Japan's retail industry is faced with numerous issues including inefficient store operations and inventory control, but the emergence of IoT-based services and smart technologies is expected to bring changes. With advancements in robotics, experiments with automated checkout, and an ambition to further the proliferation of RFID tags, will Japan be able to revolutionise its retail sector?

1. Integration of Retail and IoT in Japan

2. 1. Status Quo of the Retail Industry
I. Current Status
II. Challenges and Countermeasures
2. New Services to Bring Changes
I. Streamlining Store Operations
(Reference: Digitisation of Store and Product
Information)
II. Optimising Product Cycles and Inventory Control
III. Enhancing Appeal to Customers
IV. Summary
3. Future Prospects
I. Sensors
II. RFIDs (IC Tags)
III. Showrooms
Possibilities of Future Applications
1
Contents

3. 1. Status Quo of the Retail Industry
2

4. I. Current Status
Retail Industry Showing Sluggish Growth While E-Commerce Surging
Amidst a decreasing population and
sluggish economic environment, retail
industry revenue decreased by 8% over
the past 10 years
Existing business models are struggling,
while e-commerce revenue has
quadrupled over the same period,
indicating significant changes in
consumer behaviour
3
Source: Census of Commerce; Survey on the Current Status of E-Commerce
-10
10
30
50
70
90
110
130
150
1997 1999 2001 2003 2005 2007 2009 2011 2013 2015JPYtrillion
小売業 EC(BtoC物販系）
4x
over the past
10 years
-8%
over the past
10 years
Retail
Industry
E-Commerce
(B2C Commodity Sales)
Revenue of the Retail Industry

5. Convenience Stores and E-Commerce Becoming Important Sales Channels as a Substitute for
Comprehensive Retail Businesses
Department stores and supermarkets saw their revenues decrease by nearly 20-30% over the past decade,
but convenience stores and e-commerce witnessed substantial growth in revenue and are becoming
important sales channels
4
60
80
100
120
140
2005/01
2006/01
2007/01
2008/01
2009/01
2010/01
2011/01
2012/01
2013/01
2014/01
2015/01
2016/01
2015=100
百貨店 スーパー コンビニエンスストア
0
5
10
15
20
1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
JPYtrillion
百貨店 総合スーパー 食料品スーパー
衣料品スーパー コンビニエンスストア EC(BtoC)
Source: Japan Department Store Association, Census of Commerce, Japan Franchise Association, Current Survey of Commerce
I. Current Status
Revenue of the Retail Industry Revenue Index of the Retail Industry
Department Stores Supermarkets Food Supermarkets
Clothing Supermarkets Convenience Stores E-Commerce (B2C) Department
Stores
Supermarkets Convenience Stores

6. -2
0
2
4
6
8
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Sales Costs Rising for Clothing and Home Electronics Retailers
Sales costs of listed companies in the clothing and home electronics retail industries are rising; profitability
also tends to deteriorate compared with e-commerce businesses that do not have brick-and-mortar stores
5
Source: Company filings
50
60
70
80
90
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
10
15
20
25
30
35
40
45
50
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
総合小売業 衣料品小売業 家電・PC小売業
売上原価率 売上高販売管理費率 売上高営業利益率
%%%
I. Current Status
Average Value of Each Indicator Amongst Listed Companies by Industry
SG&A Operating MarginCOGS
Diversified
Retail
Clothing
Retail
Home Electronics/PC
Retail

7. Lack of
labour
Massive Amounts of Challenges and Issues in the Retail Industry
6
Surging
demand for
home delivery
due to
omnichannels
Demand for
shortened
delivery time
Current Issues and Challenges in the Retail Industry
Diversifying
payment methods
(shift to
digital payment)
Logistics
Payment
Channels
Decreasing
purchases
at stores due to
e-commerce
Stores
being turned
into showrooms
Diversifying
payment
terminals
Waiting time
for check-out
Delivery/Inventory
Control
Merchandising
Diversifying
customer
needs
Rising
sales
costs
Differentiation
Excess
inventory
(discount
loss)
Low
domestic
demand
Opportunity
loss
Marketing
Inefficient
marketing
ProfitabilityCustomer
Experience
Waiting time
for fitting
rooms
II. Challenges and Countermeasures

8. Streamlined Store Operations, Inventory Control, and Enhanced Ability to Attract Customers Are
Required
The various issues and challenges can be classified into streamlining store operations, optimising inventory
control, and enhancing the ability to attract customers
Solving these problems will enable cost reduction and increases in sales
7
Streamlining Store
Operations
Optimising Product Cycles
and Inventory Control
Enhancing Appeal
to Customers
Increased SalesCost Reduction
LogisticsPayment Channels
Delivery/Inventory
Control
Merchandising Marketing
Customer
Experience
II. Challenges and Countermeasures

