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Japan convenience store sales up in July for the first time in 14 months

According to data released today by the Japan Franchise Association, convenience store sales rose 0.5% in July, showing an increase for the first time in 14 months.

The hot weather appears to have helped convenience store sales in July, as sales of cold drinks, ice cream and processed food increased 5.8%. Customer traffic was up 2.3% in July, and this is notable because it is the first increase above 2% since June 2009, when the TASPO card was introduced. Read more

Cracks re-emerging in Japan’s convenience store industry

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.

Japan convenience store sales slide 4.9% in March

After the sales boom that followed the introduction of the Taspo card for tobacco purchases, Japan’s convenience stores have had a difficult time keeping sales up. According to data released today by the Japan Franchise Association, convenience store sales fell 4.9% in March, showing a decline for the tenth consecutive month. Read more

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.

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