Convenience stores should make more of themselves

Arriving weary and hungry from the bullet train in Hiroshima one night last spring, I trod the natural path by heading to a 7-Eleven convenience store for a can of beer, an onigiri rice ball and some fried chicken. In Japan’s cities, no matter the hour, one is never far from a bright haven of food and comfort.

I could equally have patronised a FamilyMart or a Lawson, which also serve fried chicken among their snacks: there is a keen rivalry over which flavour is best. Japanese konbini are not only convenient in offering a wide array of items packed neatly along the aisles, but are sited very close together. They practise an advanced form of competitive clustering.

This makes going to a convenience store the obvious solution to many needs, from buying a litre of milk to paying utility bills (in cash, with a receipt stamped with a hanko seal), finding an electronic adapter, obtaining cash from a chirpy machine, and being greeted with a respectful bow, even at 3am in many outlets. In the remotest parts of Japan, there is usually a vending machine, and a friendly shop.

So it was with a mixture of reassurance and concern that I read last week of the $3.3bn tender offer by the telecoms group KDDI for joint control of Lawson’s 14,600 stores in Japan. It wants to use them to offer more services to the country’s ageing population, including medical consultation and dispensing, making them even more embedded in Japanese society.

That part is good, but the worry is over how it will do it: Japan’s demographic crisis is making it increasingly hard to recruit younger people for the long hours that convenience stores demand. As franchise owners are forced to overwork, the chains are turning to automation, including robot floor cleaners and screen avatars that are remotely operated.

Japan is a pioneer in seeking the answers to these pressures, but other countries are bound to follow. There is a universal need for local stores and community services, and too few people who will work on basic wages to provide them. Immigration is helping to fill the gaps, even in Japan, but the question remains: is the price of convenience becoming too high?

The question was also raised this week by a Valentine’s Day strike by riders and drivers for food delivery and ride-hailing services in the UK and US, including DoorDash, Uber Eats and Deliveroo. The couriers of meals and groceries are unhappy with low, and often falling, pay as technology companies with thin margins are pressed by investors to raise profits.

As the cheap capital that once subsidised delivery services disappears, something has to give, and the pressure is falling on employees. Instacart, the largest US grocery delivery app, cut 7 per cent of its staff this week in an effort to become more efficient. “The number one reason people use Instacart is convenience,” its chief executive, Fidji Simo, declared to investors.

There is definitely a demand for convenience: even in the densely packed Japanese market, konbini revenues rose by 4 per cent last year, with a hot summer increasing drink and ice-cream sales. Asda, the UK supermarket chain owned by TDR Capital and the billionaire Issa brothers, is converting to its Asda Express brand 470 local stores that it acquired in 2022.

The cost is substantial, though. Convenience stores are quite efficient since people walk or drive to them for food and other goods rather than having them delivered by services such as Instacart or Gopuff. Even so, prices are higher than in large supermarkets, which partly reflects the logistical and staff costs of making everyday items available so near to homes.

Ultrafast grocery delivery within 30 minutes, the closest equivalent to convenience stores, may not even be sustainable unless it becomes more expensive. The valuation of Getir, the Turkey-based service, has fallen sharply and Simo hinted this week at raising Instacart’s fees for rapid fulfilment. If you do not go to a store, you will soon pay more for it to be brought to you.

One way to cut costs is automation: using robots and avatars in stores, and drones for order fulfilment. Makoto Takahashi, KDDI chief executive, talked this week of using car parks by Lawson’s convenience stores as delivery hubs and dispatching drones to remote rural areas. Machines can substitute for humans, and they will not demand to be paid more for their labour.

But operational efficiency is only half the appeal of a convenience store. They are also places to gather — Japan’s konbini increasingly have seating for customers to eat and chat — and Lawson lists “human kindness” among its business policies. By clustering more services in one place, stores could not only spread out the costs but make more of their personal touch.

This deal is being forced on Japan by demographics, but the idea applies more widely. If ageing societies can no longer support all the post offices, libraries, banks and stores they once did, why not combine them? It is nice to walk out locally, meet people, have a meal, visit a pharmacist, collect parcels and so forth: doing it all together would be very convenient.

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