CSD Cover Story: All in the Family — Inside Japan’s FamilyMart

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Aug 16, 2006
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By John Lofstock, Editor-in-Chief, Convenience Store Decisions


Through special arrangement with Convenience Store Decisions magazine, what follows is an excerpt of the current cover article, presented here for
discussion. Click to view the entire article:
All in the Family — Inside Japan’s FamilyMart.


With the experience of operating 12,452 convenience stores worldwide, Tokyo-based FamilyMart Co. felt the time was right to take on the complex U.S. market. So while much of the attention over the past six months was being paid to Tesco’s much-anticipated entry into the U.S. early next year, FamilyMart was quietly building a network of six stores in Southern California.


Japan’s No. 3 convenience store chain is now poised for rapid expansion in the U.S. It hopes to have as many as 30 of its upscale, Asian-inspired Famima shops in the Los Angeles area by the end of this year and 250 in the U.S. by 2009, according to Shiro (Sho) Inoue, president of FamilyMart’s Famima Corp. subsidiary.


At first glance, Famima stores have the look and feel of modern convenience stores. The front counter is well organized and free of clutter. It features two registers to minimize the wait in line during busy times and carries high-impulse, high-margin items like gourmet chocolates and snacks.


Famima also makes good use of display cases and hardwood floors, both of which make the company stand apart from its c-store competitors.


Shelves are stocked with the upscale items you would expect to find at specialty retailers. Organic products dominate the offering highlighted by organic coffees, cereals, candy snacks and even health and beauty items like toothpaste and mouthwash.


The price tag on some of these items is also atypical for a convenience store. Some of the specialty coffees and teas retail for as much as $20.


The foodservice offering is supported with indoor and outdoor seating, fresh baked goods, gourmet coffees and teas and a Coke branded soda fountain. At press time, the company was in the process of securing liquor licenses to sell beer and wine.


Price point is one area where Famima seeks to differentiate itself from specialty marketers. Prices for menu items are in line with its convenience store competitors rather than the specialty stores. Meals range from as little as $4 to $6.95, a relative bargain compared to local restaurants.


Geared toward on-the-go consumers, Famima is a hybrid featuring successful components of convenience stores, supermarkets and natural foods stores.


“When we first opened our West Hollywood store, many people did not know what type of business we were,” said Mr. Inoue. “From our modern store design, some people mistook us for a bookstore or cell phone store. We understand the need to build our brand awareness and this will take time. But we believe we can steadily increase awareness by expanding to new markets and continuing to provide satisfying products and services.”


FamilyMart’s focus is on maximizing space and, to that end, parts of its stores are reset daily. As an example of how it might work in the U.S., many stores market single-serve doughnuts, cookies and cakes on high-end gondolas near the front of the store. This is great for the morning rush, but sales of those items normally fall off as the day goes by. Rather than maximizing this prime real estate, the items do little more than simply taking up valuable space. Famima’s Japanese stores avoid this entirely by rotating items throughout the day so, no matter what time customers come in, the items that greet them are relevant to the meal or snacking occasion.


“Consumers in America rarely say they are going to go to the convenience store for the majority of their shopping, but people in Japan do it all the time,” said Hidenari Sato, Famima’s chief operating officer. “We thought this kind of concept could be successfully recreated in the U.S., and, so far, it seems to be working very well.”


Discussion Questions: What aspect of Famima detailed in the Convenience Store Decisions‘ article do you believe will have the most resonance with
American consumers? Will Famima be successful as it expands its operations to other parts of the U.S.?

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12 Comments on "CSD Cover Story: All in the Family — Inside Japan’s FamilyMart"


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Race Cowgill
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Race Cowgill
14 years 6 months ago

I think what we are really facing here is identifying consumer expectations in the c-store segment, and which are not being met. Our data (as of Spring, 2006) shows that the most important factors to consumers in the c-store segment are: the right selection, low price, easy in-and-out, friendly and fast checkout, and clean and attractive stores (not in order). Of these core expectations, the top ones not met are: selection, cleanliness, and checkout (not in order). It appears that FamilyMart may have hit two of these very well. Maybe three. With their slightly different model, if they gain enough market share, they are likely to alter consumer expectations, too, and in their favor. Note to their competitors: watch out.

Bernice Hurst
Guest
14 years 6 months ago

What lucky timing. In the interests of research and knowing of what I preach, I paid a visit today to a Tesco Express. Let me tell you – you should not be anticipating it as the event that it is being hyped as. It stinks. Literally and metaphorically. There was nothing that I felt the least bit tempted to buy and that’s quite apart from my well known and not the least bit hidden antipathy to all things Tesco. The Japanese alternative sounds heavenly to me and I am looking forward to visiting one on my next trip to California later this year. If their combination of quality and flair is half of what it sounds in this article, they are onto an absolute winner. And if they aren’t, then all I can say is more fool the American consuming public.

