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Department stores, convenience stores see sales slide further in July

Japan’s department stores and convenience stores have little to feel positive about after July sales results rolled in. According to data released by the Japan Department Store Association, sales at department stores nationwide fell 11.7% in July, marking the seventeenth consecutive month of decline. The survey covered sales at 87 department store operators with 272 shops.

Here is the breakdown of sales by individual categories: Read more

Family Mart to enter the Vietnamese market

Just two weeks ago, Seven-Eleven announced that it would be entering the Indonesian market. On the heels of that news, Family Mart announced today that it has plans to enter the Vietnamese market. Family Mart will be forming a joint venture with Vietnam’s Phu Thai Distribution and Investment Group as well as Itochu. Apparently, Family Mart’s first shop will be opened in Ho Chi Minh, and the firm aims to open 300 locations in Vietnam over the next five years.

Seven-Eleven to set up shop in Indonesia

A few days ago the Nikkei reported that Seven-Eleven Inc. has reached a licensing agreement with Modern International Group, an Indonesian firm that will bring Japan’s largest convenience store brand to Indonesia as early as this fall. While the Nikkei notes that strict regulations often make it difficult for firms to set up shop in Indonesia, plans are for the first locations to open in Jakarta and be followed by stores in Bandung and Surabaya.

Will Ministop be the next convenience store operator to be sold?

Monday’s Nikkei reports that “stock market experts and industry insiders” believe that convenience store operator Ministop is “widely seen as taking center stage in the M&A drama that comes next in that sector.”

An interesting assertion, given the vagueness of those cited. Still, such a deal might make sense. Ministop is a unit of retail giant Aeon, and the Nikkei quotes an Aeon executive as saying, “There is a limit to the franchise business model.”

Of course there is. There is a limit to anything. The comment could be read as, “There is a limit to our ability to expand overseas.” The next quote from the unnamed Aeon executive is telling: “We have no intention of making the convenience store business part of our mainline operations.” Ministop accounted for about 8% Aeon’s operating profit in the six months to August 2008.

Having no intention of making convenience store operations part of core business may be a mistake, though it may be part of Aeon’s way of saying that they should sell Ministop while they can still get something for it. Or perhaps they need to unload assets.

The Nikkei goes on to tell us this:

Now that Aeon has no alternative but to draw down cash on hand and other liquid assets, and rely on loans from financial institutions, the company will naturally get around to selling off in pieces group operations, such as Ministop, observers note.

There it is. Who’s lining up to buy Ministop? Lawson has already shown its appetite for acquisitions, as it is set to buy out rival am/pm. Bringing Ministop into the fold would give Lawson nearly as many locations as Seven-Eleven currently has. On the other hand:

FamilyMart’s management has also shown strong interest, as President Junji Ueda said, “We are ready to buy Ministop anytime if the deal is found to be mutually beneficial.”

Just a week ago I posited that “smaller [convenience store operators] might find themselves able to sell out at better values as competition to acquire them increases.”

Ministop appears to be undervalued (or oversold, take your pick), which is helping make it look like a good candidate for a sale. The question is whether the holding company is making a mistake by leaving this lucrative market.

Lawson to buy am/pm for 15 billion yen

Earlier today, the Nikkei announced that Lawson is set to acquire rival convenience store operator am/pm for about 15 billion yen. While nothing has yet been formally announced, the Nikkei said it Lawson may announce the buyout by the end of this week. Lawson is apparently set to purchase all existing shares in am/pm from its parent company, Rex Holdings.

Although Japan is saturated with convenience stores, with about 45,000 such shops across the country, am/pm has about 790 of its 1,100 shops in operation within the greater Tokyo area. As the population and ratio of single-member households continue to grow in the Tokyo area, it seems as though Lawson is betting on these locations to continue turning a profit despite Japan’s demographic woes.

Currently, Seven-Eleven operates 12,100 convenience stores in Japan, making it the market leader with nearly 27% of all convenience stores bearing the firm’s logo. Lawson operates about 8,600 shops, and the acquisition of am/pm will narrow the gap between the two industry giants.

It has also been speculated that Lawson has followed Seven-Eleven’s strategy of selling more store-branded items, and that this will help contribute to an earnings increase for fiscal 2008.

The Nikkei article closes with this paragraph:

Convenience store chains logged sales gains in 2008 thanks to new age verification requirements for cigarette vending machines. But the market is maturing, with sales declining for eight years in a row through fiscal 2007. This has made it increasingly difficult for midsize chains like am/pm and the numerous small regional firms to compete against the giants, and the latest deal may spur an industry shakeout.

After those eight years of losses, sales increased due to increased purchasing of tobacco products at convenience stores in 2008, while convenience store sales exceeded department store sales for the first time ever. Still, convenience stores are getting more people into their shops, which is important. However, it should also be noted that in January, the average convenience store customer spent 595.5 yen per purchase, a decline of 0.5% from a year ago.

Back to the Nikkei article. It does seem likely that more moves to acquire smaller players in this sector are to follow, and that smaller firms might find themselves able to sell out at better values as competition to acquire them increases.

A breakdown of convenience store operators by number of shops in Japan:

Seven-Eleven: 12,100 shops - 26.9% of total
Lawson: 8,600 - 19.1%
Family Mart: 7,300 - 16.2%
Circle K Sunkus: - 6,100 - 13.6%
Ministop - 1,900 - 4.2%
am/pm: 1,100 - 2.4%
Others: 7,900 - 17.6%

Japan convenience store sales up 7% in January

According to data released Friday by the Japan Franchise Association, convenience store sales in Japan rose 7.0% in January, as the number of tobacco-buying customers continues to show in the year-on-year figures.

