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Tuesday, May 13, 2008
Striving to mold definition of convenience
Whether searching for a lunch or quick snack, withdrawing cash or paying a utility bill, the nation's "konbini" convenience stores offer a range of services.
Since they began to emerge in the late 1960s and early 1970s, convenience stores rapidly spread nationwide and have literally lived up to their name.
Following is some basic information about Japan's konbini:
How are convenience stores defined and how big is the industry?
The definition is vague and varies. For example, the Ministry of Economy, Trade and Industry defines a convenience store as an establishment selling self-service beverages and food with a floor space of between 30 and 250 sq. meters and is open more than 14 hours a day.
According to Japan Franchise Association statistics, there were 43,087 convenience stores nationwide in 2006. Total sales were about ¥7.4 trillion.
Convenience store growth was quick and visible. The JFA says the industry saw ¥600 billion in sales at 6,308 stores in 1983, growing to ¥6.1 trillion at 36,265 stores in 1998.
How and why did the industry become so big?
In 1973, the Large-scale Retail Store Law took effect to protect small shops from big store encroachment. According to Tomomi Nagai, an industrial analyst at Toray Corporate Business Research, Inc., the law helped facilitate the growth of convenience stores.
Because of the law, it became more difficult to open large-scale stores, including supermarkets, and companies shifted focus to convenience stores.
At the same time, Nagai said, small shops, including tobacco and liquor vendors, were looking for ways to revitalize their businesses, and many joined convenience store franchises.
The real fuel for the convenience store boom, however, was the franchise management system.
Big operations like Seven-Eleven Japan Co. and Lawson Inc. have a manual for franchise-store owners to follow. The thorough instructions ensure stores provide almost the same level of service and quality wherever they open up, giving customers a sense of reliability, Nagai said.
Product lines also helped boost the stores' popularity, she said.
Rice balls and "bento" boxed lunches had not really been sold at a lot of shops before the emergence of convenience stores.
"Basically, people ate meals at home until the early 1980s," Nagai said. But convenience stores started selling fast-food-type products delivered several times a day, providing fresh, ready-made food around the clock.
How do stores select products?
Convenience stores use the Point of Sale system, which places product information in bar codes and enables companies to recognize product demand. Based on this data, firms can figure out which items sell well and which don't. It is said an average convenience store carries about 3,000 items, and they can efficiently market their goods based on the sales information.
In general, food products are the main source of revenue at convenience stores, accounting for about 30 percent on average.
Is the industry still growing?
That's questionable. According to the JFA, 444 convenience stores were added nationwide in 2006.
While the number of stores is still growing, sales at existing stores have been decreasing for eight consecutive years. Nagai said 50,000 stores is considered the saturation point.
"In busy cities, you see several convenience stores within a few blocks" of each other, and they are fighting over sales, she said.
The competition is not just inside the industry. When convenience stores first debuted, there weren't many stores selling bento and rice balls. However, those products can now be purchased at supermarkets, many of which also keep late-night hours.
Finding new store owners is also getting more difficult and existing owners are aging for an industry that has been in business more than 30 years.
In addition, there have been cases where franchise owners sued the parent firms, claiming potential owners were fraudulently given padded sales expectations to lure them into the business.
What are some convenience store trends?
To differentiate themselves, convenience stores continue trying new, innovative tacks.
Family Mart shops started cooperating with other businesses at the franchise level. In Osaka, one shares floor space with a Tsutaya DVD/CD rental-retail outlet. Some also incorporated Subway sandwich stands in Tokyo last month.
The main customers at convenience stores had been men in their 20s and 30s, but the chains know they must target other clientele, Nagai said.
Lawson debuted its Natural Lawson shops in 2001, mainly targeting female customers, especially working women, with products like freshly baked bread, more healthy and organic products as well as cosmetics. The company also opened Happy Lawson shops in 2007. These are geared for mothers with small children, offering child-care products and play space for kids.
Am/pm Japan Co.'s Food Style outlets are meanwhile offering vegetables and other fresh foods that have not been widely sold at usual convenience stores.
Making them even more convenient, Seven Eleven and other franchise operations even accept orders on the Internet and deliver products directly to customers.