Mom-and-Pop Ecommerce

Back to Contents of Issue: December 2000

Target One helps tiny corner stores set up shop online -- and accept cellphone-based coupons.

by Daniel Scuka

JAPAN HAS SOME 2.84 million mom-and-pop corner stores selling everything from ginseng and gyoza to golf balls. Most proprietors are older and traditionally push sales only to customers living within walking distance and who rely on the stores for daily needs (a typical home here has only a tiny fridge). Shop floor space is limited, owners' marketing budgets are next to nil, and expansion isn't possible.

Web-based sales or marketing, needless to say, isn't even on these merchants' radar screens; most don't use PCs. When the owner retires or dies, most shops close because few if any children wish to follow in their parents' footsteps. While such shops would appear to be improbable places for ecommerce, one or two merchants have given it a try. "One small shop with two locations on the outskirts of Osaka built its own Web site and saw sales rise to ¥10 million per month -- a huge boost," says 28-year-old Toshinobu Honda, founder and CEO of Target One. "But money -- not to mention know-how -- is in short supply, and most shops can't hope to emulate the Osaka success story." That's where Target One aims to help.

The Tokyo-based startup is offering small merchants its LifeCombo ASP service. Target One will essentially serve as the market catalyst, hosting merchants' product and sales information pages, and serving these up to time-stressed and convenience-hungry shoppers, who will also come to the portal for restaurant and local area information, consumer data, recipes, downloadable merchant coupons, and to obtain home delivery of purchased goods.

LifeCombo will host merchants' sites for ¥3,000 per month, a very low fee and one Honda claims will allow the service to achieve profitability if it signs up only 0.6 percent of the target merchants. "Our system will also provide merchants with CRM and sales promotion support, and they can update their pages whenever they want," says Honda. But he admits that LifeCombo's low fee means that he'll have to sign up a lot of merchants: even 0.6 percent is still more than 17,000 shops.

To achieve this mass, Honda has organized merchant sign-up sales on a territorial basis, and he wants to have 24 agents covering all of Japan -- a ratio of about 24,000 potential merchants per agent. "We're using 'Edo-style,' door-to-door sales methods," he explains, defending this approach as most appropriate for capitalizing on face-to-face trust. Honda feels that if small shops are threatened by the encroachment of large "supershops," the support provided by LifeCombo can give them a competitive edge. Target One will initially target dry cleaners, bento (lunchbox) shops, sushi shops, and tea merchants.

Coupon good for 10 percent off at the corner store
Photo by Daniel Scuka
The service's coupon system is also worth watching. It combines two of Japan's sexiest consumer technologies -- the mobile Internet and Sony's Vaio computers -- with Japanese consumers' endless appetite for coupons. Lester Patrick, principal at japaneseguest, says that Japanese shoppers are keen to use coupons, whether of the electronic or paper variety. "This is particularly true of Japanese homemakers. I know of so many homemakers who view collecting coupons as a kind of game and get a charge out of receiving a discount here and there, no matter how low it is."

Using Web-accessible keitai, consumers can download coupons to their mobile phone, and then present them to corner stores using LifeCombo. Shops install Vaio Picturebooks that can optically read the coupons and transfer the discount data to LifeCombo's central server, allowing merchants to track customer purchasing and sales data.

This is one of LifeCombo's most powerful features, and Honda has applied for a patent covering the system's operation, which may lead to future licensing revenues. Companies that develop applications for the wireless Web are clearly enjoying a boom right now.

Target One is keeping its sights set on expanding its merchant base -- it targeted signing up 50 new retailers for the month of November -- but Honda is also working to add new features to the mobile coupon system, including customized voice greetings once cellphones are Java compatible.

The company hasn't had to worry about funding, as both the banks and VCs have looked on his business plans with favor (he'll be looking for second-round funding "soon"). Also, Sony is helping the company develop the back-end to the system, giving a tremendous boost to the startup.

Honda is from Tochigi Prefecture, and in small-town Japan, he says, people tend to become jealous of successful new ideas and are rather tight with their praise. "I hope we can receive warm support from society," he says.

If his LifeCombo service can keep a few more mom-and-pops from folding under discount superstore pressure, he may just earn some of that praise, and not a little cash to boot.


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