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Owndays’ clear vision for digital transformation

Interview - December 9, 2023

OWNDAYS has digitized its customer journey, cutting down on the time customers spend in-store in order to make the overall experience more efficient

SHUJI TANAKA, PRESIDENT OF OWNDAYS INC.
SHUJI TANAKA | PRESIDENT OF OWNDAYS INC.

In the past 30 years, Japan has witnessed the emergence of regional competitors who have replicated the Japanese model of success and capitalized on cheaper labor costs, which in turn resulted in Japan losing its grip on mass consumer markets. However, despite these challenges, many Japanese retail brands, such as Muji and Uniqlo, have achieved remarkable success overseas. Moreover, in the first quarter of this year alone, Japan welcomed 4.7 million foreign tourists. In your opinion, what are the advantages of Japanese retail brands, and how do they benefit overseas customers?

Japanese companies are renowned for providing exceptionally high-quality products and services compared to other average Asian providers. This culture, however, was not inherently ingrained in the Japanese people from the beginning. It evolved as a response to the situations that arose after World War II. Interestingly, Japan is home to a significant number of people from China and South Korea. In our own firm, for instance, our second-in-command has South Korean heritage but shares the same mindset as a Japanese individual.

Nevertheless, with the advent of globalization, there is a possibility that we may no longer be confined to this unique environment. Consequently, the quality standard we maintain could potentially decline to match the general level observed in other countries. Until now, we have not had to take any extraordinary measures to uphold the high-quality products and services we offer in Japan. However, I believe now is the time to truly embody and preserve that cultural essence, or else there is a risk of losing it.

There are several factors contributing to the culture of providing exceptionally high-level products and services in Japan. One key factor is the country's insular nature as an island nation. Throughout history, Japanese people primarily spoke Japanese and had limited exposure to other major languages like English or Chinese. Additionally, after World War II, Japan experienced a prolonged period of peace, while neighboring countries like Korea and China remained embroiled in war for about three decades. This meant that Japanese individuals had fewer opportunities to seek employment elsewhere, compelling them to stay in Japan.

In contrast, Western and European countries offered their citizens the option to explore job opportunities in neighboring nations if they were dissatisfied with their current jobs. They could easily quit and find alternative employment. Japanese individuals did not have the same option, which created a unique dynamic in the country. Companies in other countries had to balance employee salaries and the quality of services they provided to society. However, in Japan, this was not necessarily the case. As a result, a condensed system emerged, emphasizing high quality and service at relatively low costs. The Japanese people adapted to this environment.

This trend can be observed in the food and beverage industry today. For instance, one can enter a Japanese chain restaurant, hand over a coin or 500 yen, and receive a freshly prepared meal within a minute. The dishes are clean, delicious, and served with a smile. Nevertheless, some people in Japan may still complain about the perceived slowness of a minute. This is a common characteristic in Japan. In other countries, people may simply acknowledge that they are paying a low price and that the quality matches what they paid. If they are dissatisfied, they can easily move on.

However, the situation is changing now. More Japanese people are becoming proficient in English, and borders are becoming less defined. The depreciation of the yen has also played a role. People in Japan can now work in South Korea, Taiwan, or China and receive competitive salaries. As Japan becomes more borderless, the quality the country offers will align more closely with international standards. It may fall below the high standards Japan is accustomed to. As a Japanese retailer, to succeed in this changing landscape, it is crucial to establish a robust system and work culture that maintains the high standards we offer to society while not burdening our employees excessively. Sustainability will depend on implementing such a system effectively.

 

In the globalized world, e-commerce has become a significant contributing factor for retail brands aiming to expand their presence. The global pandemic severely impacted physical retail, as stay-at-home orders and social distancing measures deterred many people from visiting physical stores. Consequently, there has been an exponential surge in e-commerce channel use. Specifically, Japan witnessed a remarkable 30% increase in online sales, solidifying its position as the fourth-largest e-commerce market in the world. How will your business leverage this e-commerce expansion?

Spectacles are indeed a unique product, and traditionally, they have been approached through an omnichannel strategy, which maximizes their impact by linking physical stores with the internet. The process typically involves eyesight inspections, trying and testing the glasses, making necessary adjustments even after their initial use, and providing after-service support alongside the glasses.

However, certain time-consuming steps were spent in the store pre-COVID, such as waiting for payment processing. To streamline this process, we made some changes. Now, customers come into the store for their eye check-ups and make their payments in advance. They can then receive their glasses the following day. If any adjustments are needed, they can come back, and we will take care of them. This revised flow has helped us eliminate unnecessary steps that existed before the pandemic.

