Retail Memo: Los Angeles, CA-Based Smart & Final to Significantly Grow its New 'Extra' Food and Grocery Retailing Format This Year in the Western U.S.

Los Angeles, California-based Smart & Final Stores LLC is planning to expand the number of it's new hybrid supermarket-warehouse-style "Extra" format stores, the first of which opened in August, 2008 in Southern California.

Smart & Final currently operates eight "Extra" stores - six in Southern California (four in Orange County and the one in Bellflower pictured above) and two in Northern California's San Francisco Bay Area, in Pleasanton and Fremont. The stores are nearly double the size of the retailer's non-membership warehouse stores -- 25,000 -to- 35,000 square feet, compared to about 17,000 -to-18,000 square feet for the traditional non-membership warehouse-style stores. Like Smart & Final's warehouse format stores, the Extra stores are non-membership.

The "Extra" stores also carry about 4,000-4,500 more items -- including many more in single-unit sizes -- than Smart & Final's non-membership warehouse-style stores do, which cater to small businesses and restaurants, as well as to individual consumers.

The "Extra" target customer is the individual consumer rather than the institutional customer, which is the primary customer segment for Smart & Final's non-membership warehouse stores.

In addition, the "Extra" format puts a greater emphasis on fresh foods, including produce (the fresh produce departments are in the 4,000 -to- 5,000 square foot range), meats, deli and prepared foods, compared to the non-membership Smart & Final warehouse-type stores. The Extra stores also carry a small assortment of natural, organic and specialty food and grocery products.

The "Extra" Stores are designed to be more appealing to shoppers than Smart & Final's warehouse-style stores are. This includes having an enhanced interior design package and softer colors, more traditional style shelving, improved and more colorful in-store signage, and more shopper-appealing merchandising and displays. The stores are a hybrid supermarket-warehouse store in format but look more like a traditional supermarket in design than they do a traditional warehouse store. Having visited a couple of the stores, we agree they achieve that design enhancement over the traditional warehouse-format stores.

Smart & Final appears pleased enough with the performance of the current eight stores that it's planning to open a number of new "Extra" format stores in 2009 in Southern California, Northern California, and in other states in the Western USA where it operates its 242 non-membership warehouse stores. Those states Smart & Final operates in are, in addition to California: Oregon, Washington, Arizona, Nevada and Idaho. The retailer also operates stores in northern Mexico in a joint-venture arrangement.

Likely look for an "Extra" format test store in Arizona and one in Nevada in 2009 -- and potentially additional stores in both states before next year is out. These are two states where Smart & Final operates its non-membership warehouse-style stores but has yet to open any of its new "Extra" format stores.

In addition, Smart & Final plans to open at least one new "Extra" store in Northern California's San Francisco Bay Area, in the city of Brentwood, and another in the Central Valley city of Stockton, which is about 35 miles from Brentwood, according to a previously published report in the Sacramento Business Journal.

We've also learned Smart & Final is looking for additional locations for 2009 in Southern California and in Northern California, including in the Bay Area and the Sacramento region. The Sacramento Business Journal report mentions this, as have a number of our sources, along with a couple of other previously published reports.

Further, the retailer also has plans to convert some of its existing Smart & Final banner non-membership warehouse format stores into Extra stores in 2009. It's likely some of these stores could be in Arizona and Nevada, along with in California, in addition to the company converting some its traditional non-membership warehouse format stores in Oregon, Washington and Idaho into the new format on a case-by-case basis, since it would make sense to do so wherever the company operates existing Warehouse stores.

We suggest a good candidate for such conversion is the Smart & Final Warehouse store in downtown Oakland, California. Since the store was built many years ago, the neighborhood has changed much. There have been numerous new residential developments built over the last few years, resulting in thousands of new residents in the area. As a result, the downtown Oakland area near Jack London Square where the Smart & Final Warehouse-style format store is built is understored in terms of supermarkets. We believe converting the store into the "Extra" format store presents and opportunity for the retailer, as well as add an important food retailing venue to the understored neighborhood.

Tesco's small-format Fresh & Easy Neighborhood Market was planning on locating one of its grocery and fresh foods stores nearby the existing downtown Oakland Smart & Final non-membership warehouse store. But the company pulled out, siting problems with the building it had panned to convert into one of its 10,000 -to- 13,000 square foot Fresh & Easy markets. It does have two other stores thus far planned for Oakland however.