Paul Waldron
Guest
Paul Waldron
14 years 6 months ago

This sounds like a cross between Starbucks and Trader Joe’s. Since they are looking for an upscale clientele, I think locations will be of prime importance. If they stick to the 800 SQ FT they have in other countries, they will be able to compete with Starbucks for prime location in downtown or business park areas.

Mitch Kristofferson
Guest
Mitch Kristofferson
14 years 6 months ago

Japanese C-stores, with their tight rotating assortment and attractive pricing, are retail marvels to behold. Nearly every consumer shops regularly at these stores with some consumers relying on them for most of their daily needs. The C-store segment is much less mature in the US. The Japanese are known for making small bets and refining the model over time; let’s see if and how quickly they can achieve some kind of scale in the US to make this more than an experiment. In any case, this is another example of the endless opportunities for innovation that exist in modern retail.

Ryan Mathews
Guest
14 years 6 months ago

The appeal to the higher-end shopper may work. Also, if they get day-part marketing down, it could revolutionize U.S. retailing.

Mark Lilien
Guest
14 years 6 months ago

America can use an upscale convenience store chain like Famima. It’s unlikely to be successful everywhere, but it would certainly work with high-income demographics, particularly in urban areas. Being a cross between Whole Foods, Starbucks and 7-Eleven gives the retailer good margins and gives the customer a place to shop that feels right. If FamilyMart’s execution is skillful, they’ll do fine.

Bernie Slome
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Bernie Slome
14 years 6 months ago

From what was in the discussion piece, there seem to be several good ideas that will very possibly resonate with US shoppers. And, if they do, the US convenience industry better move quickly. The first is the resetting of display cases throughout the day. The display will look fresh and will create additional purchases. The second is the look. By not looking like a typical convenience store, they might attract consumers who don’t ordinarily stop in a convenience store. Now, if they can figure out how to also give good customer service…

Camille P. Schuster, PhD.
Guest
14 years 6 months ago

Once consumers find that quality fresh food items appropriate for the time of day are available, they are likely to become frequent shoppers. Once in the store and they begin to look around, they will be surprised to see other interesting items. If the stores stock items that the consumers want, there is a very good chance of success in the US.

Pete Hisey
Guest
Pete Hisey
14 years 6 months ago
I’d love to see one of these stores. The midline C-store has pretty much saturated the country, but there’s lots of room for something more exotic. This is a strategy that will truly appeal to the time-stressed, no-kids-at-home consumer, who is often overlooked in favor of the soccer mom type of family. When you’ve just worked 11 hours and have two hours before bed, picking up a relatively healthy meal in the evening for a few bucks looks pretty good. I am surprised that no one has tried this before; it looks like a winner to me. Discounting specialty store products, like fancy teas and coffees, is a pretty good idea too. Trader Joe’s gets me to visit because they have great coffees at a reasonable price. I can’t buy Kona coffee in my usual grocery store, so it makes me visit at least once a month, and while there I buy other stuff as well. Having this available at a C-store would make my life simpler. Coffee is a luxury product to me; I… Read more »
Shaun Bossons
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Shaun Bossons
14 years 6 months ago
It’s refreshing to see a convenience store chain using a strategy around quality, excellent service and consumer satisfaction. In the US, convenience stores (and also pharmacy chains moving into this space) have maintained the look and feel of a “dollar store.” Most market analysis highlights convenience as a common motivator used in the US to align with the busy consumer lifestyle, but that doesn’t mean this should come at the expense of quality. On several occasions in the UK, high-end retailers have taken advantage of how consumers shop for convenience such as during lunch breaks or directly after work. Marks and Spencer’s introduced its “simply food” banner which sold gourmet food offerings for daytime or evening meals at a higher price point. In this case, quality led assortment and it was well accepted in the UK. I remember working with a retailer a few years ago who was looking into fixture resets more than once a day. Their analysis led them to believe that people stopped buying sandwiches and soup around 3 p.m. and therefore… Read more »
t w
Guest
t w
14 years 6 months ago

Two key points of interest:

1. Japanese consumers are much more homogeneous, so it is easier to tailor services/products to changing consumer needs over time. In the USA, the mix of people is much more diverse and the preferences are tougher to cater to.

2. The USA often falls asleep at the wheel once something is launched. We are so “in the present” in our thinking that we take our eye off the ball and end up having to play catch up later on. Just take a look at Sears, Kmart, JC Penney, the big 3 auto makers, etc. We get too lackadaisical once something is launched. Perhaps our culture has attention deficit disorder.

Stephan Kouzomis
Guest
Stephan Kouzomis
14 years 6 months ago

When in Japan 6 years ago, I saw this and 7/11 outlets. Both master the use of little space, dramatically.

Of course, offering more items in the U.S., the fresh food
meals, organic offerings and sushi should draw shoppers. But, not to buy their weekly groceries, like in Japan!

Will be interesting to see if this FamilyMart sets up
outlets in Asian neighborhoods and high, high income areas. Hmmm

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