Service industries and interaction economy

Zhou Muzhi: Unlike Mr Yokoyama's view that the labor productivity ratio in Japan's service sector is lower than the US level, my understanding is that this is exactly what makes Japan's service sector so charming. Service industries in the country, such as catering and retail, emphasize on interactions with customers, which can hardly be standardized but help engage customers in enjoyable conversations and help improve the overall service quality of the industries in a steady manner.

Yoshinori Yokoyama: This is like dining in a fancy sushi restaurant. The quality of the dishes themselves is important for the customers, but at the same time, the interactions with the sushi chefs are also an important element of enjoyment. Naturally, you can accommodate a small number of customers.

Zhou Muzhi: Therefore, when it comes to evaluating different commercial areas these days, we should compare the number of locally owned catering and retail businesses with that of chain brands in the areas. Only those with more locally owned brands can obtain high praises, because businesses doing well in customer interactions are mostly locally owned ones offering customized services.

For example, Kichijoji, the neighborhood where I live, is the most popular block in Japan and is rated the No.1 commercial area in the country. Shops in Kichijoji are mostly operated by self-employed individuals, with an average area much smaller than Tokyo's average. However, per square meter sales volume in Kichijoji shops is very high, much higher than that of the Disneyland.

Therefore, the standardized approach is not necessarily the only way to take when service businesses aim at pursuing high added value. The interaction economy approach deserves more attention.

Yoshinori Yokoyama: Tokyo has more Michelin star restaurants than any other city in the world.

Zhou Muzhi: In the 2018 ranking of Chinese cities on hotel and restaurant radiating capability released by the Cloud River Urban Research Institute, the top 10 cities were Shanghai, Beijing, Chengdu, Guangzhou, Shenzhen, Hangzhou, Suzhou, Sanya, Xi'an, and Xiamen, which are home to 36% of China's five-star hotels and 77% of the country's top international restaurants.

A close look at the radiating capability of IT industry and that of hotel and restaurant has demonstrated a "perfect correlation" between them, with the correlation coefficient reaching 0.9. This indicates that, working in a typical industry of the interaction economy, the high-income IT professionals are keen on quality dining experience, and that restaurants are important venues for these professionals to "interact". Top cities with strong radiating capability of IT industry are all famous for their food. Today, the ability to offer great food has become a major boost to a city's endeavor in developing its interaction economy.

By contrast, the correlation coefficient of manufacturing radiating capability and hotel and restaurant radiating capability registered only 0.68. Clearly, compared to IT professionals, manufacturing professionals are much less sensitive to delicious food.

Yoshinori Yokoyama: Certainly, there is connection between Tokyo's advanced IT industry and its food. The higher people's income and the intellectual levels of their work are, the higher the need for interactions will be. The COVID-19 pandemic will not put an end to globalization.

Zhou Muzhi: In that sense, as the hubs for globalization and interaction economy, international metropolises are not likely to suffer irretrievable economic declines. They are bound to recover from the setback and embrace a new era of economic boom.