We think Smart & Final could open as many as 25-35 new "Extra" stores, many of them conversions of existing non-membership warehouse format stores, mostly in California, but also in Arizona, Nevada and the other western states, in 2009.

Smart & Final becoming a multi-format food and grocery retailer

In addition to its now six month month old "Extra" format, the first store of which opened in August of this year in Southern California, Smart & Final owns the Henry's Farmers Market natural and organic foods stores in Southern California and the Sun Harvest Markets natural foods stores in Texas, which it operates as a separate division from Smart & Final, with its own headquarters in San Diego, but also has integrated into the company where synergies makes sense.

There are currently 36 total stores, about 26 Henry's banner stores (all located in Southern California) and about 10 Sun Harvest banner natural and organic foods markets, which are all located in Texas.

Smart & Final acquired the Henry's-Sun Harvest stores from Whole Foods Market, Inc in 2007. The stores were part of Whole Foods' acquisition of Wild Oats Markets, Inc. Wild Oats operated the Henry's and Sun Harvest stores, which were sort of a hybrid natural and specialty foods format, separate from its flagship Wild Oats' banner natural and organic foods stores.

The Henry's and Sun Harvest markets didn't fit into Whole Foods Market's strategic plans for Wild Oats, plus it wanted to raise some cash to aid in its acquisition, so the natural foods grocery chain sold the stores to Smart & Final, which itself is owned by investment firm Apollo Management LLC, which bought Smart & Final in May, 2007. Apollo/Smart & Final acquired Henry's and Sun Harvest from Whole Foods just a couple months later.

The Henry's Farmers Market and Sun Harvest stores were rather run down by the time Wild Oats sold to Whole Foods. However, since acquiring the stores from Whole Foods last year, Smart & Final has invested money in them and improved them dramatically, focusing the stores back into a more focused natural and organic foods format and vastly improving how the stores look, along with their merchandising, product selection and pricing.

Smart & Final is in the processes of remodeling a number of the Henry's and Sun Harvest stores and plans to open a few new Henry's Farmers Market units in Southern California next year.

With its flagship 200-plus Smart & Final smaller-format non-membership warehouse type stores, its Henry's and Sun Harvest natural foods division, and now its Extra format, Smart & Final LLC is strategically branching out into a multi-format and multi-category food and grocery retailer, and is clearly indicating a big part of its future involves being as individual consumer-focuses as it's been institutional customer-focused throughout its history.

Smart & Final is well capitalized in terms of its ability to grow the Henry's and Sun Harvest chains in the natural and organic grocery retailing segment. In fact, it has the ability if it desires to become a major player in the sector, in our analysis.

Food Retailing & Society Memo: In Philadelphia Designers Create Supermarkets of the Future; Meanwhile A Local Food Retailing Icon is Lost

The proposed concept for the Brewerytown market above avoids the traditional big-box style for a design that fits into the urban street grid and camouflages the large expanse of parking.

Natural~Specialty Foods Memo Editor's Note: Two stories, published just six days apart in the Philadelphia Inquirer USA newspaper, paint an interesting picture of the dynamic nature of the food and grocery retailing business.

As the piece below by Inquirer architecture critic Inga Saffron describes, visionary designers are busy dreaming up the supermarket of the future for urban Philadelphia.

Meanwhile, the second story by Philadelphia Inquirer staff writer Vernon Clark reports on the closing of 100-year old Caruso's Market, a beloved, small-format neighborhood grocery store.

We offer no analysis or commentary this time around. The two articles speak for themselves.

Changing Skyline: Food for thought on supermarkets

By Inga Saffron
Philadelphia Inquirer Architecture Critic

If we are what we eat, then it follows that our cities are shaped by the buildings that sell what we eat. In that case, we're heading for trouble.

After a long absence, the neighborhood supermarket is making a comeback in urban places like Philadelphia. Only the new arrivals don't look anything like the friendly local grocers we once knew. In quick succession, a gang of boxy, suburban-scaled cornucopias has moved into the thick of Philly's rowhouse neighborhoods. They've laid claim to whole blocks at 56th and Market, 52d and Parkside, Columbus Boulevard in Pennsport. And more are coming.

You might assume that the more stores that sell fresh food, the better - especially given that Philadelphians struggle with their collective weight, at least according to certain out-of-town list-makers.

The problem is that these new supermarkets tend toward obesity themselves. It's hard to overlook all that bulk when the chains dock their flagship boxes in a marina's worth of parking. And once you breach the store's solid walls, you could as easily be in Fairbanks as Fairmount.

