Monday, November 26, 2007

Monday Marketing Memo: Retail Format Innovation

Stretching the boundaries of convenience store retailing: Japan's Natural Lawson is awesome
Convenience stores are as ubiquitous in Japan as grains of white rice and packages of Ramen noodles. There are about 40,000 conbini, as convenience stores are called in Japan, in the nation, or one for every 3,200 residents.

One of the largest conbini operators in Japan, in addition to market share leader Seven-Eleven Japan, Circle K Sunkus and 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 originates 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, Sun Chain, 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 cobini (c-stores) in Japan are conventional convenience stores similar to those in the U.S. and Europe. However, Lawson also operates two other c-store 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.

Natural Lawson's key target market is women. Many of its stores also have female managers, which isn't traditional in Japan's convenience store industry. Pictured above is Shodo Yuka, manager of one of the retailer's Tokyo stores.

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 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 nonfoods. 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.

Premium, all natural international brands and products like Starbucks share shelf space with locally-produced Japanese brands in Natural Lawson convenience stores.

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. Natural Lawson recently entered into an alliance with NaturalBeat, which operates a chain of 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 cobini, so natural Lawson is blazing a new trail in the category for convenience stores in the nation.

In addition to its product selection, Natural Lawson is taking great care in how its stores look, something that wasn't evident when the first stores opened in 2001. Today's stores however 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 cobini. 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.

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 cobini 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 cobini 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 basic sandwich and other prepared foods like in U.S. convenience stores, but that's about it. ( Basic bento boxes and versions of a few other traditional Japanese foods are available at some conventional stores.)

In fact, Natural Lawson is getting some competition 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 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, which also is opening similar stores in the U.S. under the Fresh & Easy Neighborhood Markets banner, 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, along with other fresh and specialty grocery items.

Meanwhile, Natural Lawson is in the process of perfecting its merchandising mix, positioning itself not only as a higher-end cobini 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.

Natural Lawson cobini (convenience stores) even have all natural pet treat and upscale pet toy sections for man's (and women's) best friends.

There's no question Japanese consumers love their cobini. After all there's one convenience store for every 3,200 Japanese. In Tokyo, there's literally a cobini on every corner. And a joke in Japan says the only difference in the more rural areas is that there's a cobini 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 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 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. and Europe already. In addition to Tesco's Fresh & Easy stores, eleven which have thus far opened in California 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, and a couple others.

Whole Foods Market 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 (and controls the market share) the upscale, 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 creation to Eastern Europe, especially Poland, where its Express stores are doing extremely well. None though are doing quite what Natural Lawson is doing in Japan with it's combination of quality natural foods, nonfoods 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 cobini. 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.

No comments: