Convenience Stores in Japan

Defining a convenience store in Japan

In the formal sense, a Japanese convenience store is a small-format (about 100 sqm in most cases), food-focused chain retailer. The sector is defined by a number of key factors:

• Ubiquity: There are 56,000 convenience stores in Japan. The major chains deliberately attempt to saturate local areas with stores, and individual stores generally serve catchments of just 500 metres.
• Franchise Operations: almost all of the major chains are franchises. The franchise HQs organise store fit, branding, and merchandise planning and supply. Franchisees have some say in merchandising – but not much – and are mostly responsible for day-to-day store operations, notably hiring and managing part-time staff. Franchisees pay a healthy royalty based on store profits, and convenience store franchise headquarters are among Japan’s most profitable retailers.
• 24-7 operation: all the big chains expect their stores to operate 24-7, a feature that has become something of a cost burden on less successful stores.
• Standardisation: by operating very uniform stores as franchise chains, the big operators achieve multiple economies of scale, replication and scope. This also leads most stores to look and feel very uniform, not only in branding and layout but also in the assortment on offer.
• Literal Convenience: Stores are in easy walking distance for most of Japan’s population, or serve specific markets along major highways, in stations, near residential housing, or near office areas. Most stores carry 2,500-3,000 SKUs, with approximately 50-70% in food – consisting of fast and packaged foods almost entirely. Stores are well known for their ‘counter’ foods, which form a major USP for each chain but almost always include coffee and other drinks and, at least in winter, oden. The remainder consists of entertainment and basic and emergency items, such as clothing, toiletries, household items, and stationery. Stores also provide a wide range of services, including parcel drop-off and pickup, utility and other bill payments, ticket sales, insurance and other services, photocopying and printing, and ATMs.
• IT and other technology: Every convenience store run by the larger chains has a data link back to HQ that tracks sales and inventory in real time. Chains routinely record the time of each purchase and use various methods to record each customer’s age and gender, nowadays usually by tracking customer interactions through apps or loyalty cards. Recent developments include the widespread introduction of in-store media and customer movement tracking, a growing number of unmanned stores, and the use of various technologies to reduce reliance on labour.
• Sophisticated Logistics: The standard model for all major chains is to replenish every store at least three times a day, with deliveries timed just before peak sales periods. Stores aim to sell out of very fast-moving perishable foods three times every 24 hours, with less perishable items being topped up once a day or just a couple of times a week. The majority of deliveries are made through a network of cross-docking distribution centres, which also commonly house fast-food preparation factories in the same building.