By having customers pay in advance, we have cut down on the time they spend in-store, making the overall experience more efficient. Additionally, we introduced a virtual glasses-style selection process, which does not necessarily have to be done at the physical store. This allows customers to explore and choose their preferred style remotely, further optimizing their experience. These adjustments have helped us create a smoother, more efficient customer journey for spectacles.

While certain aspects like eye check-ups, inspections, and fittings still require in-store attention, we have made a deliberate effort to separate the physical and digital aspects of our operations. We allocated more resources to tasks that need to be performed at the physical stores, enhancing overall customer satisfaction.

During the past three years, particularly amidst the COVID-19 pandemic, we focused on identifying which steps previously conducted in-store could be shifted online. As a result, approximately 40% of our previous in-store processes can now be efficiently completed through online channels. However, we have no intention of transitioning all our services online, as that could potentially inconvenience our customers. We believe in striking a balance, aiming for a 50/50 distribution between physical and online services.

It is worth noting that staff labor productivity in the realm of spectacles is typically low. To address this issue, we have invested in digital transformation (DX) and artificial intelligence (AI) to enhance our staff's productivity. This investment is primarily focused on transforming the way we work, and we have been actively implementing DX and AI solutions over the past three years. Overall, our strategy revolves around optimizing the division between physical and digital operations, leveraging technology to improve staff productivity, and finding the right balance between online and in-store services for the benefit of our customers.

In all our Japan and Thailand stores, we have successfully implemented a “Remote Eye Test”. Here in our building, we have a dedicated team of 30 inspectors responsible for overseeing all our physical stores across Japan. With our efficient system in place, we have achieved the capability to establish a store even in remote locations like Okinawa, where the population is as small as 5,000 people. Even our customers can utilize this app to make reservations with our inspectors, who are based in Tokyo. The app is user-friendly and available in different languages, including English, French, and Korean, ensuring a seamless experience for all users. To maintain top-notch service standards, we have a team of nationally certified inspectors who are well-equipped to provide high-quality services. By offering this convenient reservation system and employing skilled professionals, we aim to enhance the overall quality of our services and boost staff productivity.

With remote inspections, we currently handle an impressive volume of 800,000–1,000,000 cases per year. Each remote inspection is meticulously recorded and fed into our AI system. Our aim is to transition away from relying on human employees for this aspect of the job within the next two years, with avatars taking over customer communication. To achieve this goal, we are diligently capturing and analyzing all customer-inspector conversations, using the data to train our AI. This approach ensures that avatars can effectively engage with customers, providing a seamless and interactive experience.

We have invested in advanced machinery to ensure more precise inspections. As technology continues to evolve, we anticipate that AI may even take on the role of controlling and operating these machines autonomously. We believe that this technology is highly intriguing and, if harnessed to its full potential, it can help us establish a strong global presence. However, it is important to note that there are regulations in countries like the US and some in Europe that prohibit this type of inspection. These regulations mandate that nationally certified personnel must conduct the inspections, emphasizing the requirement for the certified individual to be physically present with the customers. Consequently, conducting trial and error experiments or remote inspections is not permitted within these jurisdictions.

In Japan, we are fortunate to operate within a legal framework that provides us with more flexibility. This allows us to explore remote and online approaches while continuously improving our practices. It is worth mentioning that Australia has even stricter regulations, mandating that only ophthalmologists can perform these inspections. In contrast, we enjoy a degree of freedom in Japan to pursue our methods and enhancements.

Glasses are indeed categorized as medical devices in regions such as the US, Australia, and Europe, alongside other items like wheelchairs, hearing aids, and dental replacements. However, in Japan, glasses are classified as miscellaneous items, similar to beds and shoes. This distinction is the reason why specific regulations for glasses do not exist in Japan. When we examine countries around the world with advanced economies and populations exceeding 100 million, we find that Japan is unique in not having legal restrictions specifically targeting glasses. We consider this distinction to be our strength, and we believe that it can provide us with a significant advantage in the next five years.

 

Lenses alone do not complete the whole package; frames play a crucial role as well. One brand of frames that has captured our fascination is Senichi, which boasts historical roots in Sabae, Fukui city. Senichi is known for its unique craftsmanship and the use of celluloid material, known for its durability and flexibility. Could you enlighten us on how this brand excels over other frame brands in the market? Additionally, we would be interested to learn about your plans for growing and expanding the Senichi brand in the future.

Glasses were originally made from celluloid materials. In Japan, plastic frames are colloquially referred to as "cell frames," originating from celluloid. However, in modern times, celluloid materials are less commonly used. Instead, people now prefer plastic frames due to the challenges associated with handling celluloid. One significant issue with celluloid is its highly combustible nature, which makes it impractical for widespread use. As a result, plastic has become the mainstream material for eyewear frames.

