March 21, 2017 7:00 am JST

There's trouble in the convenience store

Japan seems to have too many 'conbini', not enough workers, customers

The Lawson convenience chain is putting prepared meals in more of its stores.

TOKYO -- With nearly 60,000 convenience stores, Japan long ago surpassed the 50,000 mark that was once thought to be the saturation point. Future growth rests on how the chains can cope with intensified competition and a labor shortage.

At the unveiling of its new private-label products on Mar. 9, Ryuichi Isaka, president of retail giant Seven & i Holdings, predicted that the yen's weakening since last year will weigh on fuel and raw material prices, and the consumption environment will become even harsher.

While convenience chain Seven-Eleven Japan has seen its same-store sales increase on a year-on-year basis for 55 straight months, customer numbers have remained sluggish.

The company's streak comes thanks to a new lineup of fresh coffee and prepared foods that have raised the average amount each customer spends.

According to data from the Japan Franchise Association, customer numbers at existing convenience stores fell 1.1% on the year in January, declining for the 11th straight month. But sales rose 0.1%.

Customer numbers are declining for two reasons:

  • Intensified competition within the industry. Since three operators -- 7-Eleven, FamilyMart UNYholdings and Lawson -- run 90% of Japan's convenience stores, shops belonging to the same chain often fight over customers.
  • More competition from other industries. Supermarkets and drug stores are offering more heat-to-eat meals -- convenience stores' bread and butter, so to speak.

Lawson has reacted by selling ready-to-eat boxed lunches and prepared foods in more of its stores. The convenience chain plans to increase its selection of refrigerated meals and other foods for its evening and morning customers.

FamilyMart plans to spend 35 billion yen ($308 million) on upgrading factories run by the subcontractors who make its prepared food items.

Even though customer numbers at existing stores have remained sluggish, the three major operators are opening more shops.

The three plan to add 1,000 or so stores in fiscal 2017. The number of 7-Eleven outlets is expected to reach 20,000.

That could exacerbate problems. It has already become difficult for convenience stores to find franchisees and part-time workers.

In February, it was also revealed that a 7-Eleven store in Nagoya, Aichi Prefecture, had illegal labor contracts with its part-timers that fined the workers for unexpected absences.

The labor shortage will hamper new store openings and make store networks more difficult to maintain.

To ease the labor problem, Lawson plans to introduce unmanned cash registers at a dozen stores in fiscal 2017. 7-Eleven is set to introduce dishwashers at all outlets by the end of February 2018 to free up employees to do other tasks.

(Nikkei)

FamilyMart UNY Holdings Co. Ltd.

Japan

Market(Ticker): TKS(8028)
Sector:
Industry:
Retail Trade
Food Retail
Market cap(USD): 7,808.60M
Shares: 126.71M

Seven & I Holdings Co., Ltd.

Japan

Market(Ticker): TKS(3382)
Sector:
Industry:
Retail Trade
Food Retail
Market cap(USD): 35,471.87M
Shares: 886.44M

Lawson, Inc.

Japan

Market(Ticker): TKS(2651)
Sector:
Industry:
Retail Trade
Food Retail
Market cap(USD): 6,502.04M
Shares: 100.30M

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