'Convenience Store Kingdom' Japan, New Stores Plummet... 21% Decrease Compared to Previous Year

Increased Rent and Drugstore Competition Burdens

The number of new store openings by major convenience store franchise companies in Japan has plummeted by more than 20% compared to the previous year, drawing attention to the underlying reasons. Once known as the "convenience store kingdom," Japan's convenience store industry is now facing difficulties coping with structural issues such as a shrinking domestic market, rising rent, and labor costs. Additionally, competition is intensifying as drugstores like Don Quijote are launching even cheaper private brand (PB) products, leading to a gradual narrowing of convenience stores' market position.

On the 16th, Nihon Keizai Shimbun (Nikkei) reported that according to its own survey of the three major convenience store chains including Seven-Eleven Japan, the total number of new store openings by the three companies decreased by 21% year-on-year to 1,040 locations. This figure is only about 30% of the peak period in 2013 when convenience stores opened the most, and it is the lowest since the survey began in 2007.

According to Nikkei, Seven-Eleven opened 625 new stores, down 6% from the previous year, while Lawson opened 228 new stores, a 53% decrease. Only FamilyMart increased its new store openings by 10% to 187 locations, but Nikkei noted that this is still a significant decline compared to its heyday.

A Lawson representative explained the unusually large decrease in new store openings by saying, "With rising rents in the metropolitan area, we have started to focus more on the quality of stores," adding, "As a result, the number of stores has significantly decreased," according to Nikkei.

Interior view of a Japanese convenience store.

The reason the three convenience store chains are reluctant to open new stores is due to rising rent and labor costs. According to Japan At Home, a real estate company, the rent per tsubo (approximately 3.3 square meters) for stores under 50 tsubo in central Tokyo areas such as Shinjuku increased by 1.7% year-on-year in the second half of last year to 25,635 yen (about 235,800 KRW). Major cities like Nagoya and Osaka are also experiencing similar upward trends.

As a result, the convenience store industry, which once continuously opened more than 1,000 stores annually by company, is changing. Seven-Eleven plans to open 585 new stores this year, a 6% decrease from last year. Lawson plans to open 280 new stores, a 23% increase, but this still indicates that the situation has not improved compared to the significant decline last year. FamilyMart did not respond.

Moreover, the convenience store market is already saturated, making it difficult to maintain competitiveness with regular stores. With about 60,000 convenience stores nationwide in Japan, drugstores and others have recently started selling PB products, replacing the role of convenience stores.

The drugstore Don Quijote recently launched a PB brand called "Jounetsu Kakaku (Passion Price)" and is expanding into the clothing and food markets. Don Quijote attracted attention by releasing jeans priced at 690 yen (about 6,300 KRW), claiming they would be cheaper than the fashion brand GU.

Don Quijote launched a PB product called 'Olive Oil Kettle Chips'. The product name is as long as 156 characters. (Photo by Don Quijote)

Recently, Don Quijote has gained popularity with marketing that covers product labels with product names exceeding 100 characters. For example, the "Olive Oil Kettle Chips" released last year featured a product name that read, "Discovered potato chips that I wholeheartedly want to recommend to people! After bowing several times, the person in charge succeeded in importing the potato chips they believe were fatefully met in the U.S.! The flavor of olive is truly recommended," capturing both price and consumer interest, receiving positive reviews.

To survive in this environment, Japanese convenience stores are adopting a new strategy of prioritizing "quality over quantity." They aim to increase profitability per store by improving the quality of each convenience store.

One noticeable approach is introducing high-priced products to raise the average spending per customer. Seven-Eleven increased the number of high-priced products in its "Regional Fair" section, which sells products related to specific areas, resulting in a 3.7% year-on-year increase in sales per store last year.

FamilyMart has expanded its PB products not only in food but also in clothing, and to address rising labor costs, plans to introduce robots that stock beverages in shelves at 300 stores by next year.

This content was produced with the assistance of AI translation services.