Having saturated the domestic market, Japanese convenience store operators are successively opening outlets across China in what is shaping up to be a battle for survival.

Lawson Inc. has increased its outlets in China by twofold from three years earlier to more than 5,000 and opened its first store in Guangzhou, southern China, on Sept. 28.

With a floor space of more than 100 square meters, the newly opened store was packed with customers in their 20s to 30s just after 11 a.m. on the opening day.

One twentysomething woman who works nearby picked up an Akuma no Onigiri seasoned rice ball, which sells for 3.9 yuan (about 80 yen, or 54 cents), and took of a photo of the purchase, already a proven hit in Japan, with her smartphone to be uploaded on social media.

“A friend told me this is a sought-after item,” she said with a shy smile.

Lawson initiated its expansion into China in 1996, starting with Shanghai.

But its personnel were poached by a rival firm in the industry, resulting in a “reduction in service quality” at one time, according to a Lawson insider. The Japanese headquarters then acquired all the local subsidiary’s shares to develop unique products and make more active inroads into the Chinese market.

Lawson had 5,235 outlets in 15 provinces and cities as of the end of August, compared with less than 3,000 in 2020.

Ryohei Yoshida, an official in charge of business promotion activities at a subsidiary in China, explained the factors behind the growth.

“The network of distribution centers, bento factories and other facilities, along with an information technology-based system, is now in place,” he said. “This has led to more affiliated corporations opening and running stores.”

Another factor concerns the smaller convenience store number on a per-capita basis in China.

A research report released in 2021 by a government-affiliated industry organization shows there is one convenience store for every 7,033 people in China, an outlet density level that is one-third that for Japan.

Lawson is looking to increase its number of outlets across China to 10,000 by the end of 2025 with annual sales projected to soar from the current level of around 10 billion yuan to 20 billion yuan through 25 billion yuan.

A decision by the Chinese government to re-evaluate the role of convenience stores is giving operators additional momentum.

City lockdowns and travel restrictions have created difficulties in securing food supplies to residents under Beijing’s strict zero-COVID policy.

As the issue enters the national spotlight, the Chinese government is stepping up efforts to encourage the opening of new convenience stores to supply foodstuffs and daily necessities to local residents.

China’s commerce ministry plans to lift convenience store numbers to 300,000 by the end of 2022.

JUMPING ON BANDWAGON

Other leading Japanese chains are also making forays into the market.

Seven-Eleven Japan Co., Japan’s largest operator, which had 81,839 outlets in 18 countries and regions as of the end of May, assigns special importance to China, while its purchase of the U.S. Speedway brand in 2021 to expand sales in North America is also drawing much attention.

Seven-Eleven Japan opened its first Chinese store in 2004 in Beijing and had 3,980 stores, including those managed by a local corporate group, as of the end of 2021. The figure is just behind those for Japan, North America, Thailand, South Korea and Taiwan.

The first FamilyMart Co. store opened in China in 2004. The number of outlets reached 2,702 at the end of August this year. By region, around 1,500 stores, the most, are in Shanghai, followed by Suzhou and Hangzhou.

Taiwan is home to the largest number of overseas shops of FamilyMart at 4,095, and the operator is seeking to expand operations further in China, describing the huge market as “an area of special significance.”

Tomomi Nagai, chief analyst at Toray Corporate Business Research Inc., who tracks the convenience store business, explained the appeal of the Chinese market.

“The market is attractive, because there is still room in China for convenience stores to open, and because people’s incomes and living conditions are improving,” she said. “A future challenge will involve how to make products stand out from those of other chains as competition with unstaffed stores and other kinds of retailers heats up.”

(This article was written by Atsushi Okudera in Guangzhou and Takeshi Suezaki in Tokyo.)