Creating a new value in retailing. The technology-based shopping experience that Mitsubishi Estate is challenging, together with a biometrics authentication startup

Selecting your favorite product from a showcase in an office, reading the barcode with your smartphone, and completing the payment: The challenge of such a new way of shopping has begun in the Daimaruyu (Otemachi, Marunouchi, and Yurakucho) area. ELEMENTS Co., Ltd. is working on a new shopping style called “FANTRY,” together with Mitsubishi Estate.

Liquid Co., Ltd., a company that develops biometrics authentication systems, changed its name to ELEMENTS. Why did a biometrics authentication company and Mitsubishi Estate start working in the retailing field? We interviewed Mr. Nakamura of ELEMENTS and Mr. Wada of Mitsubishi Estate about the background of the business idea and issues in open innovation.

INDEX

・Will biometrics technology solve the problems the retail industry is facing?
・The key to success is increasing customer contact points by developing showcases.
・Distress in product selection. What is important is whether the products you want are being offered
・Relying on a startup for tasks that require speed. Things big companies should be aware of when collaborating
・Key Points

Kenji Nakamura
ELEMENTS Co., Ltd., General Manager
He has been involved in the online marketing industry since 2000 and was in charge of media content management and online marketing at Rakuten, Inc. After that, he was engaged in work centered on data infrastructure construction as a marketing platform specialist and team manager at Google Japan. Since July 2019, he has been in charge of new businesses at LIQUID Co., Ltd. (company name changed to ELEMTNS Co., Ltd. in March 2020).

Yasuhide Wada
Tokiwabashi Development Department, Mitsubishi Estate Co., Ltd. (since April 2020)
He joined Mitsubishi Estate Co., Ltd. in 2016 and worked in the Town Brand Promotion Department (now the Area Management Planning Department) and DX Promotion Department. He was involved in various area management measures in the areas of Otemachi, Marunouchi, and Yurakucho, as well as the construction of service infrastructure for BtoC, investments in startups, and operations for examining the utilization of advanced technologies. He has worked in the Tokiwabashi Development Department since April 2020, and has been in charge of the redevelopment of Tokiwabashi block in front of Tokyo station.

Will biometrics technology solve the problems the retail industry is facing?

First, when asked about the idea behind FANTRY’s business, Mr. Wada talked about the concept he had in mind when receiving the proposal from ELEMENTS.

Wada: “I work at Mitsubishi Estate in a department that works with startups to take on challenges concerning measures and businesses, especially for BtoC. The proposal from ELEMENTS (called “Liquid” at the time) was ‘We want to create new retail value.’ We also valued creating new things in the Daimaruyu area, so we decided to start collaborating. As a starting point, we envisioned a cashier-less store like FANTRY and retailing using showcases.”

Mr. Nakamura, who joined the company after the FANTRY business started, talks about what it means for ELEMENTS, which has been dedicated to biometric authentication, to enter the retail business.

Nakamura: “Before I joined ELEMENTS, I worked at Google helping major operators build the foundation for continuous data collection, analysis, and utilization. I moved to ELEMENTS because I thought I could create a new business that utilized real data from the standpoint of a service provider. In that sense, the fact that ELEMENTS, which provides biometric authentication services, is conducting a retail business has helped collect data on the commercial behavior of people in real life, which had been difficult to collect until now. I think this can be an interesting aspect of business development. In addition, we see a wide range of possibilities, such as supporting the retail industry by utilizing the data accumulated by our company.

One of the technologies of the ELEMENTS group is ‘eKYC’ (‘electronic Know Your Customer’). By utilizing this, it is also possible to automatically authenticate individuals and sell products. Now, by law, you can sell alcohol only via face-to-face sales, but it may be possible to sell it in a non-face-to-face manner.”

Mr. Nakamura added that ELEMENTS, which can acquire a variety of data from users, has the potential to solve problems the retail industry is facing.

Nakamura: “Our goal is to use physical stores as bases for delivery and inventory, and to develop unmanned showcases in surrounding offices. Efficient refilling of small showcases requires technology that accurately understands and predicts where and what quantity of products is needed. We are collecting data for this using an app and cameras installed in the showcases.

If we can collect large amounts of data and make more accurate forecasts, we may be able to reduce the huge amount of waste/loss in the retail industry. If you eliminate waste, the store can increase its profit margin, and you can return that amount to the user. Providing a solution is not the purpose of this business, but we are looking at it as one possible social contribution.”

The key to success is increasing customer contact points by developing showcases

Mr. Wada said that the fact that ELEMENTS provides solutions to other retailers would also offer great benefits for Mitsubishi Estate.

Wada: “Mitsubishi Estate wants to turn Daimaruyu into an area where new things can be created. Therefore, it is significant that the cashier-less and image analysis technology of ELEMENTS can be used at other stores as well. This is because it is possible to help stores that are confident in their products but are not good at sales promotion using technology.
We also have to devise ways not only to rent out the places but also to get the stores to do business efficiently. ELEMENTS will be a strong partner in that sense as well.”

Both companies seem to be considering a wide range of business development, but Mr. Nakamura said that the immediate mission is developing showcases.

