Thursday, March 27, 2008

Small-Format Grocery Retailing Feature: Stretching the Boundaries of Convenience Store Retailing; Some Say Japan's Natural Lawson is 'Awesome'

Convenience stores are as ubiquitous in Japan as grains of white rice and packages of Ramon noodles are. There are about 40,000 combini, as convenience stores are called in Japan, in the nation, or one for every 3,200 residents.

One of the largest combini operators in Japan--in addition to market share leader Seven-Eleven Japan, Circle K Sunkus (number two) and number three FamilyMart,--is Lawson, which operates 8,400 convenience stores in all 47 of the nation's prefectures.

If the name Lawson sounds American that's because it is. The origin of the Lawson name originated in the U.S. state of Ohio in 1939. A man named J.J. Lawson started up a milk business there called Lawson's Milk, and opened a chain of store's in the state to sell his milk. The milk stores evolved into convenience-type stores and in 1959 Consolidated Foods Co. bought out Lawson.

In 1974, Consolidated Foods partnered with Japanese food retailer Daiei to open the first Lawson branded convenience store in Osaka in 1975. Daiei opened many more Lawson stores throughout the 1970's and 1980's. In 1989, Daiei merged another chain called Sun Chain which it operated in Japan, with Lawson and created Daiei Convenience stores. In 1996, the combined operation was renamed Lawson, Inc., with all the stores getting the Lawson banner.

The Lawson banner is long gone in the U.S. Its stores all became Dairy Mart convenience stores in the states over a decade ago.

The majority of the 8,400 Lawson combini (c-stores) in Japan are conventional convenience stores similar to those in the U.S. and Europe. However, Lawson also operates two other formats in Japan. The first is called Lawson Store 100, a 20-store chain which sells various items for 100 yen each. It's similar to a dollar or 99-cents store in the U.S.

Lawson's other format, and the one of interest in this piece, is called Natural Lawson. It's an upscale, high-end convenience store format positioned to serve Japanese women and the nation's seniors rather than salarymen. Salarymen are working men in Japan. Like their counterpart convenience stores in the U.S. and Europe, which traditionally target men, the majority of Japan's c-stores still do the same.

There currently are about 24 Natural Lawson small-format convenience stores in Japan, with 12 located in Tokyo. The stores' offer a broad selection of foods and other items for shoppers. The focus is on health and wellness, and increasingly on upscale, fresh prepared foods, along with natural and specialty groceries and non-foods.

Specialty foods brands line Natural Lawson's shelves and perishable cases. There's locally-grown produce, including organic, provided by a local Japanese farming collective. Organic groceries, coffee, teas and other foods and beverages are plentiful in the stores. High-end, all natural cosmetics for woman are offered for sale along with other natural health and wellness-oriented items, including those for pets.

An area Natural Lawson is moving further into is offering a diverse selection of healthy, upscale-quality fresh prepared foods, breads and related items. For example, the natural c-store retailer sells an all-natural healthier version of the popular bento lunchbox, which is a staple of Japan's working class. Basic bento boxes are sold in all of the nation's conventional convenience stores.

Natural Lawson recently entered into an alliance with NaturalBeat, which operates a chain of high-end sandwich and delicatessen stores in Japan. The stores' prepared food items are all homemade, using natural ingredients with no food additives, preservatives or artificial colors. NaturalBeat also has a subsidiary called Wholesome Co. Ltd. which produces all natural healthy fresh breads and other baked goods.

All Natural Lawson convenience stores are now selling NaturalBeat's healthy, upscale-quality prepared foods, including sandwiches, salads, entrees and other grab-and-go items. The stores also are featuring the healthy fresh breads and baked goods produced by Wholesome Co. Ltd. Fresh, prepared foods--especially all natural and upscale--are a rarity in Japan's combini, so natural Lawson is blazing a new trail in the category for convenience stores in the nation.

In addition to focusing on its product selection, Natural Lawson is taking great care in how its stores look, something that wasn't evident at all when its first stores opened in 2001.

Today's stores reflect the retailer's target market and positioning. Soft colors and natural woods are used inside the stores, appealing to the retailer's prime target shopper--women. There's no neon lighting like in Japan's typical conventional combini. Instead, soft, recessed lighting is used throughout the stores, complementing the natural woods and pastel colors. Many of the stores have a bar area where shoppers can lounge, and where trained staff members give out health, wellness and beauty tips. Additionally, Natural Lawson uses an upscale, attractive font-style and natural motif graphic for its logo on the signs outside each store, inviting shoppers to come inside.

The stores' brand--via its design, merchandising and product offerings--says Natural Lawson is the place to shop for premium, natural and healthy merchandise in a convenient format. This is still new to Japanese shoppers who are used to going to a combini to get coffee, tea, soft drinks, pastries and other basic convenience items. Conventional c-stores in Japan also are popular for offering mobile phones, fax services, ticket sales, photocopies and other similar service-type offerings.