So a competition to encourgage architects to think outside the supermarket box comes in the nick of time. The Community Design Collaborative asked three Philadelphia architects to come up with more urban-friendly structures for our modern hunting and gathering.

To keep the exercise from devolving into the abstract, the collaborative identified three sites that have already been targeted for food stores, two in Philadelphia and one in Chester. It also partnered the architects with real clients. Even if none of the three gets built, the design exercise provides the food retailers with alternatives they can chew on.

The most exciting concept was developed by Interface Studio Architects, which pulled the most ambitious of the three projects. The firm was asked to design a new full-service supermarket for developer John Westrum at 31st and Girard, in the Brewerytown neighborhood.

Westrum had been trying to bring a supermarket to the three-acre triangular lot ever since he completed Brewerytown Square, a townhouse project. But it's been difficult because the site has only the tiniest bit of frontage on Girard Avenue, the area's commercial street. The property also sits on a steeply sloped bluff overlooking the east side of Fairmount Park and the Schuylkill. You can practically see the Philadelphia Zoo on the opposite bank.

Panoramic views are nice, but what supermarkets really need is to be able to broadcast their presence to passersby. The usual box, set behind a welcome mat of parking, would be nearly invisible to motorists and pedestrians traveling on Girard Avenue. In any case, that highway model is unworthy of a grand urban street that is still a mix of townhouses and independent stores.

Interface, led by partner Brian Phillips, solved the problem in a way that goes beyond just reimagining the utilitarian supermarket; its design has real architectural heft. The proposal clicks because it acknowledges the supermarket's dual nature as a car-oriented business that happens to be located in a multifaceted pedestrian neighborhood.

Since there is so little frontage on Girard Avenue, the designers bent the main commercial structure into two angled sections that wrap their wings around the corner of 31st and Girard. The section closest to Girard would provide small retail spaces for things like a bank, and the northern portion would house a midsize supermarket.

Though their angular form breaks from Philadelphia's street-wall tradition, it compensates for the deviation by offering the neighborhood a substanial plaza that works as a pocket park. At the hinge, where the two wings come together, the plaza slides down under the buildings, providing sight lines and walking ramps to the parking lot at the low end of the slope.

Because of that sharp incline, the supermarket floor would be below the level of 31st Street. Interface turns the problem into a virtue. An all-glass facade would enable arriving pedestrians to see into the store, while a sequence of switchback ramps would move them gently down to the store entrance. Since the parking lot is at the entrance level, customers who drive would have easy access.

This jaunty arrangement solves the site's problems in one stroke. The designers use the level change to screen the parking lot from the neighborhood. Meanwhile, the swooping roof becomes the building's can't-miss sign.

And by splitting the commercial structure into two sections, Interface avoids the bulkiness of the box. With their glass facades, the structures resemble park pavilions, which is what they are, since they overlook Kelly Drive.

Like Interface, the other firms that participated in the design exercise, Agoos Lovera and KSS, recognized that supermarkets are about more than just food. They're neighborhood anchors. Interface included housing at the north end of its site. The supermarket's sinuous roof winds around, jumping onto a third structure that would contain loft apartments.

Because the other projects involved retrofits of existing buildings, there was less opportunity for the designers to reinvent the supermarket form. Nevertheless, in its three-stage scheme for turning an Ogontz Avenue rowhouse in West Oak Lane into a satellite for the Weavers Way food co-op, Agoos Lovera sketched a plan that includes a meeting room, a demonstration kitchen, and a community garden. KSS came up with a nearly identical program for an old furniture store on Chester's Avenue of the States, purchased by a Chester food co-op. In the future, they believe, food stores will be community hubs.

At the moment, most people see supermarket shopping as a necessary chore. But who knows? If these designers can open the eyes of store operators, we just might start to look forward to the weekly shopping trip.

Caruso's Market closes in Chestnut Hill
By Vernon Clark
Inquirer Staff Writer, October 1, 2008

It was a boutique grocery that specialized in quality meats and produce, and that anchored the Chestnut Hill shopping strip for nearly a century.

Last month, Caruso's Market, 8418-24 Germantown Ave. (pictured above), closed abruptly, leaving many residents recalling bygone days of personal service and a family-friendly atmosphere, and wondering what will become of the property.

Fran O'Donnell, head of the Chestnut Hill Business Association, lamented the loss.

