Tokyo & Kyoto 2016
In March 2016 the Forum visited Tokyo and Kyoto, 5 years after the first visit. Japan is the world’s second largest Convenience market after the USA and the top market for product and technology innovation.
The Japanese convenience retail business model is a franchise model: 95% of stores in the top three retailers – 7-Eleven, Lawson, Family Mart Uny Holdings Company - are operated by independent retailers. The three retailers each has its own franchise model, however, they are similar to the 7&I model for 7-Eleven franchisees. Seven-Eleven Japan’s distinct franchise system aims to bring innovation and dynamism to small and medium sized retail stores and achieve coexistence and co-prosperity with franchisees.
The top 10 learning from the trip were:
1. C-store sales are growing at +5% through franchising, integrated stores & institutional locations. #2 channel with 53,600 stores after supermarkets.
2. Big 3 retailers are targeting a 12% increase to 60,000 stores. Focus on Business, Education, Health, Transport & combo-stores, e.g. Drug & Greys’ Lifestyle. Store density is 1: 2,500 within a ‘3 minutes’ walk.
3. Food for Now #1 strategic category across Fresh, Hot, Ambient & Dry. Products such as onigiri rice balls, instant ramen noodles, bento box meals and fried chicken are > 50% sales.
4. Proprietary products are 50% store sales, 68% excluding Tobacco
5. 100% annual replacement of food skus: innovation ‘waterfall’ with >200 new skus in-store every Tuesday (Family Mart Uny)
6. Innovation - ‘always something new’ – to hold shopper interest and visits. Manufacturers launch new & premium products at C-stores. Unsuccessful products are moved to the Discount sector to clear after 4 weeks. Product failure rate is 90%.
7. Fresh food deliveries x 3 each day.
8. Retailers have a constant focus on ‘single Cm’ space performance
9. 100% supply to franchisees: >99% fulfilment across all categories driven by real time data exchange.
10. Stored payment transport cards such as ‘Pasmo’ & cash dominate transactions. Customer use ‘corner’ machines for banking, auto loans, bill payment, ticketing and other services.