There's a space in Japan's huge convenience store market for something other than traditional combini retailing, which is what Seven-Eleven Japan, Circle K and in the main Lawson itself does with all but its 24 Natural Lawson and 20 100 yen format stores. This is especially true when it comes to quality fresh prepared food and meals merchandising. It's nearly non-existent in the nation's c-stores. You can get a sandwich, standard bento box and other very basic grab-and-go prepared foods' items, but that's about it.

In fact, Natural Lawson is getting some competition in Japan in this yet to be proven merchandising niche of fresh prepared foods from British retailer Tesco. Tesco is opening a Japanese version of its popular and successful Tesco Express format stores in the nation that loves convenience stores. Tesco Express stores are a mix of convenience store and small supermarket, typically selling high-quality fresh foods, prepared meals and other offerings found in Tesco supermarkets but offered in convenience store-sized urban settings.

The British retailer, parent company of small-format Fresh & Easy Neighborhood Market in the U.S., is opening 25 of these Express stores to start in Japan. The stores will sell basic grocery and other items along with lots of fresh prepared foods, meal solutions and quality grab-and-go items, as well as some other fresh and specialty grocery items. Tesco already has some of its Express format stores in Thailand through its Tesco Lotus division in that country.

Meanwhile, Natural Lawson is in the process of perfecting its merchandising mix, positioning itself not only as a higher-end combini for fresh, natural and quality foods, but also as a destination for busy urban Japanese women who want quality natural health and beauty items in an attractive and comfortable setting designed with them in mind.

There's no question Japanese consumers love their combini. After all there's one convenience store for every 3,200 Japanese. In Tokyo, there's literally a combini on every corner. And a joke in Japan says the only difference in the more rural areas is that there's a combini on every other corner. To put it in perspective, the U.S. has about 24 times more land mass than Japan does--but it has only half as many 7-Eleven's.

Natural Lawson is stretching the definition of "convenience store" not only just in the c-store capital of the world Japan but internationally as well. Just as Tesco is importing its brand of "Express" convenience retailing to places like Eastern Europe, Japan and the USA, it will be interesting to see if retailers in these western countries pick up on what Natural Lawson is doing with its 24 stores in Japan and try a similar format at home, in the U.S. or Europe.

To a degree it's happening in the U.S. already. In addition to Tesco's Fresh & Easy stores, 60 of which have thus far opened in California, Arizona and Nevada, there's Trader Joe's (a somewhat similar format to Natural Lawson), Wawa, an upscale convenience store operator in the Eastern U.S. which puts a major focus on fresh prepared foods, Giant Eagle Express and a couple others.

Additionally, as we've reported, Wal-Mart plans to open it's own version (4-5 stores) of a small-format, hybrid basic grocery and fresh and specialty foods market called Marketside in the Phoenix, Arizona region this summer. Safeway Stores, Inc. also plans to open 4-5 new, small-format hybrid grocery markets in the San Francisco Bay Area as well this summer.

Further, Whole Foods Market, Inc. is in the process of opening its own upscale, all natural convenience-type store in Boulder Colorado. The store, called Whole Foods Express, will be a prototype for the supernatural foods retailer in terms of natural products retailing in a smaller, convenience-oriented format. The store will be about 14,000 square feet. In Japan that's considered a big store, especially in Tokyo. For Whole Foods its radically small, especially since the grocer's average new lifestyle natural supermarkets range from about 55,000 to 80,000 square feet.

In Western Europe, Tesco pioneered the Express convenience format. There are a few other players who've joined the market niche as well, with more considering doing so. Tesco's also taken it's Express format creation to Eastern Europe, especially Poland, where its small-format, hybrid Express stores are doing extremely well. And, of course, Tesco Express was the inspiration for the retailers small-format, combination basic grocery and fresh and specialty foods Fresh & Easy Neighborhood Market grocery stores in the U.S.

None though are doing quite what Natural Lawson is doing in Japan, with it's combination of quality natural-organic foods, non-foods and health, wellness and beauty offerings. If Natural Lawson can bring a new definition to convenience retailing in Japan--or at least add to the current definition--it could create a solid niche for itself among those its targeting--busy women and seniors who many think aren't currently being fully-served by the nation's conventional combini.

Men like natural products offerings too, even if they aren't the primary target market. And in Japan, like elsewhere, men buy lots of gifts for the women in their lives. That's another market Natural Lawson should look at.

Note: Click here to view our pictorial of the Natural Lawson stores.

1 comment:

Chris Sobieniak said...

Only a shame they hadn't thought to branch out into America. I'd love to see Lawson come back to Toledo!