Despite the decline in popularity, celluloid frames offer unique advantages in terms of aesthetics compared to plastic materials. Additionally, when you wear celluloid glasses, they gradually conform to your face and provide a better fit over time. This is due to celluloid's ability to absorb face oils and adapt to the contours of your face, enhancing comfort and personalized fit.

In Japan, the number of craftsmen specializing in celluloid is declining. The cost of celluloid frames alone can range from JPY 50,000-60,000. When lenses are included, the price can increase to around JPY 70,000. However, our company offers celluloid glasses starting at a lower price point of JPY 15,000, which is below the average market price. We have achieved this by reaching an agreement with our craftsmen.

In Japan, many craftsmen do not have a consistent volume of orders throughout the year, leading to idle periods. We have utilized these idle times by requesting our craftsmen to process our bulk orders during those periods. With our numerous stores, we are able to provide them with substantial orders. This arrangement has been mutually beneficial, providing the craftsmen with a steady flow of orders throughout the year and allowing us to procure our products at a more affordable price. Consequently, we have been able to maintain the quality of our products while offering them at a lower price point.



Are you interested in working with designers from abroad as well?

Yes, we are interested. We are actively collaborating with a Japanese designer who used to design for a famous luxury brand.

 

What personal product would you like to recommend if we walk into an Owndays store?

I cannot recommend specific products because we firmly believe that glasses cater to a diverse range of people, spanning from children to the elderly. Our approach is to be cautious about promoting any particular item in our store. Similar to Uniqlo's mindset, we offer a wide variety of glasses designed for different purposes, genres, and lifestyles. Our goal is to provide customers with a comprehensive selection and allow them to find the glasses that best suit their individual needs and preferences.

While our general practice is to avoid recommending specific products, I understand that in certain situations, there may be exceptions. In this case, I can provide information about a product that will be launched in Autumn. We have collaborated with Huawei to create a smart glass specifically designed for business people. These glasses feature a speaker discreetly positioned by the ear, setting them apart from other smart glasses in the market.

Many manufacturers have ventured into the realm of smart glasses, but we take pride in the exceptional design of our product. The speaker is ingeniously integrated, so small that it remains virtually imperceptible to the eye. In contrast, smart glasses from brands like Bose tend to be significantly larger, making them noticeable and potentially uncomfortable and heavy to wear. Our smart glasses, however, boast a sleek and lightweight profile, ensuring a comfortable and enjoyable user experience.

In our October 2023 launch, we have made further improvements to the design of the smart glasses. They will be even narrower, making it challenging to distinguish them from conventional glasses. Additionally, we have enhanced the battery life, allowing the glasses to last for a full day after a full charge. As part of our testing, our staff members have been wearing these glasses during meetings, and it has been fascinating to observe how seamlessly they blend in. Without the need for external earphones, it is difficult to tell whether they are actively participating in the meeting or simply listening in through the glasses. This discreet functionality adds a new level of convenience and versatility to the user experience.

 

Since 2013, your company has expanded across Southeast Asia, India, UAE, and Australia. Which regions have you identified as key for your corporate growth, and what strategies are you planning to employ to achieve that?

In terms of corporate growth, our company has identified India as a key region. Recognizing the challenges of entering the Indian market, we made the strategic decision to merge with an Indian lens company. While many companies have focused on China in the past decade, we believe that the companies that establish a presence in India will be the ones to succeed globally in the next decade. With a population of approximately 2 billion people in Asia and Southeast Asian countries alone, it is crucial for us to expand into India and Southeast Asia to tap into this immense market potential and facilitate our global expansion.

Simultaneously, in the same decade, we anticipate a significant increase in the aging population in Japan. This demographic shift indicates substantial growth in the spectacle market. Therefore, we will also be directing our focus domestically in Japan over the next decade, aligning with our expansion plans in India and Southeast Asia.

After India, our attention will shift towards Africa. We have already initiated discussions with several African companies to explore potential collaborations and market opportunities. Additionally, countries like Singapore and Taiwan will also be grappling with an aging society, making them important areas of focus for us. By strategically expanding into these regions and adapting to the specific needs of each market, we aim to establish a strong global presence and drive sustained corporate growth.

Our merger with Indian Lenskart has resulted in a market valuation of JPY 500 billion, which we consider to be a favorable price without any overvaluation concerns. However, our primary focus lies in achieving success in the Indian market and securing the number one position in Japan. To accomplish these ambitious goals, we are determined to implement DX and AI initiatives successfully. Our target for the next decade is to bring the market cap to JPY 1 trillion.

