Message from the Executive Officer in Charge of the Sales Strategy

We aim to transform from “a convenient company” to “an essential company” with two channels (real stores and EC business), as well as the five categories of home appliances, entertainment, renovation, mobile communications, and support business.

Representative Director, Vice President and Executive Officer in Charge of Sales Strategy

Tetsuya Takahashi

Looking Back on the Previous Medium-Term Management Plan

For JT-2023 Management Plan, our previous medium-term management plan, we achieved our goals for the first year due to the extraordinary demand created by the COVID-19 pandemic and cash subsidies. After that, we were struck by backlash for two years in a row, ending up falling short of even our lower revised goals. On the other hand, we grew the base share of individual stores by avoiding an expansion that overemphasizes new store openings. Consequently, the number of our stores fell by 18 (including the transfer of six drug stores) while net sales per store trended upwards. We faced a tough environment, but I believe we have achieved our goal of building a competitive foundation.

Environmental Changes

The home appliance industry is facing unprecedented change from longer replacement cycles, varying lifestyles, and new buying habits. In addition to responding to this change in the market, there is a growing need to switch from providing value with physical goods to value from services. In the future, we must recognize that the home appliance industry will enter a stage of competition for providing value involving D-to-C (direct to consumer) sales, GMS, specialized EC websites, and the participation of other industries. Mindful of a shrinking working population, an aging society, and the resulting smaller market, we also redefined our SWOT analysis when formulating our new medium-term management plan (shown on page 29).

Customer requirements for durable consumer goods have changed significantly with the times, and buying habits have changed to buying highly useful and valuable products, with people recognizing that the cost of choosing is value. In business negotiations, we have entered an era that demands wide-ranging sales strengths. In addition to the salespersons’ own experience and knowledge, other skills are required: listening strengths to hear customers’ needs; proposal strengths to assemble the best plan based on what was heard; and communication strengths to convey proposals in an easily understood way. I believe that from now on we will enter an era of returning to basics centered on the concepts of people and value that have long been left behind.

JT-2025 Management Plan

The JT-2025 Management Plan (the new medium-term plan) positions the eight years until 2030 as a single package and considers, through backcast thinking, what should be done over the next three years for the Company to reach our ideal form in 2030. First, our management base for promoting the new medium-term plan includes the business foundation of a service infrastructure~{1}, information systems, and branding that supports the two channels (real stores and the EC business), as well as the five categories of home appliances, entertainment, renovation, mobile communications, and support business.~{2} So, we will work on business growth with the aim of transforming from a convenient company to an essential company.

Looking at the service infrastructure, Joshin Service Co., Ltd., a wholly owned subsidiary, has long been responsible for delivery, installation, and construction work at customers’ homes, and we are armed with technical strengths cultivated through training at our in-house training center.

For improving our information systems, we will nurture human resources by mechanizing and systemizing work, with the goal of boosting sales strengths and sales quality by utilizing these resources.

We have also set up an online booth~{3} (see TOPICS on page 26) and started online contract agency services. Online technology makes it possible to shorten the time and distance in our business. Moreover, we intend to strengthen existing support as well as create new businesses and services.

In addition, PDA terminals used by salespersons, tablet information devices installed in each corner, and cashless touch POS (points of sale) systems shorten the lines of employees and make it possible to complete business negotiations at the each corner. Selling can be done with less stress for both customers and salespersons, so we can expect to increase the sales floor territory covered by each salesperson by about 10%.

Based on these three business foundations, we will strengthen our competitiveness through the integration and collaboration of channels with products to provide value to customers using our two channels: real stores and EC business.

  1. Service infrastructure: Delivery, installation, and construction systems and capabilities
  2. Support business: A category that aims to expand business fields by strengthening the competitiveness of core businesses such as reuse, various types of support, and maintenance.
  3. We set up telephone booths at each store and began online contract agency services using video and audio. The booths are equipped with a camera for documents, assuming that they are used for a wide range of purposes, from support to contract work.

Fan Base Strategy

The fan base strategy is at the core of our growth plan. We are developing a membership strategy, defining active members as members who have made a purchase even once a year. We monitor the number of visits and sales of those members, and have a system in place to grasp all annual changes. A fan member is someone who makes purchases of 80,000 yen or more a year and who visits our stores three or more times a year, while a core fan member is defined as someone who spends 300,000 yen or more and visits our stores 10 or more time each year. At the end of the previous fiscal year, we had approximately 5.2 million active members, and the average spending amount per member was 62,000 yen. We believe that it is necessary to factor in a 1% per year decline in memberships due to the falling population in Japan. Two important metrics for our fan base strategy are maintaining of the number of active members by investing in existing stores and acquiring new members through new store openings. On the other hand, the average spending amount per member increased by 2.9% year on year, indicating a strong tendency for members to make a large portion of their annual spending with us due to our improved sales strengths and fan base strategy, resulting in increased spending amount per customer.

