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Cracks re-emerging in Japan’s convenience store industry

July 27, 2010
By Ken Worsley


A Nikkei report published today told us that Japan’s convenience stores experienced their second lowest annual growth in financial 2009 since 1978 as sales booms derived from the introduction of the TASPO card wore off. According to the paper:

Overall sales at domestic convenience stores edged up 1.1% in fiscal 2009 to mark their second-weakest rise since tracking of comparable data began in 1978, according to a survey by Nikkei Inc.

Overall sales came to 8.31 trillion yen, with the number of convenience stores growing by 1,075 to reach 46,069.

While sales are still on the rise, a 1.1% increase is not much to boast about; sales increases were below 2% in both FY2006 and FY2007. With the number of convenience store locations still increasing, it looks as though the sector is bound for price wars and the survival of the fittest (richest). On a daily basis, customer traffic per store fell 0.6% to 1,025 people in FY2009, while average sales per store dropped 2.4% to 487,000 yen per day. There were 8.6% more convenience store locations open in FY2009 than the year before.

The industry, however, clearly understand the problem:

Of the 27 convenience store operators offering responses on business conditions, 20 said the business environment has worsened. The most cited reasons were a glut of stores in urban areas and the expansion of store networks

Makes sense.

Many of the large convenience store chain operators now intend to slow their expansions this fiscal year while shutting down or relocating unprofitable stores…The four big players — Seven & i Holdings Co. (3382) unit Seven-Eleven Japan Co., Lawson Inc. (2651), FamilyMart Co. (8028) and Circle K Sunkus Co. (3337) — plan to open a total of 2,320 new stores, down 3.5% from last fiscal year. This figure excludes the 350 stores of the former am/pm Japan Co. that will be rebranded as FamilyMart stores. Meanwhile, store closings are projected to rise 7.8% to 1,540.

The Nikkei article fails to mention overseas expansion as the only viable growth model.

Filed Under Convenience Stores, Retail 

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Comments

2 Responses to “Cracks re-emerging in Japan’s convenience store industry”

  1. Mike Smitka on August 13th, 2010 11:57 am

    Yes, CVS are in a shake-out period. But in the early days, expansion was the priority, preferably by getting local liquor stores to switch format (because the liquor license would transfer, while in the regulatory environment of that day getting a license was very, very hard). As a result, the three rules of retailing — location, location and location — were not observed. I’ve not checked the latest data, but 7-11, for example, was closing about 350 stores a year that were being replaced by stores in better locations (street corners, or with parking), a “scrap and build” policy. Separate, there is also M&A activity, Lawson spun off from Daiei, picking up a couple small chains and the larger 99 Yen chain…

  2. Ken Worsley on August 21st, 2010 1:01 pm

    Mike, that’s a good point about the early days. Further to that, a few years ago Lawsons was touting how its Natural Lawson chain would get women shopping more at convenience stores. Now that they’re used to it and everyone’s broke, Lawson is converting some of those Natural Lawson locations into Lawson 100.

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