Every day is a journey, and the journey itself is home – Matsuo Basho
Guest Post by Rob Mayo.
Transport service provision in Japan, along with retailing and consumer product design, have a long-standing reputation worldwide, for customer-centric service quality, efficiency, reliability, technology innovation and demand management.
There is a belief outside of Asia however, that Japan’s large, homogenous population and its social / business cultures are just too different and the customer service mindset of the Japanese too unique to be of real relevance in Europe, UK, the Middle East, North/South America and Oceania markets. Japan thus often gets overlooked by companies and organisations in these regions seeking to improve their service delivery and customer experience.
Auckland’s population of around 1.5 million in 2017 is projected to reach as high as 2.4 million before 2030. How the city manages its housing and its transport infrastructure, will determine how well it will cope with such a significant population increase in the coming decade. A change in the way of thinking is needed around how and when to build new and improved public transport-related services and how to fund both the building and the operating of those services. Its already becoming evident that the traditional methods of service funding are not sustainable as Auckland’s public transport network enters a period of rapid and prolonged growth.
Transport service providers in Japan have since the 1980s, via non-fare revenue sources, been able to fund continuous improvement in services to meet / grow user demand and maintain overall service profitability. How Japan does this, is relevant and applicable even in smaller-sized countries such as New Zealand.
Transport service provision in Japan – it’s all about convenience
Modern Japanese culture prioritises convenience (便利さ – benrisa) and the avoiding / mitigating of inconvenience (不便さ – fubensa). Japan as a country, often feels like one giant, well-run restaurant – pumping out consistently good service, with customers coming back again and again, recommending the place to everyone they meet.
For public transport operators in Japan, there are three key tenets of this convenience-oriented customer service culture which underpin continuous improvement in service delivery and revenue generation:
- Believe in your product and sell it. People from all walks of life, are happy being sold to by those who they see as genuinely believing in their products and who demonstrate that they truly want to help. Customers will more often than not,purchase something from those people, just to show their appreciation.
- Good spatial ambience transforms the routine into the memorable. Customer touch points that are clean, colourful, stock goods that anticipate needs and have good spatial design, immediately create a positive environment. Attention to detail in information, product choice and buying experience – for all purchasing environments (mortar and clicks), is paramount.
- Appreciation is a powerful tool. “Thank you” – the phrase that generates loyalty, repeat business, word-of-mouth publicity and goodwill, especially among women customers. Recognise that women have a high sensitivity to hearing the words “thank you”, because as mothers, they have taught their children to say these words many times and consequently, they notice and appreciate when they receive a “thank you”. For Japan public transport providers, no matter how fast the technology change, customers feeling appreciated, having a memorable experience and being on the receiving end of kindness and enthusiasm, are the core planks of service delivery.
Japanese people enjoy the world’s most convenience-oriented lifestyle and the services provided on public transport networks in Japan are an integral part of that. From a very early stage, transport operators recognised the significance of revenue derived from providing lifestyle convenience-oriented services throughout their networks.
Over the years, frequent, quality public transport services to dense, mixed-use, pedestrian- friendly housing and commercial developments, have allowed cities in Japan to achieve high rates of public transport usage and given citizens the freedom to view car ownership as a lifestyle choice rather than a daily necessity. Such PT-integrated communities – dense, walkable, mixed-use centers with a “morning-to-night vibrancy”, have turned transport service riders into loyal customers for a variety of non-fare service offerings (and vice versa), at all times of the day / evening during the week and on weekends.
For the communities that have over time developed along key public transport routes, the transport operator has been able to provide consistent, valued societal benefits – frequent, reliable weekday commuting services and frequent, reliable weekend access to recreational and social destinations…all while still being able to pursue profits from the ever-increasing numbers of people using public transport corridors on a daily basis.
