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Wednesday, May 8, 2013

No. 27: Convenience store chains in a turbulent age: IT and differentiation are the keys to survival (1/2) (May 8, 2013)

Management:
There are more than 50,000 convenience stores at present, increasing from 44,500 stores to 50,000 stores in the past five years. Combined sales are 9,000 billion yen today. Leading chains now focus on local regions to expand business. Tokyo has one store for every 1,992 people, whereas Kagoshima Prefecture, southernmost prefecture, has one store for every 3,159 people.

Top five convenience store chains in Japan

Convenience store chain
No. of stores
in Japan
Domestic sales
(billion yen)
Seven-Eleven Japan
15,072
3,508
Lawson
11,130
1,906
Family Mart
9,481
1,715
Circle K Thanks
6,242
946
Ministop
2,168
352

With the accelerating aging of population, the access provided by a convenience store is growing more appealing to consumers. The boundary between supermarket and convenience store is growing more ambiguous. Many convenience stores are handling fresh foods and sell them in small packs for 100 yen apiece. The 100 yen groceries corner is growing more popular these days. It is no longer unusual that housewives and the elderly buy fresh foods with prepared foods in the evening. It is crucial for every chain to enclose customers. They key to the enclosure is IT and differentiation.

Lawson introduced Ponta that is a point card system usable at every Lawson store. One point is one yen, and shoppers can exchange their points for discount and designated products. Since the system was introduced, the assortment improved and shortage of popular products decreased dramatically. Enchanted by the effect of Ponta, stores are very eager to obtain new members. This good cycle helped Lawson increase sales greatly.

Seven-Eleven is taking another strategy. It sells fresh coffee nationwide. The prefecture that sells most is Kagoshima Prefecture. A Seven-Eleven store in this prefecture sells 280 cups of fresh coffee a day, and sales increase to 360 cups on the weekend. Seven-Eleven spends two months to educate employees for new stores, and they are competent enough to tell the difference in taste between generally available coffee and Seven-Eleven’s fresh coffee. Family Mart is also carrying out a new strategy. It concluded a franchise agreement with two organizations affiliated with Japan Agricultural Cooperatives. They also started mobile catering of vegetables. A new system is required to sell consumers in a scarcely populated area.  

 
Introduction of Japanese convenience stores
 

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