9. 2. New Services to Bring Changes
8

10. New Services to Bring Changes
New Technologies and Services Emerging, Though Yet to Achieve Proliferation
Various technologies and services that involve IoT are emerging, but have not yet proliferated
9
Purpose Summary Examples
I. To streamline
store operations
 Increasing convenience for customers and
reducing costs through the use of smart mirrors
and payment systems
II. To optimise
product cycles and
inventory control
 Enhancing the accuracy in demand projection
through the use of big data
 Shortening the lead-time through improving
production processes and the use of Supply
Chain Management (SCM) systems
III. To enhance
appeal to
customers
 Customer analysis through personal attributes,
shopping history, etc.
 Information and ad-listing for potential customers
Smart Mirror Auto CheckoutSmart Shopping Cart
Big Data Analysis
Supply Chain Management
(Procurement, Production, Logistics, Sales)
Product Info Customer AnalysisAd Listing

11. Saving Labour While Retaining Convenience for Consumers
Streamlining store operations saves labour while retaining the convenience for consumers, and
contributes to sales through proper pricing and releasing discount notices
10
Smart Mirror Smart Price Tag
Smart
Shopping Cart
Allows for virtual try-on via
monitors at apparel shops
Able to change colour, size, etc.
and look for best fit using 3D data
Determines proper size
Changes price in accordance with
demand
Automatically changes tag to the
optimal price
Navigates and releases discount
notices based on items in
shopping cart
Optimises product display
through customer flow analysis
I. Streamlining Store Operations

12. 11
Smart Shelves
Robots
(Operations)
Robots
(Customer Service)
Detect shelf conditions and
releases notices about product
shortage and freshness
deterioration
Automated product
replenishment and display
Respond to enquiries regarding
inventory, product information,
etc.
Increasingly Sophisticated Robotics Leading to Emergence of Automated Services
Product replenishment and display can be automated through the use of robots; communication
robots are also emerging, and will very likely be used for servicing customers in future
I. Streamlining Store Operations

13. Automating Checkout Counter Operations That Incur Massive Labour Costs
Checkout counter operations are the foremost issue in customer experience and labour costs, and
automating these operations can help resolve the issue
12
Automated Checkout
Automated Payment
Automatic product scanning and
checkout using RF tags and sensors
The checkout counter itself can be
dismissed if combined with automated
payment
Simplified payment procedures
through facial recognition
technologies mounted on customers’
smartphones and credit cards when
they visit a shop
Automated Checkout Counter
(Specific Products)
Automated Packing
Automated packing operations
I. Streamlining Store Operations

14. Various Attempts in Automating Checkout Underway
Many companies have begun to experiment with automated checkout, and some have even launched
the service in their shops
13
Examples of Automated Checkout
 Automated checkout in general shops that
handle various products
 Items are scanned using cameras,
microphones, and weight sensors and put
into one’s Amazon shopping cart without
using IC tags
 Items are removed from
the shopping cart when
put back on the shelf
 Panasonic and Lawson launched verification
tests for checkout robots
 Shoppers scan barcodes using the barcode
scanner attached in the shopping basket
 Total price will be calculated and
shown, and automatic packing
will be carried out after putting
the basket into the checkout robots
Amazon GO Checkout Robots
 Implemented in some of its stores as part of
the self-checkout system; coverage scheduled
to expand to 50% of its retail outlets by August
2017
 RF tags attached to price tags of each product
 Total price will be calculated
and shown after putting
the shopping basket at
the self-checkout machine
GU (Apparel Retailer)
I. Streamlining Store Operations

15. Reference: Digitisation of Store and Product Information
(Summary)
Beacon and IC Tag Networking Through IoT Necessary to Streamline Store Operations
Beacons and IC tag systems (RFID) are indispensable in automated checkout systems and providing
various information
14
Beacon and RFID
Summary Unit Price
Beacon
 Bluetooth signal transmitter
 Monitors customers’ location and flow with high precision
 Consumes electricity albeit in small amount
 Capable of active information release targeting smartphones
A few hundred to
thousand JPY
RFID (IC Tags)
(Passive)
 Also known as IC tags, digital tags, RFID tags
 Consumes electricity generated by electromagnetic wave from an RFID reader
 RFID refers to the system that comprises tags and readers, etc.
 Passive information release (sending information collected by RFID readers)
Around JPY 10-20
Reference:
Barcode
 Manual scan by laser and sight confirming is required
 High flexibility in printing size
 Small information storage
Around JPY 1

