Scant Room for Growth in Japan’s Saturated Convenience Store MarketEconomy
Convenience store sales growth is starting to slow in a heavily saturated market. A survey by the Japan Franchise Association found that total sales for all convenience stores in the country went up by only 2.7% in April 2019 as compared to the same month in 2018. Overall sales for stores in continuing operation over the period increased by only 1.3%. The growth rate continues to show ups and downs, reaching as high as 9.6% year-on-year in January 2019, but has been generally slowing since around 2015.
Japan’s convenience stores have enjoyed uninterrupted growth since they were first introduced into the country in the early 1970s. According to the JFA, there were around 58,000 convenience stores nationwide as of April 2019, roughly a 1.5-fold increase from 20 years ago. Annual total sales in fiscal 2017 exceeded ¥11 trillion.
Although growth continues, sales are not increasing at the rate they once did, as companies continue to open new stores in an already saturated market.
Problems with the Current Business Model
The long-accepted convenience store business model has also become difficult to sustain. In February 2019, franchise owners in Osaka Prefecture decided to shorten their store hours due to lack of personnel. When the franchise headquarters protested, this sparked a public debate on the conventional expectation that convenience stores should be open 24 hours. The practice of throwing away food products after their expiration date and the prohibition against discounting prices have also attracted considerable public criticism.
In response, the major convenience store chains are beginning to change their policies, opening fewer new stores to cope with the labor shortage, allowing shorter hours on an experimental basis, and allowing point “refunds”—in effect discounts—on food items that have passed their expiration date.
(Translated from Japanese. Banner photo © xiangtao/Pixta.)