 

The cost of eyeglass frames tends to be higher due to the inclusion of design fees in the overall price along with the technical fees associated with specific functionalities and the overall aesthetics. Corporate mergers and acquisitions can also exert a significant influence, with a notable illustration of this being the merger between the Italian brand Luxottica and Essilor. In contrast, Owndays has consistently bolstered its sales and profits through the SPA (strategy, planning, and action) approach. In this method, the company handles all aspects in-house, from planning and manufacturing to sales, ensuring both high quality and competitive pricing. Why do you believe the SPA method is so successful for your business?

In several countries where the eyeglass industry has seen significant advancement, such as Singapore, eyeglasses are classified as part of the medical field rather than the apparel industry. As a result, the eyeglass industry in these countries is subject to strict regulations, including requiring a national license for the sale of eyeglasses. Due to those regulations, makers who can provide an integrated solution from the planning and designing to the manufacturing and sales are not seen as often.

In contrast, Japan has more than 100 million people and it has the third highest GDP in the world, but it also lacks any specific rules or regulations governing the eyeglass industry. For other nations, due to the regulations, it is more common to find smaller shops rather than chains. Because these smaller shops are protected by the regulations, they can secure a certain amount of profit just by selling glasses after procuring them from the manufacturers.

 

In countries like Singapore, due to the strict regulations and licensing, consumers do not purchase glassware as fashion apparel but strictly for medical needs. When it comes to these areas, what branding strategy are you employing to overcome this idea of glasses being a medical device instead of fashion apparel?

In countries like Singapore, most users typically visit traditional eyeglass shops with a specific purpose in mind. For instance, they may go there with a prescription or for lens adjustments. However, our company offers a quick and convenient service that allows customers to casually visit our shops and explore various styles of eyeglasses that complement their fashion preferences. Customers are encouraged to drop by and enjoy trying on different eyeglass styles at their leisure. When they find a style they like, we offer a rapid eye test right in the shop, which typically takes about 20 minutes after purchase. Our prices are generally budget-friendly, enabling customers to make purchases with the cash they have on hand.

Ordinarily, when you want to buy eyeglasses, you are required to place an order, and manufacturers will produce the lenses based on that order, delivering them to the customer within a week or thereabouts. However, we maintain a substantial inventory of lenses at each shop, making the product readily available for immediate purchase.

 

In the United States, a pair of glasses can cost up to $800 depending on the frames, the lenses, and the designer fees. How are you able to ensure your high quality at a cost-competitive price?

The key to our strategy is to increase the number of products we sell. When we sell more units, we gain greater control over the manufacturing supply chain. For instance, selling between 10,000 to 100,000 units of a product allows us to exert good control over the assembly line. As our sales volume increases to the range of 1 million to 3 million units, we can extend our influence to the die makers. Further, when we sell 5 million to 10 million units, we can exercise control over the plastic manufacturers. In essence, the more we sell, the more command we can have over the entire supply chain.

Our primary goal is to maintain affordable prices, which requires a substantial market share. In the Japanese domestic market, to sell 10 million products, we would need to capture approximately 10-20% of the market share, which presents a significant challenge. This is why we have expanded our focus to the overseas market. In Southeast Asia, there are 600 million people, and in India, there are 1.4 billion people. Additionally, we have established a presence in Taiwan and Hong Kong. This means our potential market encompasses over 2 billion people. Our aim is to sell 10 to 20 million products to these populations, which would constitute just 1% of the total market. This approach has enabled us to secure a substantial share of the market.

 

In Southeast Asia, more than 80% of teenagers suffer from myopia. Teenagers can be quite particular when it comes to their fashion choices, and they often hesitate to acknowledge any medical issues they might have. Are you developing any products that cater to that teenage market?

Our primary target audience in Southeast Asia is not teenagers; rather, we are focused on customers in their late 20s, 30s, and 40s. This demographic typically already wears eyeglasses, and their income levels are steadily increasing each year. The average price for Owndays glasses is approximately $100, which translates to about 14,000 yen. While this may not be considered highly affordable for most of Southeast Asia, we anticipate that as their incomes continue to rise, we can expand our market presence in the region.

 

If we conduct this same interview on the last day of your presidency, is there a personal goal or ambition that you would like to achieve for the company then?

In other regions like the United States and European countries, the business model in the eyeglass industry has remained largely unchanged for many years. Our objective is not solely to reduce prices or create more fashionable glasses. Instead, we aim to advance quality through innovation, including enhancing the customer's experience when purchasing eyeglasses in our shops. We are committed to implementing these innovations so that we can transform our eyeglass shops over the next decade.

I want to build a strong system and a well-organized organization in place, providing me with reassurance that the business is sustainable. I don't want to face the risk of being forced out because the business is declining. My goal is to hand over the business to the next person confidently, knowing that it will continue to flourish and prosper.

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