Looking closer at the numbers, however, we see that sales per customer declined in January by 0.5%, to 595.5 yen. Thus, the increase in sales is due to a 7.6% increase in the number of customers over a year ago. In January, about 975.7 million visits were made to convenience stores in Japan.

Here is a breakdown of the four major categories reported, with the percent of total sales represented by that category as well as it’s change from a year before:

• Prepared foods: 33.2% of total, +1.2%
• Packaged foods: 29.7% of total, +2.9%
• Non-foods: 32.8% of total, +28.0%
• Services: 4.3% of total, +9.6%

Warm weather in northern and eastern Japan apparently also contributed to higher sales of soft drinks and ice cream.

Japan’s convenience store sales up in 2008, top department store sales for the first time

According to data released Tuesday by the Japan Franchise Association, convenience store sales in Japan rose 6.7% in 2008, for the first yearly rise in nine years. On the same day, it was also announced that convenience store sales in December increased 8.5%.

Despite the continued slump in department store and supermarket sales, Japan’s convenience stores have enjoyed a robust 2008. For the first time ever, convenience store sales in Japan have exceeded sales at department stores; department store sales were at about 7.4 trillion yen while convenience stores rung up about 7.86 trillion yen in 2008.

Increased tobacco sales due to the introduction of the Taspo card was a major contributor to the spike in convenience store sales in 2008, and the year-on-year effect of increased tobacco sales will last until July of this year. Still, it seems likely that the recession, the increasing number of single-person households, more diverse product lineups and the introduction of store brand items - at 7-11 in particular - also contributed to the sales increase at convenience stores last year.

It does appear as though convenience store sales are rising when the boost in tobacco sales is stripped out. If that continues into 2009, convenience store operators might find themselves in the uncomfortable position of hoping for a longer recession than is expected.

Convenience store sales up, Mos Burger in Indonesia, lower sales at Toyota and trouble with the iPhone

According to the Japan Chain Stores Association, sales at Japan’s convenience stores increased 6.6% in September from a year earlier. Total sales hit 624.0 billion yen, showing a rise for the fifth consecutive month, as customers continue to flock to convenience stores for their tobacco products. September’s figures follow a 7.5% rise in August.

Keeping watch of Japanese service brands moving overseas, Mos Burger has announced plans to move into the Indonesian market. According to the Nikkei, the firm intends to set up a joint venture capitalized at 2 million dollars. Masuya Holdings will contribute 70% of the funds, while Orix’s Indonesian subsidiary will chip in 20%. This leaves Mos with a 10% stake in the firm. Mos Burger intends to open 15 shops in Indonesia by 2011, with 50 or so being open ten years from now.

According to Attractors Lab, 62.2% of those folks in the market for a new condo in Japan believe that current prices are too high. This figure is up by 6.4% from July.

In the bad news category, Japanese steelmakers are set to cut production for the first time in three years, as demand from automakers has slowed. At the same time, Toyota’s sales are expected to slide for the first time in ten years, by 2%, in 2008.

Finally, the Nikkei is reporting that quality control problems with Apple’s iPhone are apparently “tarnishing” the firm’s image in Japan. Nikkei lists trouble with the “MobileMe” service, as well as faulty chargers, software glitches and the “freezing of the iPhone while in use” - I used to call that a “blue screen of death.” Any iPhone users out there to report?

Japan’s convenience stores loving the Taspo card; sales up 7.5% in August

Despite the continued fall in department store and supermarket sales, Japan’s convenience stores have held up fairly well over recent months. This summer, an additional windfall hit the nation’s convenience stores. The implementation of the Taspo ID card, which must be used to purchase cigarettes at vending machines nationwide, has driven consumers to make their purchases at convenience stores, as adoption of the Taspo card apparently remains low.

After seeing a 14.0% rise in sales in July, Japan’s convenience stores saw a 7.5% rise in August, according to the Japan Franchise Association. Unlike supermarkets, which are contracting in number, the number of convenience stores in Japan increased by 1.5%, from 41,047 a year ago to 41,645 last month. To put that in perspective, Japan has about 1 convenience store for each 3,000 residents.

Japan convenience store sales up 4.2% in June, higher sales projected for July

While sales at both department stores and supermarkets continued to flounder in June, sales at convenience stores rose 4.2% year-on-year in June after having posted a 3.7% increase in May. According to data released by the Japan Franchise Association, sales at the nation’s convenience stores came to 648.7 billion yen in June, which was just lower than the 648.8 billion yen seen in May.

The future looks even brighter for convenience store sales. Reuters is reporting that the Taspo ID system, which must now be used nationwide to purchase tobacco products at vending machines, is providing a boost to tobacco sales at convenience stores. July’s sales increases are projected to surge into the double digit range.

Share prices at major supermarket chains Family Mart and Lawson are up 22% over the past quarter, as the market anticipates what could be the highest sales growth posted in the past decade at many convenience store operators.

One interesting part of the Reuters article: While department stores and supermarkets continue to blame bad weather for their decline in sales, “price hikes at supermarkets and favourable weather have helped sales [at convenience stores].”

Of course, growth from tobacco sales will be filtered out of the system in a year’s time, and Japan’s convenience store chains are still going to have to find ways to continue increasing revenue, which means we still expect to see Japanese convenience store firms make further attempts to establish overseas operations.

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