The value of a property in Japan, increases the closer it is to a station or interchange, land use is mixed. Access to public transport is either on foot or by bike, car parking is non-existent at the majority of stations but bike parking is plentiful. The transit system has a high quality and frequency of service from early morning until late at night. Stations and interchanges are the centers of life for the surrounding communities.
A 90+ year history of convenience-based transport service provision
As detailed in a 2012 report for the US Journal of Transportation and Land Use by John Calimente on Tokyo’s rail-integrated communities, Tokyu Corporation was one of the first transport providers in Japan to build an on-going strong financial foundation based on non-fare revenue activities. It was Tokyu Corporation that pioneered the creation of a convenience-oriented lifestyle for their customers.
Established in 1922, Tokyu Corporation in 2017, is a large-scale public transport-based conglomerate of over 300 companies that employs more than 30,000 people, only a tenth of which work directly for Tokyu’s bus and rail services. Within ten years of its establishment in the 1920s, Tokyu had surrounded its transport service hubs with commercial and retail buildings and sold land near its intermediate stations to tertiary institutions, to create reliable residential, education and commercial access corridors.
Tokyu’s pioneering of this growth strategy in the 1920s – where fare and non-fare revenue activities live in a symbiotic relationship, is the same strategy and modus operandi that has been used progressively by all of the other major transport service companies in Japan over the ensuing fifty years.
The business activities of the various major public transport operators, focus on the development and maintenance of convenient, reliable services that are both fare and non-fare-based. This has served over the years, to make public transport deeply woven into the Japanese social and business fabrics and has underpinned strong economic and societal growth in both small and large cities.
Rather than relying on fare revenue and taxation, public transport service providers in Japan have actively sought and developed from an early stage in their respective histories, income from non-fare sources. Service diversification has been the key to the long-term financial health of these providers.
With such business diversification (retail is a prime example), service ridership increases as passengers are attracted to these ‘complementary’ and ‘convenient’ service offerings. These non-fare services can in turn better ‘utilise’ the passenger base. Complementary service offerings such as small footprint station and service interchange retail, serve to smooth out passenger volume differences between peak and off peak services, including the directions the services are heading – inbound and/or outbound. The transport provider can more easily develop a market-oriented outlook based on the experience of running non-fare revenue services. Transport service operations costs are reduced by sharing those costs between fare and non-fare-based divisions. Business diversification is aimed strictly at increasing transport service ridership.
In 2017, there are over 1,000 bus, train and ferry operators in Japan with many electing not to receive subsidies from either local or central government, in order to innovate and diversify into a range of customer offerings along their corridors and at their respective transport interchange nodes, to keep services running.
Japan’s influence on transport service provision in Asia
As already described, since the 1920s, retail at stations and interchanges has been the bedrock of non-fare revenue generation for transport providers in Japan. Even in 2018 – in an age of convenience-oriented lifestyle with the Internet playing an ever-increasing role in online purchasing, transit network-based retail in Japan shows no sign at all of slowing down – the future is the present and the past.
The station retail culture that Japan pioneered and is still the world’s number 1 in, has over the last 20 years, become well-embedded in other parts of Asia.
An example of this is in Hong Kong where the MTR Corporation was one of the first transport providers to successfully emulate the Japan station retail model – over 15 years ago. Subsidiary MTR Properties in 2016 generated NZ$664 million (HK$3.723 billion) from station retail and NZ$846 million (HK$4.741 billion) from property rental.
To be fair, MTR Corporation has been able to achieve such high levels of non-fare revenue partly because Hong Kong is a closed transport system – there are very few suburbs from which people can realistically commute to / from by car, so there are strong incentives for everyone within the Hong Kong territory, to use the public transport network. This feature, combined with other government regulations, has kept car ownership low in Hong Kong: 6 of every 100 vehicles are for personal use. Once buildings and retail are very well ‘patronised’ thus at station locations across the network.
Despite Hong Kong’s specific regulatory benefits to MTR Corporation, similar Japan-influenced station retail and amenities have sprung up in other countries in Asia where the government does not enshrine in law, any special dispensation to public transport service providers.