16. Despite a Small Number, There Are Services Using Beacons
15
Field of Usage
(including future
applications)
 Active marketing approaches targeting customers such as offering coupons
 Acquisition of location and movement information
 Diversified services can be created by adding data and information detected by sensors such as
movement, temperature, brightness, etc.
Related Service
Examples
 Apple launched iBeacon in 2013
 Capable of sending push notices
and providing multi-language store
guides to lure customers to stores
 Beacon service using LINE accounts
 Store and product information will be
delivered to one’s LINE account by
pushing the button-like beacon (co-
developed with START TODAY)
 Credits will be granted to one’s LINE
account from beacon when
purchasing drinks from vending
machines (co-developed with Kirin
Beverage)
 Used in smart shopping carts
 Beacons set up in hanging
signboards inside a shop
 Provides navigation services based
on location information, campaign
information, and product
information
iBeacon LINE Beacon Carrefour Smart Shopping
Examples of Beacon Applications
Reference: Digitisation of Store and Product Information
(Beacons)

17. Adoption of IC Tags in Apparel Industry Progressing
16
Field of Usage
(including future
applications)
 Enhancing the accuracy in demand projection through the use of big data
 Shortening the lead-time through improving production processes and the use of SCM systems
Related Service
Examples
 Manufactures low-priced RF tags
 Aims to lower unit price to JPY 5 by
2020 and further to JPY 1 by 2025
 Expects to implement the tags in
general retailers like convenience
stores and supermarkets where
products have low unit prices but
large variety and quantity
 Implemented RFIDs in some of
its stores from 2013 onwards,
and aims to achieve full-scale
implementation by February
2018
 Streamlined product inspection
at warehouses and checkout
operations
Dai Nippon Printing Onward
Examples of RFID Applications
 Implementing RFIDs since the
2000s to monitor the inventory
situation of apparel products like
denims
Reference: Digitisation of Store and Product Information
(RFIDs)
Walmart

18. Major Convenience Stores Plan to Introduce IC Tags by 2025
17
Summary
 Faced with a shortage of labour and rising labour costs, major convenience store operators agreed on the due time
and conditions for the introduction of IC tags
Details
 Aims to have all products (estimated to be around 100 billion items per year) attached with IC tags and achieve an
individual product management system by 2025
 To look into the possibility of providing some information acquired through IC tags to supply chains
 To experiment with the introduction of IC tags in specific regions in 2018
Condition
 The unit price of “regular” digital tags that cannot be used for special conditions (e.g. microwave products) is below
JPY 1
 Manufacturers attach IC tags to products; almost all products are attached with IC tags
Target Operators
Declaration of Plan to Introduce 100 Billion Electronic Tags for Products in Convenience Stores
By 2025, major convenience store chain operators plan to introduce IC tags in uniform specs provided
that manufacturers are able to attach IC tags to their products and the cost is viable
Reference: Digitisation of Store and Product Information
(RFIDs)

19. RFIDs Pose Challenges with Costs and Other Operational Issues
18
Issues with beacons and RFIDs are derived from both implementation costs (“hard” issues) and
operations that link to increased revenue as an O2O strategy (“soft” issues)
However, beacons and RFIDs (IC tags) are effective ways to streamline store operations and secure
revenue through omnichannels (preventing customer outflow to online shops)
Major convenience store operators aim to fully implement IC tags by 2025, as the technology is attracting
attention along with industrial advancements in reducing RFID costs and establishing the Japanese
Industrial Standards (JIS) for RFIDs that applies to supply chains
Benefit Cost
Reference: Digitisation of Store and Product Information
(Summary)

20. II. Optimising Product Cycles and Inventory Control
Securing Profitability by Minimising Losses Incurred by Discounts and Opportunity Loss
Improving the accuracy of demand projections through big data analysis and reducing inventory
through SCM systems help minimise losses incurred by discounts and opportunity losses
19
Big Data Analysis
(Improving Demand Projections)
Analysing such big data as ID-POS data, weather
data, events, online reviews, and trends on
social networking systems to improve the
accuracy of demand projections
Supply Chain Management
(SCM)
Shortening the lead-time that spans from order
placement to delivery and sales, thereby
reducing inventory and losses incurred from
discounts and disposal