Building trust relationships with customers, further improving their quality of life, and problem-solving initiatives all contribute to increasing the number of fan members and core fan members. By selling value-added products and providing a range of support businesses, we intend to grow our business by securing a rate of increase in the average spending amount per member that exceeds the rate of decrease in members.

Fan members increase their lifetime value by visiting our stores many times, and that lifetime value contributes significantly to our business performance. We believe that our core fan members can be even more enthusiastic, strongly supporting the Company, and that they can co-create value into the future. When people have experiences that are beyond their expectations, they want to tell those around them. This is called word of mouth. We are grateful to have fan members and core fan members who not only shop for themselves when their enthusiasm rises, but also pass on recommendation by word of mouth. These recommendations create a chain of value, stronger than any media can build. The purposes of the fan base strategy are to maximize the lifetime value of every customer and to increase the number of fan members through the ability of fans and core fans to communicate with others.

For this reason, we consider the fan base strategy to be the foundation of our sales growth strategy.

The New Customer Loyalty Program, scheduled to be released in the future, is a program that supports our fan base strategy with digital technology. We plan to expand the threestage Customer Loyalty Program currently implemented in our EC business to five stages, as a customer loyalty program common to real stores and the EC business. We will promote the conversion of customers into fans and core fans with advanced digital technology from analog points of contact with customers. In addition to the physical value of digitalization, we will provide emotional value through our skilled salespersons, so that customers will think “I can rely on that salesperson” or “I can ask Joshin for the right answer.” So, by using this approach, we aim to increase the number of active members and turn them into fans and core fans.

With our fan base strategy, our goal is to have not only have customers become fans but employees, business partners, and shareholders as well. Definitely, we believe that turning employees into fans is the most important part of promoting
our fan base strategy and we will work to improve the employee engagement that supports our fan base strategy.

To further develop our human resources, the driving force of our fan base strategy, in April 2023 we renovated one of the Company’s buildings and reopened it as Joshin Magokoro
College for improving and strengthening our education programs.

During the current fiscal year, we are planning to hold the first Joshin Customer Service Roleplaying Contest (national competition). We will promote strategic customer service events with the goal of improving customer service and hospitality (see
TOPICS on next page).

Dominant Strategy

To advance our dominant strategy, we have positioned Kansai, Tokai, Kanto, and Hokushinetsu as priority regions. Our dominant strategy is not premised on opening new stores. We consider the dominant strategy as helping to bolster the sales strengths of existing stores, including scrap-and-build stores, as well as creating a Joshin economic zone that maximizes the synergy with our EC business and service infrastructure. We know the market share within a 0 to 5 km radius of each store, and we have implemented a store opening strategy based on making individual stores profitable, instead of looking at area as a whole.

The Company ranks seventh in the industry, with a market share of about 5% in Japan and a market share of about 20% in the Kansai region, where our net sales are the highest. In other words, there is still a market that is more than nine times as large in all of Japan and more than four times as larger in the Kansai region. Therefore, we believe that there is plenty of room to grow our business not only in the rest of Japan, but in Kansai region as well, where the dominant strategy has made the most progress. We intend to raise our market share in the Kansai region to a much higher level and then use that market share as a foothold to expand the Joshin economic zone in
Kansai, Tokai, Kanto, and Hokushinetsu.

The JT-2025 Management Plan Is the Key to Our Success!

Employees are the most important “capital” for achieving our vision of becoming a company that supports the growth of local communities and contributes to the future of people and the environment, which is our ideal form in 2030. We must be strongly aware that the people included in this message are all of our stakeholders and employees.

We believe that from now on, we must adapt to changes in the social environment and the social structure. Unfortunately, the Company exists in an environment with negative factors, and our approach and way of thinking will differ sharply depending on whether we see these factors as risks or opportunities. Today, we see these as opportunities and make that meaning clear to management, believing that management allows every employee to feel a sense of contribution to the Company and that their contribution will lead to the Company’s contribution to society. We will work to bolster our earning strengths (power) by steadily implementing the growth strategies set out in the new mid-term plan, helping us to resolve issues one by one, and confidently earn the support of all our stakeholders, including customers, business partners, and shareholders.