"I think the closing brought great concern to the community as far as being a fixture there, but also as a necessity," O'Donnell said. "It's not like another retailer. This is servicing what you put on your table."

Ellen Maher, 78, who has lived most of her life in Chestnut Hill, was a regular shopper there for decades.

"It was always a very nice market," Maher said. "They did delivery service. It was an alternative to the supermarket. My husband and I always walked to Caruso's."

Residents said the store's windows were covered with brown paper on the night of Sept. 15 and a sign posted that read, "Closed for repairs." A day later the sign was replaced with one saying, "Sorry for the inconvenience. Reopening soon."

The next day the sign was changed to "Sorry for the inconvenience. Closed until further notice."

CMS Cos., an investment company in Wynnewood, issued a statement saying that John Capoferri, the market's operator, "had terminated the Caruso's Market lease," making way for a CMS affiliate to take control of the property.

Capoferri did not respond to several phone messages left for him.

Capoferri bought the 10,000-square-foot building in the spring.

The market was operated for decades by the Marano family, owners of a South Philadelphia pasta business, said Joe Marano, who operates Marano's Fort Washington Garden Mart.

Marano said Caruso was the name of relatives who opened the market in the early 1900s.

"Despite attempts over the prior several weeks to work with Mr. Capoferri to help restructure his financial obligations at the property, we concluded it was in our investors' best interest to take control of the building," said Richard T. Aljian, a CMS official.

He also said the company was preparing the building for "re-leasing, with a grocery-store concept remaining a potential strategy."

O'Donnell said residents want another grocery at the site.

"I think in a community like this, there has to be an outreach to make sure that it stays just the same use," O'Donnell said. "Whether it's Caruso's or not, we want it to still be a food market."

Paul Dodge, owner of the French Bakery on Germantown Avenue, said the closure was a major blow to the community.

"So many older people really rely on the local businesses," Dodge said. "A loss like this is devastating. Who can open a grocery store?"

Dodge said that at the holidays, customers would flock to the store.

"On Thanksgiving they had hundreds of turkey orders," he said. "Caruso's Market was like a dinosaur in many ways."

Philip LeCalsey, an official of the Chestnut Hill Community Association, said that many in the neighborhood want the market to be replaced by one similar to Caruso's.

"Having a neighborhood grocery for such a long time . . . has been a big asset to Chestnut Hill residents," LeCalsey said.

He said he had been a regular customer at Caruso's.

"I was in there usually twice a day, getting coffee in the morning and getting lunch," he said.

Marie Chiodo, who has lived in Chestnut Hill for more than 50 years, worried about the future of the store.

"It was very convenient," Chiodo said. "Now, who knows what's going to happen? I hope they come back and reopen."

Standing outside the store with her infant daughter, Tessa, in a stroller, Katie Maier, a Chestnut Hill resident for about 31/2 years, also regretted the closing.

"I think it's a shame that it closed. There is nowhere else here where I can go to get a few things," Maier said. "I was here last week and ordered a roast. They said the butcher was going to call me, and the next day they were shut."

Retail Format Innovation Memo: 'My Organic Market' Opens 'Mighty Healthy Pet;' A Natural Product's Store For Man's Best Friends

My Organic Market (known as MOM's), a fast-growing, five-store independent natural foods retailer with markets in Maryland and Virginia, has opened it's sixth natural products' store.

But this particular store has a twist to it unlike the other five MOM's natural foods' markets--it's not for humans but rather is for pets. of course, the human owners are welcome to accompany their pets on shopping trips to the new natural products' pet store.

That store, called Mighty Healthy Pet, is located just a few doors down from a My Organic Market natural foods store (for humans) in a shopping center in College Park, Maryland.

Mighty Healthy Pet sells a wide variety of natural, organic and healthy food for all types of pets, along with an array of pet treats, toys and related goodies. Pet foods span the categories: dry, refrigerated, frozen and even raw.

Among the natural pet products' stores offerings and attributes are:

>All of the pet foods are free from artificial flavors, colors, preservatives and additives.

>All of the pet food items in the store are made from either natural or organic ingredients.

>The pet food varieties include raw foods, freeze-dried products and cooked items, including a range of high protein and hypoallergenic grain-free pet foods for sensitive cats and dogs.

