Why brick-and-mortar stores are here to stay

Physical retail has a bright future.

This may sound counterintuitive – especially coming from a company like Rakuten, which was founded as an e-commerce marketplace. But as Rakuten has grown and expanded its services to include banking, credit cards, communications, media and other services around the world, we are able to see the way in which physical retail will thrive going forward. It will do so in partnership with digital innovators.

Already, we can see strength in the physical retail marketplace. You might assume that the majority of Rakuten Card transactions are on our e-commerce services, like Rakuten Ichiba. But one of the reasons that Rakuten Card is now the leading credit card in Japan in terms of transaction value is that transactions on non-Rakuten services have grown to around 80% of the total, and that includes a large proportion spent at brick-and-mortar stores. Shoppers have embraced the internet but they have not abandoned the process of visiting physical stores. This is not surprising when we think about why people shop. Certainly, they do so to acquire goods they need. But they also shop for entertainment and for the social experience. Physical stores continue to serve this desire.

And companies like Rakuten can help them – thanks to our digital know-how. Rakuten is already working with numerous merchants to help them implement points programs, payment options and ways to integrate data. These elements can help regional supermarkets, bookstores, electronics shops, even fashion shops. We can digitize their physical retail experience in ways that make physical retail a more convenient and pleasant experience for shoppers. We can even look ahead to options such as personalized pricing for customers or dynamic pricing that allows a convenience store to charge higher prices after midnight, to support the higher cost of keeping the store open at that hour. There are many ways that we as a data owner can support the work physical stores do every day.

There are some e-commerce companies that are opening their own physical stores and investing directly in brick-and-mortar. But our focus is different: Partnering with retailers so that their stores grow and succeed can result in great opportunities for everyone involved.

As many of us do our shopping this holiday season, we may look around at stores and shopping streets we have come to appreciate and enjoy over the years. These stores are not necessarily on their way out as a result of the internet. Instead, they could opt to partner with digital leaders and equip themselves for more success going forward. When we at Rakuten look at our customers’ behavior, we see they want physical retail to stay.