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Business Trends

Lawson quits home delivery as costs rise in Japan

Convenience store operator to focus on store pickups to draw customers

Lawson will now focus on store pickups to spur customer traffic.

TOKYO -- Japan's Lawson will do away with the delivery of fresh food to online shoppers at the end of August, as rising costs and slow demand have rendered the service unsustainable.

The members-only home-delivery service, launched in 2013, carries some 8,000 items, including vegetables, meat and processed food. But membership topped at no more than 60,000 over the past year.

Shipping was free with a 5,000 yen ($45) purchase in greater Tokyo. But the delivery service did not make economic sense, given surging shipping rates charged by such partner carriers as Yamato Transport and Japan Post.

Lawson instead will continue to offer store pickups of fresh food, available as soon as the late afternoon of the day of ordering. The service, now offered at a little more than 200 locations in Tokyo and Kanagawa Prefecture, will expand to some 2,000 stores in the greater metropolitan area this fiscal year.

Store pickups will be promoted as a strategic tool drawing customers to brick-and-mortar locations. While online orders for home deliveries were recorded on Lawson's books, sales from store pickups will be credited to franchisees.

Peers have made similar moves. For instance, FamilyMart, a unit of FamilyMart UNY Holdings, shut down its online shopping website at the end of February.

One exception is Seven-Eleven Japan, which last October began delivering products available at stores to smartphone users' homes. The service will be introduced at all locations in the northernmost island of Hokkaido by August 2019 and other parts of the country thereafter.

The unit of Seven & i Holdings teamed with logistics concern Seino Holdings last year, with the latter forming a wholly owned subsidiary handling shipping for the convenience store heavyweight. The goal is to insulate the Seven-Eleven service from the rise in shipping costs.

Rising logistics rates are also prompting other retailers to review shipping policies. Supermarket chain Ito Yokado, also a member of the Seven & I Holdings group, will start charging Friday an additional delivery fee for customers buying cases of select beverages. Supermarket operator Aeon and affordable furniture giant Nitori Holdings have raised rates for certain products and regions.

Couriers are raising rates as they cope with surging interest in online shopping, which is stretching their already scarce staffs thin. Yamato hiked base rates for retail customers by 15% on average last year, rocking the industry and spurring SG Holdings unit Sagawa Express and Japan Post to follow suit.

Yamato top door-to-door shipper negotiated with some 1,100 high-volume clients through last year, extracting higher rates from 60% of them, including Amazon Japan. But the remaining 40% have left the Yamato Holdings unit, resulting in a roughly 2% decline in shipment volumes for fiscal 2017.

Couriers plan to raise retail rates further this fiscal year, with Yamato planning a 10% increase to 659 yen, and Sagawa a 7% hike to 588 yen. Japan Post is negotiating with customers as well.

The online and catalog shopping market keeps expanding, posting 8.4% year-on-year sales growth for fiscal 2017, the strongest since fiscal 2013, a Nikkei Inc. survey shows. Industry leader Amazon boasted a 13.6% jump.

As online shopping keeps booming amid a driver shortage, logistics costs are certain to continue rising, shipping consultant Ryoichi Kakui predicts. The question for retailers is whether they can offer lucrative products and services that can make up the increasing costs while fighting back industry behemoth Amazon.

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