The IROF visited Tokyo and Hong Kong in March 2018 and were hosted by Family Mart Japan and The Grand Hyatt in Tokyo and by Dairy Farm Group and Convenience Retail Asia in Hong Kong.
Japan and Hong Kong are two of the world’s most dynamic Convenience retailing incubators alongside the UK, Ireland, USA and South Korea. Our ‘hundreds’ of individual learning spanned flexible shelving, through hot cold fridges and food, to e-payment and AI in action. Here is ten of the big learning:
1. Be fast and be simple. The retailers are selling ‘time’:
‘We make our customers lives easier’ … ‘< x 3 faster than a QSR’. Circle K Hong Kong
‘#1 corporate focus is to reduce the workload / tasks at store level to better serve our customers’. Family Mart Japan
2. Discipline & retail standards. Stores are typically < 1000 Ft² (200 Ft² in MTR stations) with high store standards:
Family Mart’s franchise model: 17,000 franchised & 1,000 company stores. Operates the Japanese ‘mass customisation’ model across all stores whilst recognising independent retailers needs & rights.
Circle K Hong Kong coco model: 350 company stores offering ‘Hot & In’ proprietary hot food and Saint Honore bakery items.
3. Retail formats: B&I, Education, Healthcare & Transport locations are delivering > 5% growth per year through specialist formats & ranges.
Family Mart uses the upscale Famima brand for high-end building landlords. Capex and customer count is x 3 a typical Family Mart store.
Convenience Retail Asia & 7-Eleven Hong Kong have one or more stores in every MTR and Airport Express stations, alongside other Bakery, Drug and Chinese medicine stores.
4. Technology led customer insight. Both markets utilize 100% EPoS, e-payment and loyalty programme data across all franchise and company stores:
Convenience Retail Asia’s OK Stamp uses AI to interact with its 1 / 7 of Hong Kong’s 7.5m population membership, spending 18% more than non members. The card is linked to the leading e-payment systems of Alipay and the Hong Kong government’s Octopus (Oyster card-style) travel cards, used in 50% of all purchases.
Family Mart is a partner in T Point card, which includes other national retailers, department stores and food outlets.
5. Challenging labour environment. Working in C-stores in Japan or Hong Kong is unattractive to young persons.
Family Mart is recruiting retired persons who better understand the needs of ‘Greys’ in Japan’s ageing society and work to fulfil personal different needs than youths.
The corporate focus on using technology (see 1) to reduce in-store tasks is part of the solution.
7-Eleven Hong Kong is also utilising technology to reduce the staff needed to handle scan & pay and manage a (too) high range of products linked to the Japanese franchisor contract.
6. Food for Now is #1 strategic category across fresh, hot, ambient & dehydrated in Japan & Hong Kong. Products such as onigiri rice balls, instant ramen noodles, bento box meals and fried chicken are > 50% sales.
7. Proprietary products are 50% store sales, or 60-80% excluding Tobacco
8. 100% annual replacement of food skus in Japan is standard practice.
Family Mart launches >200 new skus in-store every Tuesday.
Convenience Retail Asia offers ‘Always something new’ in imported Japanese and Korean snacks & drinks to hold shopper interest.
9. Manufacturers launch new & premium products at C-stores in both markets. In Japan unsuccessful products are moved to the Discount sector to clear within 4 weeks. Product failure rate is 90%.
10. ‘Single centimetre’ space performance. Retailers have a daily focus on space utilisation and item performance driven by store rental costs of < 20% sales and that consumers are easily bored.