The Importance of Being Convenient

Features - March 17th, 2006
One-stop shops

Japan’s one-stop shops just keep getting handier

by David Meredith 

You see them everywhere, every few blocks of every few streets, and every few floors of every office high-rise. Japanese convenience stores, where you can buy your lunch, mail some documents, pay your electricity bill, even take out money. To state the obvious, con­venience stores in Japan, are really convenient. Major chains in Japan have managed to find holes in the market and exploit them to their great benefit, and our further convenience. Once upon a time we scratched our heads, wondering why on earth the post offices had to close so early and on weekends. Enter the con­venience store with 24-hour delivery service reception. And why, we asked, do banks also have to have such inconvenient hours? Enter the convenience stores again, with their convenient ATMs. And it doesn’t stop there. Convenience stores in Japan are finding further ways to serve us, and to save us from inconveniences we didn’t even know we had.

Raising the Convenience Bar

Convenience stores in Japan, or combinis as they are bet­ter known here, are everywhere. Prime spots including busy office blocks, streets with high pedestrian traffic and isolated roadsides all have combinis, leaving literally little room for growth. This has lead operators to search high and low for other untapped locations. When Law-son, a top Japanese convenience store chain, opened a branch in Tokyo University, it became the first 24-hour convenience store to open in a Japanese university. Other unique locations include police stations, train stations, hospitals, factories and temporary locations at festivals. It won’t be long before the market reaches ma­turity — predicted to be at 50,000 convenience stores across Japan — making expanding services and interna­tional growth a key business focus.

Collaborating Forward

In 2004, the major convenience store chain FamilyMart introduced clear wrapping on its Japanese lunch, or bento boxes. This innovation allowed advertising space for regional restaurants that have collaborated on recipes. Meanwhile, Seven-Eleven, a chain familiar all over the world, has teamed up with a number of manu­facturers to produce original beverages and food-lines, a concept that spurred rivals and supermarket opera­tors to follow suit. A joint venture between the large securities firm Nikko Cordial Securities and Lawson in July 2004 saw the convenience store operator open a branch inside Nikko’s brokerage office. The branch distinguishes itself by featuring an impressive 13m2 screen shared by both businesses. The giant screen tracks investment programs and lists various stock and financial information, thus encouraging possibly risk-shy middle-aged and mature investors to seek financial advice in the non-threatening sales environment of the friendly combini. In this way, convenience stores have become community centers — sites where consumers pick up new or helpful information. These one-stop shops fulfill services that previously involved separate­ly visiting the supermarket, bank, or post office. They have the added bonus of serving as community hubs where consumers interact with staff and neighbors.

From Cheap to Chic

In June 2004, FamilyMart launched Famima!! in Ebisu Garden Place, an upscale store with a larger than average range of own brand goods targeting business people. Famima!! stocks a total of 1,700 products, and the majority of their product lines are their own brand. Compared to a regular FamilyMart, they have 900 few­er product lines. Additionally, the staff wears a stylish uniform unique to Famima!! The concept is quick to go global, with the first international Famima!! launched last July in West Hollywood, with a further branch opening in trendy Santa Monica, both in California. The store’s stylish appearance and up-market product line successfully reinvents the lowly convenience store — traditionally viewed as a lesser alternative to the su­permarket or specialist store — into a hipper option.

Japan’s domestic combini success is relentless. Seven-Eleven Japan’s operating profits rose 6.8 percent in 2004 to ¥281.6 billion, representing 8.8 percent of the entire convenience store industry. Its profits are more than the top three supermarkets in Japan combined, proving that combinis are a definite force to be reckoned with. Their philosophy for prioritizing consumer needs has provided worrying competition to, and upped the ante for, the banking, supermarket, post office, ticketing, and discount retailing industries — the latter especially with the new trend in combini-related ¥99 discount stores. These discounted combinis also squash the stereotype that convenience stores are the preserve of the young. Various marketing practices, such as selling bananas in units of one, serve the senior market, benefiting older consumers with cost and convenience.

Japanese convenience stores are also addressing the concept that convenient does not necessarily equal low quality. This also reflects a wider shift in Japan, with consumers reexamining their personal definition of what’s valuable and worth their money. This new trend would find it logical to drive to a combini in a brand new European sports car to buy a ¥500 bento lunch.

Though the discounts are a big draw, convenience is the biggest factor. Most items sold at combinis are at a price premium, demonstrating that consumers are willing to pay extra for the added benefit of 24-hour accessibility. By offering a range of services that make consumers’ lives more convenient, combinis appeal to those living in a time-pressed society.

Ladies Love Convenience

Another untapped market that should reap plenty of profit is single women in their twenties and thirties. This demographic often has a large disposable income. However, am/pm Japan, another top convenience store chain, found that only 35 percent of women were sat­isfied with convenience stores, compared with 65 per­cent of men. They responded with Happily, a conven­ience store which has flowers out the front, all-female staff during the day, fresh juices and a water bar. There are 2,500 types of cosmetics, including large displays of brands like L’Oreal-owned Maybelline New York, and 240 dietary supplements.

In am/pm Japan’s research, one of the most request­ed amenities was a large, clean bathroom. Happily’s bathroom has free toiletry samples and is equipped with a full-body mirror and a stocking-changing area. Mean­while, rival Lawson has its own strategy for winning more female customers. Earlier this year it announced plans for nursery convenience stores with free child-care facilities for working mothers. No matter how this combini battle plays out, women are sure to benefit.

Tell Them to Tell You What You Need

And in the larger picture, we are all set to be further convenienced. The peculiar mix of factors that is mod­ern Japan may be the perfect environment for conven­ience stores to grow. The shortage of physical space, the lack of concern over customer satisfaction with govern­ment agencies such as the national post office (where you can’t even buy envelopes people, envelopes!), and the loneliness of a workaholic nation attracted to the warm, midnight glow of the combini make these stores the most highly tuned, rapidly evolving stores, possibly on the planet. Your local Lawson may perfectly reflect your deepest needs and desires, or at least that of your neighborhood. Some even stock iPods, no doubt caus­ing many to open their wallets before they even knew they wanted one. A rice-ball with your iPod anyone?

This article is based on a Change Point newsletter, released bi-monthly on a variety of subjects relevant to marketers in Japan by Bates Asia, a leading brand communication agency. For further information call 03-5793-5622.