In major cities in Korea, mainland China, Singapore, Malaysia and Thailand, supermarkets and shopping centers are often directly connected (above, below or adjacent) to transit service nodes. Like Japan, these facilities have become well-embedded into the respective social / business fabrics and continue to be highly pro table revenue streams for the local transport providers.
It is not only the integrated supermarkets and shopping malls at transit network interchange points that make up the lion’s share of non-fare revenue in Japan. Small footprint convenience retail makes quite a significant bottom line contribution. Interestingly enough, in the drive throughout Asia to emulate Japan’s transit retail success, the significant revenue generated by well-designed and located small convenience retail outlets, seems to have been somewhat surprisingly, overlooked.
Why should Auckland adopt an Asia-style model for PT network service provision instead of adopting models from Australia, the UK, Europe and North America?
One crucial reason is Auckland’s population demographic. In 2013, almost 1 in 4 people (23.1% or 307,233 people) living in the Auckland region identified with one or more Asian ethnic groups, compared with 1 in 5 people (18.9%) in 2006. By 2021, it is projected that 30% of Auckland’s population will be made up immigrants from countries in North, South East and South Asia. Currently, 12% of Auckland’s population are from North Asia and this will grow to around 20% by 2021. These customer segments have been brought up on a steady diet of everyday retail and service provision at stations and interchanges, in their respective countries of origin – countries where these services are well-woven into the social fabric.
This 12 / 23% of the population in 2017 and 20 / 30% of the population by 2021, are significant market segments for AT Metro non-fare revenue business – full of latent demand for transit retail services.
Not only the large number of Asia-origin people living in Auckland, equally significant are the substantial number of ‘kiwi millenials’ – of every race, who know and love the Japanese model of customer service, technology, food, drinks, culture and lifestyle. This global culture-savvy younger generation together with Asia-origin residents, will increase ridership on the AT Metro network when they are able to become shoppers at stations.
Modern day New Zealand lives in the ‘Asian Century’. Our young people across the board are very Asia-oriented on a number of levels. They are a broad spectrum demographic that’s hidden in plain sight, waiting to be catered to.
There is a reputational and a relevance risk to Auckland thus in continuing PT services as they are currently provided; as POTS – Plain Old Transport Services. Customers, including millenials now expect a broader range of services on the transport network and they expect services to be more life-relevant and responsive to their needs. For the foreseeable future, the pace at which urban culture and lifestyle is developing in Auckland is such that there is a risk of public transport service provision being left behind if it continues to provide POTS and not make a concerted move into proper convenience-based services as is the norm in Asia. As described above, Auckland’s population demographic is such that an Asia-style model of service fits the city better than models from other regions.
The deploying of Asia-style station-based convenience micro-retailing (including vending machines), together with the appropriate supporting smartphone apps, is the key next-step to generating non-fare revenue that will more than likely reach a level within 3-4 years, where it can make a sizeable contribution to the funding of public transport capital works and operational expenditure.
Following in the footsteps of transport operators in Japan, Auckland can develop / roll out a suite of non-fare revenue-generating lines of business 2018-2021 to build income, manage service demand and stay relevant to customer needs.
Auckland can and should:
- Build a culture of PT customer needs anticipation – anticipating customer’s changing lifestyle (whole of life) needs through deep insight research into the relationship between transport service use and consumer purchasing behaviour as is done in Japan.
- Tie patronage growth for bus, train and ferry services to station retail revenue growth.
- Change customer beliefs on what public transport ‘services’ in Auckland are and should be – through the development of micro retail-oriented business initiatives as curated customer experiences.
- Change the way service patronage growth is measured – by developing and running digital marketing and customer interaction initiatives that drive usage of the Auckland public transport network as a full end-to-end multi-modal service transfer system, analysing the effectiveness of those initiatives at each service interchange point.
- Institute more a comprehensive benchmarking system for measuring customer service satisfaction.