Nakamura: “As we mentioned earlier, our business consists of stores and showcases, but the key is the showcases, for two reasons. One is that these can be deployed at low cost. Various expenses are incurred when operating a store, such as on rent and human resources. In the case of a showcase, delivery costs are high, but the expenses are vastly lower than those for a store, and it is possible to increase contact with customers. The other reason is the convenience for customers. For those who are busy with work, it is a waste of time to eat lunch at the store or go out to buy it. A lot of people must have wondered if lunch could be delivered to their desk. Our showcases meet that need. You can pay with the app, so you don’t have to carry your wallet with you.

By adding the sales function to the showcase, the store can have new functions. Currently, there is a backyard role for managing inventory, but we plan to add the function of media. We want to help revitalize the area by creating select shops nearby that offer popular products.”

Distress in product selection. What is important is whether the products you want are being offered

Despite using the latest technology, retailing is a challenge in an unknown domain for both companies. As a result, both parties said that it was more difficult than expected to select the products.

Nakamura: “We have been focusing on technology so far, but for users, it doesn’t matter what technology is used. The important thing is whether or not the products they want are available. Therefore, it was really difficult to select the products, and it is still a headache.

Since we are a technology company, we want to rely on historical data to do business, but we don’t have purchasing data for customers yet. Therefore, we actually ate around in eateries by ourselves and investigated what the employees bought and ate. We would like to analyze the data and prepare the lineup as needed.

Wada: “It was up to ELEMENTS to select the products, but I found it very difficult to choose a product without knowing who would come. When I saw the various types of water in FANTRY, I thought ‘Is it necessary to have so many types of water?’ but we decided to try to see if these would sell. Until we have all the data, we need a sense of, or an antenna for, the market.”

If we manage stores from now, we will be able to accumulate purchasing data, and products that better suit the tastes of users will be lined up in stores and showcases.

Relying on a startup for tasks that require speed. Things big companies should be aware of when collaborating

Let’s move to another topic and talk about open innovation at both companies. Did the two companies, both of different sizes and cultures, have any difficulty in carrying out the project together?

Wada: “I often collaborate with startups, so there is one thing I’m careful about—properly deciding the budget and schedule in order to not slow down decision making, then determining the tasks that each one can commit to within that framework. Tasks that require a sense of speed are assigned to the startup. By no means is the goal to impose tedious tasks on them. Of course, we also commit firmly and make efforts to come up with ideas, but, by considering the characteristics and strengths of the company and allocating tasks optimally, business progress is accelerated.

In the past, there have been cases where we have taken up a task and the progress of the project slowed down, so now we reach an agreement when starting a project and pay attention to the assignment of tasks and the division of roles between the companies.”

It is often said that startups and large companies have different decision-making speeds. How did Mr. Nakamura deal with this and manage to collaborate?

Nakamura: “As you might expect, big companies and startups have different processes for deciding things, so naturally, the sense of speed is also different. However, it’s important to accept it as it is without thinking whether it is good or bad. While we have the strength of speed, we also have weaknesses. For example, we don’t have any know-how about building stores, and we are really grateful to Mitsubishi Estate for covering that point. Isn’t the secret to successful open innovation utilizing each other’s strengths and making up for each other’s weaknesses?”

In addition to the speed of decision-making, Mr. Wada talked about communication between the two.

Wada: “ELEMENTS has Mr. Hisada as a representative and Mr. Nakamura, who understand the whole project, so basically it was enough if Mr. Nakamura talked to Mr. Hisada, the CEO, regardless of the scope of the issue. On the other hand, for us at Mitsubishi Estate, various departments were involved in the project, and we proceeded with a limited number of people at the forefront. Because of this, even if Mr. Nakamura consulted with me, there were some situations where I couldn’t answer without checking with the related departments.
Sometimes I replied the next day or later due to the time needed for internal coordination. I think this caused inconveniences for ELEMENTS.”

Mr. Nakamura also felt that there was room for more creativity with regard to communication.

Nakamura: “Since we work together as a company, I wish we could create a system that enabled smoother communication. There are some unavoidable situations because each company has its rules, but I feel that using e-mail as a means of communication causes a waste of man-hours. There are many project management tools now, so if we could use such tools, I think it will be smoother.”

While seeking to collaborate with startups, Mr. Wada seemed to have concerns about working methods.

Wada: “We try to use tools taking into consideration the startup as much as possible, but we are responding within the rules of the company. It is very important to be able to write professional e-mails because you must show some manners in e-mails, but I felt that using a chat tool where formal manners can be overlooked sometimes accelerates the business.

Also, in response to recent work style reforms, the general public is more willing than before to work overtime, but in contrast, there are some situations where this becomes a concern when working with a startup. I feel that a more flexible business execution attitude and quick response are important in order to promote smooth business and gain the trust of business partners. In the future, I would like to devote myself to addressing this kind of trouble.”

Although they have highlighted some challenges, they are both positive that this experience could be used in the next collaboration. Collaboration between startups and major companies is indispensable for future innovation. I am looking forward to seeing how this experience is used as a basis for creating greater value.