Convenience store chain operators are now focusing on compact, unstaffed shops that emphasize quality as the number of their outlets continues to plummet.

The nationwide “konbini” number dropped year over year by 119, or 0.2 percent, to 55,620 in March, statistics released by the Japan Franchise Association on April 22 showed.

It was the 22nd consecutive month of year-on-year declines since June 2022, the longest streak since such statistics became available in 2005.

The three largest chains--Seven-Eleven Japan Co., FamilyMart Co., Lawson Inc.—operated the lion’s share of the outlets. Ministop Co., the fourth largest, and three other operators have fewer than 2,000 stores each.

FamilyMart ran more than 18,000 stores in 2016 following its merger with Circle K Sunkus. But after culling unprofitable outlets, the number fell by 262 year on year to 16,271 in February.

FamilyMart said it has closed not only stores for which it no longer held leasehold rights but also the chain’s own stores that were difficult to franchise.

Those konbini were abandoned as “part of our business metabolism,” the company said.

FamilyMart is now taking a “scrap-and-build” strategy to relocate shops to prime locations.

“We will be stepping up expansion of quality outlets instead of putting in place as many stores as possible,” a senior FamilyMart official said.

Market leader Seven-Eleven Japan said its shop number was up by 133 to 21,535 in February, but the increase rate has slowed.

Around 10 years ago, the company was adding 1,000 outlets annually.

“We will be relocating existing stores to better locations, given changes in the townscape,” Seven-Eleven Japan President Fumihiko Nagamatsu said.

The konbini market has been described as saturated.

But while the number of outlets is shrinking, combined annual domestic sales in the industry hit a record high of more than 11 trillion yen ($72.66 billion) in 2023.

“There are now fewer locations, primarily in non-urban areas, that have profit potential,” said Masuji Ikeda, a senior researcher at the Distribution Economics Institute of Japan. “Franchisees are hesitant about opening new outlets under such an environment, with society aging and labor shortages worsening.”

The seven corporations’ store total had fallen below the previous year’s level between November 2019 and March 2020.

At the time, the companies refrained from opening new stores. Competition with other retailers intensified. And one short-handed convenience store franchisee ended its 24-hour services and feuded with headquarters, drawing public attention and sympathy.

The latest downward trend derives from the much harsher business conditions facing franchisees, who must deal with surges in personnel costs and utility expenses.

Tomomi Nagai, chief analyst at Toray Corporate Business Research Inc., who is knowledgeable about konbini affairs, said the industry is reaching a turning point.

“Chains’ headquarters have no choice but to change their conventional business model of earning profits through a myriad of outlets,” Nagai said. “The era of opening stores en masse is over.”

QUALITY OVER QUANTITY

Key players in the konbini market are now beefing up the quality of their stores.

Seven-Eleven Japan this year plans to open compact stores on 50-square-meter spaces in corners of cafeterias and rest areas inside office buildings.

These konbini are expected to handle one-third of the goods normally available at conventional stores. Clerks will be replaced by automatic cashiers for smartphone payments.

The compact option, expected to serve as a substitute for employee cafeterias, will be open only during the business hours of the offices.

FamilyMart has taken the lead in incorporating unstaffed outlets where customers use self-checkout counters.

To promote employee well-being programs, FamilyMart has introduced unmanned stores in more than 30 locations within office buildings and rest areas of commercial facilities and logistics centers.

The company says it also receives inquiries from school operators whose cafeterias have been closed down.

Lawson, whose management will soon be transferred to a joint operation of mobile carrier KDDI Corp. and trading house Mitsubishi Corp., is considering selling the chain’s products at 2,200 cellphone shops operated under the au brand.

Lawson will also work toward developing new services, taking advantage of digital technologies and communications systems.

“Our dream is becoming part of GAFAL (Google, Apple, Facebook, Amazon, Lawson) in Asia,” said Lawson President Sadanobu Takemasu.