A New Business Model Approach to the Retail Industry and the Importance of Customer Engagement:

from a case study of the Sapporo Drug Store

Abstract

In the Japanese retail industry, the Drug store business is one of the most growing retail formats. Major drug store chains are conducting M&A, expanding merchandizing from cosmetics and health & beauty products to include food categories, producing private brands and providing loyalty programs in order to meet customer’s various shopping needs and are attracting many customers. Under such competitive circumstances, SATUDORA HOLDINGS, which runs the Sapporo Drug stores mainly in Hokkaido, takes a unique business approach and has reconstructed their brand strategy. Unlike major Japanese drug store companies, their main focus on business strategies has been to establish a strong regional chain store format, thus creating a strong and engaged community with loyal customers and acquiring inbound needs. Furthermore, they invest and consider the effective use of AI in the retail format.

Through an in-depth interview with the CEO and analysis of the business model, this case study advocates the following meaningful points to support a new business model approach to retail; 1) construction of regionally-circulating Customer Relationship Management, 2) the new role of the regional retailer in regional marketing, 3) new role of the sales channel in the creation of community value, 4) the importance of creating customer engagement and 5) sharing the emerging concept of collaborative consumption as a new relationship between the retailer and the customer.