PIE VAT: an American start-up carves out a niche in the tourism industry
When Pie Systems launched in 2018, international tourist arrivals had increased by 5% to 1.4 billion and the sector’s export revenue had reached $1.7 trillion. But in 2020, with the raging COVID-19 pandemic and border closures, that has changed.
For Pie Systems, a startup with a mobile app that facilitates tax-free transactions for tourists, times have been tough. However, co-founder and CEO Sunny Long says the company continues to expand its markets and services, including entering Japan in 2021.
Why did you create Pie Systems?
My co-founder Dominic Sheehy and I were thinking about the many challenges tourists face when traveling overseas, including payments and shopping.
In this vein, a particular memory resurfaces. I was lucky enough to have traveled quite a bit across Europe and as a tourist had gone through a VAT (Value Added Tax) refund procedure. It was horrible. And it got us thinking, Dom and me.
In the travel industry, where hundreds of millions of people travel each year, this is something we wanted to help: save money, save time and provide a better tourist experience.
What can you tell us about the solution you found?
The mobile application is called PIE TVA. You can find it on App Store for iOS and Play Store for Android. This is the application intended for consumers. If you download it, you can see which stores work with us and you can shop at those stores. Everything is digitized. This means that after making a purchase you can upload your receipt, scan your passport and receive your VAT. Everything is done through the app.
What was life like for tourists before the PIE VAT app?
Traditionally, the tax refund comes to you between a week and three months after you leave the country, if at all – online reviews show many frustrations and complaints about refunds never arriving – and having made the tail to fill paper shapes. If the refund arrives, a 30-40% fee will be charged on your refund amount, which is outrageously high!
We’re reversing that by creating features that allow you to do it much faster and much smoother. Our goal is to ensure that tourists get the most out of their travel experiences, not to change them lightly.
Sunny Long, right, and country manager Hiroaki Mizuno Photo: Pie Systems/Michael Holmes
When and why did you enter the Japanese market?
We entered Japan almost a year and a half ago. When we look at market opportunities, there are a couple of things that come to mind: market size, market defensibility, and competition.
When we look at the markets where there are a lot of tourists — and where there are a lot of zero-rated expenses — we think of Spain, France and Italy. However, Japan is 6th or 7th globally, which makes it a very big market.
Second, and arguably more importantly, Japan is a growing market, with more and more tourists arriving every year. There is also an underlying government theme of promoting tourism to increase GDP, and also to promote digital transformation or DX. Finally, tax-free penetration in Japan (the number of stores offering tax-free purchases) has the potential to grow more than 10 times!
Finally, in terms of competition, the concept of tax refunds was born in Europe in the 1980s. In Japan, tax refunds only started in 2013, less than 10 years ago. We saw this as an interesting opportunity because (the tax-free vertical in Japan) has not been as commonplace as in some European markets and has plenty of room to grow.
You launched in Japan amid COVID-19. What has been the traction here?
Of course, COVID-19 was (and still is) a huge challenge for our business. However, we’ve accomplished a ton during this time and I’m super excited. First, we built a world-class team in Japan; we’re now down to six or seven people, led by our incredible General Manager, Hiroaki Mizuno.
In terms of store partnerships, despite the COVID-19 induced lack of enthusiasm, we have managed to engage and partner with some amazing stores in Japan including Porter, a bag brand; C’bon, manufacturer of cosmetics; and, Imayo Tsukasa, a sake drink maker. Our digital solution has gained traction in all major tourist regions, from Tokyo to Osaka to Hokkaido.
Photo: Pie Systems/Michael Holmes
Can you tell us about PIE VAT Station and your general impression of this market?
One of the major achievements when entering Japan was the launch of PIE VAT Station, a (digital) counter solution for AQUA CiTY ODAIBA, a large shopping center in Odaiba, Tokyo. We launched this late last year and are working to simplify the refund solution for tourists at the mall. The PIE VAT station itself is a beautiful space that shines with minimalism and technological inspiration. Through the PIE VAT station, AQUA CiTY ODAIBA is the first mall in Japan to provide a digital and efficient tax-free solution for tourist shoppers.
Combining the stores and the partnerships we have forged, we have a very solid roadmap for this year for the partners we want to seek out as we move forward until tourists return. All things considered, we’ve had a fantastic start in Japan and are excited about what the future holds.
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