With Seven Eleven and Lawson adding around 1,000 new stores a year, and Lawson rapidly diversifying out of uniform convenience store retailing overall, number three chain Familymart is fighting to keep pace. With all three chains going after similar locations for their new stores, Familymart is losing out. To make up for this it is now looking at joint venture tie-ups to allow it to expand its brand and supply chain more widely. Will this be enough to keep it in the game?
Familymart, the number three convenience store chain, is taking a different approach to business expansion and increasing the number of cross-format tie-ups it has in place. In addition to its relationships with other former members of the old Seibu retail group such as Muji, Credit Saison and Loft, Familymart has had long standing deals with Kintetsu and Izumiya in Kansai, and over the past two years has completed deals with various regional drugstore chains to develop hybrid formats.
This model of joint development will now be accelerated; deals with Yokohama Subways, Daiichi Kosho Star Karaoke and Maido Okini Shokudo restaurants all came online during the summer. The aim is to grow jointly run stores to more than 3,000 by 2019. It has also tied with Japan Net Bank and plans to combine its T-point loyalty card with a new cash and credit card service.
While Seven Eleven and Lawson continue to expand stand-alone store numbers at more than 1,000 stores a year, Familymart hopes these cross-format tie-ups will help it keep pace. All three chains are slowly moving into drugstore hybrid formats, with Seven Eleven having its own operation and Lawson choosing to franchise its convenience store know-how to existing drugstore chains. Using this ‘joint venture’ model, Familymart already has 10 regional drugstores signed up and is slightly ahead of its larger rivals in terms of store numbers, with more than 100 stores already up and running. The usual format is 40% convenience store, 60% drugstore merchandise in an enlarged space – with existing outlets at partner chains converted to the hybrid format in many cases. Most stores also use dual branding.
Back in May, Familymart also completed a deal to integrate its convenience store model with A Coop grocery stores, owned by JA, the biggest agricultural union in Japan. The first Familymart A Coop store opened in Ehime in Shikoku in the summer, and there is a target of 30 stores in the first year or two. JA and Familymart will develop a joint supply system for the chain, with both sides providing some of their own brands and exclusive lines. Unlike typical Familymart stores, JA stores will also sell fresh produce – another example of a joint venture solving a problem that Lawson is tackling alone. A Coop currently numbers around 800 stores in total and the two sides are still discussing just how many will eventually become Familymart integrated. The convenience store will be hoping it can take on the entire chain.
Familymart still retains a reasonably secure third place in the sector with none of the area franchisee defections and shrinking market faced by the fourth largest chain, Circle K Sunkus. It will continue to emphasise overseas expansion, despite a set back earlier this year forcing it to pull out of South Korea, its biggest single market outside Japan. At the same time, overseas expansion needs stability and strength at home. Familymart’s new strategy of business tie-ups will certainly help, but it does mean a slower rate of expansion as well as reliance on a growing and potentially unwieldy number of partners – disagreements with a partner were the source of the problems in Korea.
Convenience stores aiming to be default for online delivery
FOCUS: Retail Industry Performance FY2014: solid results for many as distribution evolution continues
Convenience store sales up 1.6% in May with innovations across sector
Conbini coffee hits 1.9 billion cups
2014 Calendar Year Results: Leading chains make progress in difficult year
Healthcare at convenience stores
Lawson ties with Sagawa to compete with Seven & I and Amazon
80% of retailers expecting increased profits in FY2015
Get a concise monthly update on Japanese Consumer Markets – and a FREE copy of our monthly report.