Defying Business Customs
Japan's second-largest convenience store chain backs off round-the-clock hours
By Takayuki Fujiyoshi

Foreign visitors to Japan often are stunned by the country’s ubiquitous convenience stores. In fact, there are more than 40,000 convenience stores in Japan; c-store retailer Seven-Eleven Japan, with 10,000 doors, is the country’s largest retailer. In general, the stores are small, but they carry as many as 2500 items and can be found everywhere in Japan: in large cities, roadside in more remote locations, inside office buildings, at train stations, near beaches, in the mountains and in hospitals.

The convenience store concept, while born in the U.S., was a natural for the Japanese market. The stores have revolutionized Japanese life. Consumers visit c-stores to pick up tasty to-go meals, use ATM machines, purchase tickets for sports and entertainment events, fax and copy documents, make hotel reservations, mail letters and packages – and much more. And to the Japanese, the root of the stores’ convenience is their custom of staying open all hours.

That’s why it came as a shock to Japan’s huge convenience store industry when in late 2005, Lawson, the country’s second-largest c-store chain, announced it would alter its policy of staying open around the clock. Instead, some of Lawson’s franchises would be permitted to close overnight, despite Japanese convenience stores’ usual desire to serve the “midnight market” of late-night sales.

Lawson’s president cited two key factors in this decision. First, many of the chain’s aging population of unit owners now prefer not to work overnight due to health issues, and they are concerned about finding suitable replacements to cover those hours. Second, juvenile delinquency, which largely occurs at convenience stores during the overnight hours, is gaining attention as a serious social problem in Japan. By closing during those hours, Lawson believes it is contributing to an effort to decrease delinquency. It is also assumed the chain has analyzed the potential for lost sales based on shorter hours and decided a shorter business day actually may prove more profitable. Shortly after Lawson’s announcement, Seven-Eleven Japan founder (and convenience store guru in Japan) Toshifumi Suzuki harshly criticized the company, accusing it of not understanding the nature of the Japanese convenience store business.

UTILCREST, a consumer panel tracking service for the Japanese foodservice market (owned by The NPD Group and UTIL, Inc.), estimates convenience store traffic accounts for 44% of total foodservice sales during the “midnight market” hours. But the overnight daypart accounts for just 6% of all convenience store meals sold around-the-clock.

Source: The NPD Group/UtilCREST

By removing itself from the midnight market, Lawson will miss its share of overnight c-store sales, the smallest of the daypart segments. The company must have come to terms with that loss in order to change its business in this way. More significantly, though, the chain could lose brand loyalty: if consumers find another retailer that meets their needs during the day and at night, it could spell a market share shift for daytime sales. Lawson views it differently. The company believes consumers’ perception of Lawson’s brand value will increase since the company has connected its shortened hours to the problem of late-night juvenile delinquency. In Japan, fulfillment of corporate social responsibility can go a long way in winning consumers’ loyalty.

For more information about NPD’s services for the foodservice and convenience store industries in Japan, contact Takayuki Fujiyoshi at 81 3 5350 7684 takayuki_fujiyoshi@npd.com.