21. III. Enhancing Appeal to Customers
Enhancing Appeal to Customers Through Offering Comprehensive Services That Include Making
Proposals Based on Understanding Customer Needs
 Promoting customer traffic through ad listing for target consumers with high accuracy based on customer data
analysis
 Promoting purchase through offering value-added proposals at each store, such as detailed product information,
recipes, and coordination plans
20
Customer Analysis and Ad Listing
(O2O)
Product Information
Analyse customer profiles through purchase
history, personal attributes, location data, etc.
Product planning for specific target customers
Push ads that are most effective in O2O services
for targeting customers
Display detailed product information, e.g. colour,
size variations
Promote purchase through offering value-added
proposals, e.g. recipes for food, coordination
plans for apparel

22. 21
Store Concept
Smart Price Tags
Robots (Operations)
Automated Checkout
Smart Mirrors
Smart Shelves
Robots (Services)
Smart Shopping Carts
New Product
Info Display
Ad-Listing

23. IV. Summary
Future Utilisation Key to Proliferation of Technology
Although various technologies and services have emerged, many of them are not prevalent yet due to
a lack of advantages that match the costs
Automated checkout has been adopted in the apparel retail industry, but whether it is able to
contribute to revenue increases in addition to cost reduction is important
22

24. 3. Future Prospects
23

25. Future of Retail Shops
Optimising the Overall Supply Chain Including Not Only Brick-and-Mortar Stores but Also
E-Commerce Businesses
24
Manufacturers StoresLogistic Centres
Real-Time Feedback
Planning Manufacturing Logistics Retail
Automation of brick-and-mortar store operations
Optimisation of the overall supply chain including e-commerce businesses using sales data
Headquarters
E-Commerce

26. Future of Retail Shops
25
I. Sensors II. RFIDs (IC Tags) III. Showrooms (Warehouses)
Can be broadly categorised into three types

27. I. Sensors
High Initial Investments for Sensors Hampering Progress
 Sensors can be introduced in general retail stores, but capital investments in each store are required
 Not only do sensors have a small effect on the supply chain (e.g. manufacturers and wholesalers), but it is also
difficult for them to contribute to structural reforms in the retail industry
26
Effects
 Able to reduce checkout costs and improve customer
experience
 Suitable for general retail stores that do not require
product operations
Issues  Large capital investments in stores
Possible
Sectors
 Large-scale general retail stores if the expected
revenue increase matches investments
Characteristics
Manufacturers StoresLogistic Centres
Planning Manufacturing Logistics Retail
Headquarters
E-Commerce

28. II. RFIDs (IC Tags)
Introducing IC Tags Has a Wide Range of Impact
 Cooperation from all manufacturers will be needed if IC tags are to be introduced in the retail industry
 IC tags help reduce costs and make inventory control easier as they provide a better picture of product inventory,
including information on location and quantity
 It is highly possible for IC tags to be widely adopted in apparel retail stores at an early stage
27
Effects
 Able to reduce checkout costs, improve customer
experience, and enhance SCM
Issues
 To lower the cost for RF tags to 1/10 of the current price
 To introduce RF tags amongst all manufacturers
 To unify specs (adaptability, data items to be registered,
etc.)
Possible
Sectors
 Industries where unit prices are relatively high but the
numbers of suppliers and product items are small, e.g.
the apparel retail industry
 Convenience stores where private-brand products
account for a high share in comparison to other general
retail industries
Characteristics
Manufacturers StoresLogistic CentresHeadquarters
E-Commerce
Planning Manufacturing Logistics Retail

29. III. Showrooms
Lowered Logistic Costs Through Automation Are a Prerequisite
 Direct delivery of products from logistic centres after product selection and payment at stores
 Store operators can curb operational costs as store sizes will be smaller and staff numbers can be reduced after
removing inventory at stores
28
Effects
 Improve customer experience
 Remove store operations
 Reduce store size
Issues  To reduce logistic costs (warehousing and delivery)
Possible
Sectors
 Industries that do not require strict timeliness or
freshness, such as non-food sectors
 Diversified industries if a network of home delivery
box installed at convenience stores or an automatic
delivery system is realised
Manufacturers StoresLogistic CentresHeadquarters
E-Commerce
Customers
(Home Delivery)
Planning Manufacturing Logistics Retail
Characteristics

30. Possibilities of Future Applications
Technological Progress Opens Doors for Various Applications of Such Devices and Services
29
I. Sensors
II. RFIDs (IC Tags)
III. Showrooms
2020 2025
General Retailers/Shops
Convenience
Stores
Single-Brand Shops
General
Retailers/Shops
Specialty Stores
Along with technological advancement, such technologies can be applied in various types of stores
and industries while meeting cost requirements IC Tag
Cost Reduction
Automatic
Delivery
Other General
Retailers/Shops

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