the apparel industry

To address current challenges, companies can enact the following initiatives:

Manage inventory based on demand analysis

It is important to avoid excess inventory. However, this can be a challenge due to unpredictable customer demand. Therefore, it is important to manage inventory based on actual customer demand. Businesses can investigate trends in the apparel market and formulate strategies based on data.

For example, businesses can examine past sales data and customer purchasing behavior and conduct analyses that consider multifaceted factors, such as seasonal trends and social conditions. This can help make inventory management more precise. Businesses can also conduct customer surveys about products and services to directly understand their needs.

When a business understands the current state of the market and future outlook, it can respond swiftly to changing customer needs. This can help the business differentiate itself from competitors, reduce excess inventory, avoid wasting resources, and increase profits.

Use an OMO strategy

In Japan, ecommerce sites rapidly gained popularity during the COVID-19 pandemic. They have since become firmly established in customers’ daily lives. At the same time, physically handling products in brick-and-mortar stores has also regained prominence since the pandemic subsided. When responding to these customer trends, it is important to ensure that customers use ecommerce sites and shop in physical stores. If they don’t, this can cause customer loss on the other side.

To attract customers, businesses can implement an OMO strategy. This strategy combines sales channels (i.e., online and offline) and shows how customers can benefit from using both.

Examples of OMO strategies include the following:

• Customers can pick up items ordered online at the nearest physical store.
  
• Customers can try on clothing at a physical store and then buy clothing online in online-exclusive colors.
  

Use sustainable practices

The apparel industry is facing a growing waste problem due to unsold merchandise. In response to this, many companies are prioritizing sustainable initiatives aimed at minimizing waste products.

By creating environmentally conscious products, businesses can also enhance customer goodwill and trust. The following initiatives are gaining attention as sustainable actions businesses can take:

• Use recycled materials (e.g., recycled polyester fibers) that can reduce the consumption of new petroleum resources.
  
• Use materials that require less water and reduce environmental impact during production (e.g., organic cotton).
  
• Develop technology to improve long-term durability (e.g., sewing techniques to prevent fraying or fading).
  

Create branding that balances quality and price

In the future, price competition driven by inflation will likely intensify further. Due to the recent economic downturn, cost performance has become a key consideration in customers’ purchasing behaviors.

However, the approach of “producing in large quantities and selling cheaply” means that even if customers buy items at low prices, the items quickly become unwearable. This forces customers to replace those products quickly. Therefore, advertising low prices does not guarantee superior cost performance and could lead to lower customer satisfaction and customer churn. From a sustainability perspective, this kind of mass production is not desirable and will make it difficult for a business to differentiate itself from competitors.

Even as the average price per customer generally continues to drop, businesses can execute a unique, customized branding strategy to attempt to increase average transaction value. Examples include the following:

• Ensure attentive customer service.
  
• Train staff about the company’s brand philosophy and unique characteristics.
  
• Implement a personalized loyalty program, and review the benefits and perks as necessary.
  
• Promote upselling and cross-selling.
  

By consciously focusing on branding, businesses can clarify product value and establish sales strategies while balancing quality and price.

Implement artificial intelligence (AI) technologies and business management systems

Because of labor shortages, it is important for companies to review their wages and benefits. In addition, implementing systems to improve operational efficiency can also help address labor shortages. For example, by using customer management and inventory management systems provided by payment agents, businesses can reduce the workload for staff members and potentially improve the quality of their work.

Centralized management can provide real-time monitoring of both online and offline product inventory and sales. This can also be effective for implementing an OMO strategy.

Exploring the introduction of the latest AI and virtual reality (VR) technologies as part of customer service is also a practical step. This can reduce the burden on store staff, which can serve as an effective countermeasure against labor shortages and can enhance customer convenience. Customers can use some of the services below:

• Chatbots
  
• Virtual try-on services
  
• Digital body measurements
  

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.