Warning Sent to Korea... Is the Golden Age Over? [Convenience Store Kingdom Japan]

Successful Localization of Imports from the US
Joint Growth Amid Economic Boom

Price Competition and Continuous Store Openings Lead to Saturated Market
Seeking Exit Strategies

A scene of inspecting ready-to-eat meals at FamilyMart, which introduced the inspection system in 1994. (Photo by FamilyMart)

The history of convenience stores in Japan runs parallel to its economic development. The Japanese convenience store market began to take shape in the 1970s, a period when Japan experienced rapid economic growth in the 1960s, elevating its economic level. At that time, the Gross Domestic Product (GDP) was $212.6 billion, and the GDP per capita was $2,056. South Korea followed in Japan’s footsteps. Although the first convenience store appeared in Korea in 1982, it closed within a year. Considering this, the convenience store market in Korea is generally regarded as having started with the opening of the first Seven-Eleven store in 1989 in Oryun-dong, Songpa-gu, Seoul. During 1986?1988, Korea’s economic growth rate exceeded 10%.

Introducing and Establishing American Convenience Stores... Growth Alongside Economic Boom

In November 1973, the supermarket chain Ito-Yokado partnered with the American convenience store chain Southland to establish a company called York Seven. This later became what we know as Seven-Eleven Japan. York Seven opened the first Seven-Eleven store in Toyosu, Koto-ku, Tokyo, in 1974. This is why 1974 is considered the founding year of Japan’s convenience store franchises. In 1975, Daiei, a company that had agreements with American food companies, introduced Lawson convenience stores?originally started as a milk store in the U.S.?to Japan, and the retail company Seiyu Store leveraged its own retail chain advantages to launch FamilyMart.

The convenience store business, which began this way, exploded in growth alongside Japan’s economic expansion. The 1980s were a period of stable growth for Japan, with annual increases of 4?5%. In 1982, the GDP per capita was $9,575, and the GDP reached $1.135 trillion. The convenience store industry also enjoyed a golden age at this time. Seven-Eleven expanded to 800 stores nationwide, Lawson to 380, and companies ranging from confectionery manufacturers to trading firms eagerly entered the convenience store business, leading to a proliferation of franchise brands. In 1982, for the first time, convenience store giants appeared in the top 200 retail companies surveyed by Nihon Keizai Shimbun (Nikkei), with Seven-Eleven Japan ranking 81st and Lawson 95th.

From 1986, Japan entered the extravagant bubble economy period. By 1988, Japan’s GDP per capita was $25,059, surpassing that of the United States, and real estate and stock investments were booming. The rapidly growing market then entered a maturity phase. Consumers had sufficient purchasing power, and convenience stores had largely established their distribution chains and assortments. As a result, strategies to attract customers with higher spending power began to be devised. Until then, the focus had been on 'convenience'?long operating hours, accessibility, and quick shopping?but it was time for qualitative changes. Delivery systems were improved, and staff customer service training began to receive attention.

Stagnation During the Lost 30 Years... Brief Periods of Prosperity

The appearance of the first Seven-Eleven store that opened in 1974. (Photo by Seven-Eleven Japan)

However, when the bubble burst, the industry faced a completely different phase. From the late 1990s, Japan entered a long-term recession known as the 'Lost 30 Years.' The GDP per capita, which was $44,191 in 1995, fell to $32,423 as the economy stagnated. Consumers refrained from purchasing anything unnecessary, making it difficult to expect further increases in average spending per customer. Consequently, the industry began a price war known as the 'price revolution.'

A product that clearly illustrates this period is convenience store rice balls and lunch boxes. Seven-Eleven and FamilyMart held major discount events on lunch boxes and rice balls during the year-end and New Year holidays, which became very popular amid the recession. This trend spread widely, and many stores began focusing on ready-to-eat meals, establishing the formula 'convenience store = affordable meal.' However, the excessive price competition led the industry into a dark period overall. Especially for small and medium-sized companies, this recession and price war dealt a direct blow to management, and from this time, the gap between large corporations and smaller companies began to widen significantly.

However, in 2008, an unexpected event brought prosperity to the convenience store industry: tobacco. With the introduction of a system requiring customers to carry a card for adult verification to use tobacco vending machines, many customers found it inconvenient and started visiting convenience stores instead. In some locations, tobacco sales accounted for up to 40% of total sales. Although there were criticisms that convenience stores had become neighborhood tobacco shops, this shift helped convenience stores in Japan’s aging society attract elderly customers and significantly increase sales of alcoholic beverages, coffee, and other favored products.

From this period, new store openings increased again, signaling a brief boom. However, Takeshi Ninami, then president of Lawson, responded to reporters’ questions about how long the tobacco effect would last by saying, "The convenience store market is already saturated. Going forward, the focus should be on revitalizing existing stores rather than opening new ones," signaling the end of the golden age.

Emergence of the 'Convenience Store Saturation Theory'

From the 2020s, although there was no remarkable growth, the number of new stores increased by more than 1,000 annually, maintaining a net increase. Convenience stores adapted quickly by revising strategies and restructuring the industry according to the economic situation, establishing themselves as the market closest to consumers. Even during difficult economic times, sales declined but never stopped growing. The 'convenience store market saturation theory' was met with optimism that innovation could overcome it. Convenience stores remained the most attractive business choice for retired middle-aged and older adults starting a second career.

However, over time, it became increasingly difficult to maintain a purely positive outlook. Continuous price increases led to rising rents and electricity bills, and labor costs rose due to workforce shortages caused by low birth rates and aging populations.

Current interior view of a Japanese convenience store.

To make matters worse, drugstores like Don Quijote began selling private brand (PB) food products at low prices, becoming formidable competitors. Last year, Nikkei reported based on its own survey of the three major convenience store chains, including Seven-Eleven Japan, that the total number of new store openings decreased by 21% year-on-year to 1,040 stores?the lowest since the survey began in 2007.

CEOs’ outlooks are not very optimistic either. The golden age of the convenience store kingdom has ended, and new strategies for survival are needed. In 2020, Takashi Sawada, president of FamilyMart, stated, "Unfortunately, we recognize that the market is saturated. The number of customers at existing stores is hardly increasing," and added, "Under the perception of a fully saturated market, we are trying various management strategies."

Editor's NoteJapan, the 'convenience store kingdom,' is sending a warning to South Korea, which has entered an era of excessive competition in convenience stores. Japan’s convenience store history began in the 1970s and has already surpassed half a century. There is not a single area without a convenience store, even if there are no department stores, and the number of stores is vast. However, now it is a crisis situation. As the market reaches saturation, the number of new store openings has sharply declined, and external factors such as rising rents, labor costs, and shrinking domestic markets have contributed to the industry's golden age coming to an end. South Korea, which has already surpassed Japan in the number of convenience stores, is following the same path of decline due to excessive competition. By examining Japan’s convenience store history and the strategies of companies facing crisis, we seek survival strategies for the Korean convenience store industry.