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Japanese convenience stores pursuing expansion strategy

Publication Date : 18-09-2012

 

Three major convenience store operators are accelerating the pace at which they open new stores. While Seven-Eleven Japan Co., the nation's largest operator, decided to advance into the Shikoku region, Lawson Inc. and FamilyMart Co. have partnered with different businesses to open joint stores to attract more customers.

As they are also increasing the number of stores overseas, they seem to be firmly settled in a strategic expansion for the time being.

Seven-Eleven Japan announced on September 6 that it will open stores in Shikoku next spring, and aims to run 520 stores by the end of February 2019 in all four prefectures in the region. With the opening of new Shikoku stores, Aomori, Tottori and Okinawa prefectures will be the only three in which the company does not operate.

In 1997, Lawson, the second-largest operator, had opened stores in every prefecture in the nation, and FamilyMart, the third largest, did so in 2006.

While the second- and third-biggest operators placed priority on expanding their store networks, Seven-Eleven's strategy focuses on intensively opening stores in areas where stable profits are predicted. Therefore, it is inevitable that competition in the Shikoku market will intensify from next year.

Convenience store operators had seen drops in same-store sales for eight consecutive years since 2000, and the industry in the domestic market was considered to have reached saturation point before the Great East Japan Earthquake.

After the quake, however, more female and elderly customers began using convenience stores instead of supermarkets after finding them to actually be convenient and offering food and staple items at more reasonable prices than they had expected.

As a result, the three major operators have posted record operating profits in the business year ending February 2012. The three companies plan to open about 3,150 stores in total in fiscal 2012--also a record.

According to the Japan Franchise Association, 10 major convenience store operators had 45,671 stores in total as of July. But Seven-Eleven thinks the demand is strong, as the average daily sales per store keeps increasing.

Diversity of store types

Store types are being diversified to attract more customers.

Lawson opened in May a joint store with music and video software retailer HMV Japan K.K. FamilyMart made a franchising contract with drugstore operator Higuchi Sangyo Co. to open joint stores in the same month.

The operators are also looking for new growth markets by opening more stores overseas, mainly in other Asian countries including China and Indonesia. In China, both Seven-Eleven and Lawson have established holding companies in preparation for opening stores there.

Operating more than 30,000 stores overseas, Seven-Eleven has purchased several convenience store operators in North America following buyouts in Asian nations. FamilyMart runs more than 12,000 stores overseas, mainly in China and Thailand. Lawson, which trails its two rivals with about 460 overseas stores, has been making preparations aimed at opening stores in untapped markets such as India and Myanmar.

However, there is no guarantee that their profit growth will continue, as the nation's population continues to decline. New overseas markets always have risks, as shown by recent attacks on Japanese-affiliated retailers in China in the ongoing anti-Japan protests. Convenience store operators will need to lay careful plans whenever they open new stores.

 

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