Mighty Healthy Pet merchandises a large selection of premium natural and organic pet food brands including:

>Stella & Chewy's From the Farm

>Aunt Jeni's Homemade

>Halo Purely for Pets

>Ziwi Peak

>Fromm's Four Star

>Wild Kitty Cat Food

>Honest Kitchen

>Country Pet

>Castor & Pollux Organix

>The Raw Advantage

These brands are just the tip of the natural pet emporium's brand list and product selection.

Mightly Healthy Pet also believes in holistic pet remedies. The store stocks a full selection of holistic remedies for pets, ranging from dust-free kitty litter and all-natural flower essences, to Kookamunga brand Catnip Bubbles, which are designed to make even fat cats and lazy dogs jump for joy.

Grooming supplies also are in plentiful supply at the natural pet store. These include natural and organic pet shampoos and conditioners, as well as toxic-free pet wipes. Pet hair brushes, combs and other grooming supplies line Mighty Healthy Pet's shelves as well.

My Organic Market (MOM's) also has extended its "green" and sustainable retailing policy to its natural pet products store. Lisa de Lima, MOM's vice president for grocery, tells Natural~Specialty Foods Memo, the natural products' retailer tries to buy as many pet products made from recycled materials for Mighty Healthy Pet's merchandise selection.

Products made from recycled materials include pet toys and bedding made from 100% recycled materials. The store also carries pet products made from organic cotton and natural hemp.

Lisa de Lima says MOM's sells a wide variety of natural and organic pet foods and products in its five natural foods stores in Baltimore and Virginia. However, the natural products' retailer has noticed an increased demand for the natural and healthy pet products and therefore decided to open its first freestanding natural pet products store next to its My Organic Market natural foods' (human) store in College Park.

The goal of Mighty Healthy Pet: "To keep our customers happy--humans and animals alike," says Ms. de Lima.

My Organic Market (MOM's) was founded in Beltsville, Maryland in 1987 by Scott Nash, who was all of 22 years old at the time. The initial store, called Organic Foods Express, was operated as a home delivery and mail order company by Nash out of his mother's garage, hence the name MOM's.

Nash then expanded operations by renting a 900 square foot warehouse, making MOM very happy to get her garage back, followed by opening his first store in about 1989. That store was a 2,000 square foot natural foods' market in Beltsville, which also then served as the picking warehouse for the mail order and delivery business.

The mail order and delivery business was eventually phased out and Nash put his focus on running the retail store.

In 1996, Nash closed the Beltville store and opened a new 6,000 square foot natural foods' market in nearby Rockville, Maryland, just one half-mile from the previous location. With the opening of that new, bigger market, he also changed the name from Organic Foods Express to My Organic Market, or MOM's.

MOM's opened its second natural foods store in 2000 in College Park, Maryland, followed by a third store in 2002, in Alexandria, Virginia.

The fourth MOM's natural and organic foods market opened in 2006 in Columbia East, Maryland, followed by the opening of the fifth and newest store in Fredrick, Maryland in April, 2007.

My Organic market is currently developing other store locations in Baltimore and Virginia as well as in nearby Washington, D.C.

MOM's says in its corporate mission statement that its number one reason for existing as a retail business is to "restore the environment to the maximum extent it is able to. "Whether taking action as individuals (both employees and customers), as a company, influencing other companies, funding legislative efforts, or supporting environmental advocacy groups, we will work tirelessly towards ensuring a clean and restored environment for our children and many future generations," the grocer's mission statement says.

The independent natural products' grocer is a founding member of the Clean Energy Partnership (CEP), a group in the Washington D.C., Maryland, Virginia tri-state region that's organizing businesses to adopt and promote practical solutions for today's biggest environmental challenges, such as global warming and air pollution.

MOM's powers all of its stores on renewable energy by buying wind power credits. The grocer also builds it's new stores using environmental building guidelines and does things like putting skylights on the stores' roofs as a way to reduce electricity use.

The grocer isn't just a "green" or environmental grocer however. It's also a competitive one. For example, one of MOM's policies is that it guarantees to have the lowest prices on branded dry grocery, frozen, refrigerated, nutritional supplements and health and beauty care product in its stores.

If a customer finds any item in these categories at a cheaper price at another store in the region, My Organic Market will match that price. In fact, the natural products' retailer claims to be 10-20% cheaper on items in these categories than competitors such as Whole Foods Market.

MOM's newest store is scheduled to open either later this year or early next year in Washington D.C., and will be the natural foods' grocer's first store in the nation's capital.

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.