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Japanese Convenience Stores (Konbini) May Be At a Crossroads

Interior of a Japanese convenience store (konbini). From Wikimedia Commons, mxmstryo [CC BY 2.0 (]

(Originally posted on August 8, 2019.)

Japanese convenience stores, or konbini as they're usually called, are well lit, clean oases in the urban landscape, where you can go to get a tasty snack, a complete meal, various sundries, magazines, a cold or hot drink, a pack of cigarettes or emergency medication, and so much more. They mysteriously stock plenty of umbrellas when it rains, and they are the places to go to check out the latest potato chip varieties or ice cream flavors. The ATMs in konbini are much more convenient than bank ATMs since they're available whenever the store is open, which means in most cases 24 hours a day - and they don't charge fees any higher than the banks or post office do. You can send and receive packages at a konbini, pay your utility bill, get black and white or color copies or print files. And perhaps most importantly of all, they have clean bathrooms that anyone can use, even if you don't buy anything. If you've ever visited or lived in Japan you have probably used and perhaps marveled at the well, convenience of a konbini.

The tale of how a group of Japanese businessmen convinced the people at Southland Corporation to sell them franchise rights in Japan in 1973, which the apparently Americans did very reluctantly, is the stuff of legend in Japanese business lore. Apparently the Japanese businessmen looked through the precious manual that came with the franchise rights, realized it wasn't workable in Japan, and went about building their version of a convenience store from scratch.

The first 7-11 store in Japan opened in 1974 in Toyosu, Tokyo, not exactly a busy urban crossroads at the time, but the owner of a liquor (sake) store there was willing to give this new type of store a try. As of July 2019 there are 20,973 7-11 stores in Japan (source), making them the market leader by far[1]. As of the end of 2017 there were nearly 59,000 konbini overall (same source).

For a while, it looked like konbini could do no wrong. They pioneered retail concepts like using weather forecasts to adjust the stock (hot oden when it was cold, more ice cream when it was hot). They popularized the idea of readymade and ready-to-go onigiri (rice balls), something that until then had been mainly an item made at home or only available from speciality stores. And in recent years they seemed to have risen to the challenge of making businesses more eco-friendly, by replacing their in-store light fixtures with LED versions.

But yet, cracks may have started to appear on what seemed until now to be an unflappable business model.

The leftover perishables problem

Most[2] konbini are owned by franchisees, who must follow a strict policy code set by the company. Most of the problems facing konbini spring from friction between franchise owners and the corporation.

One such problem is the disposal of perishable items like bentos and sandwiches. It's common practice for supermarkets in Japan to cut the prices of perishables at the end of the day - savvy shoppers know this and even plan for it. But most convenience stores had policies in place that prohibited store owners from cutting prices like this, which meant that any food that had to be sold on the same day was discarded, usually at the franchise's expense. This was not only wasteful, it was a loss that was shouldered entirely by the franchise owner.

A couple of 7-11 franchise owners defied corporate policy and discounted bentos that were still unsold in the evenings and so on on their own in 2009, but the company retaliated by fining them. The franchise owners sued, and won their case, with the Fair Trade Commission issuing a warning to the company for obstruction of business. Still, as of 2017 only about 1% of franchises discounted perishables, because the owners were afraid of retaliation in the form of the company refusing to renew their franchises. This is what happened to one of the owners who sued 7-11 back in 2009. (source).

With more attention paid to the problems of food waste, the big konbini companies have finally started to institute discount policies. However, not all of the companies are offering simple cash discounts. One - yes 7-11 again - only offers discounts in the form of nanaco loyalty card points, which has drawn criticism for being a blatant attempt to get more people to sign up for the nanaco card.

The 24 hour operation problem

One of the defining features of konbini is that they are open 24 hours a day, 365 days a year (although some have closed for New Years recently). But keeping such long opening hours puts a great strain on the store workers, especially the franchise owners who usually work the hardest and longest of all. This is where konbini hit one of the major issues facing Japan today - the labor shortage, which is reaching critical proportions.

Konbini workers are typically paid around the minimum wage or marginally more[2]. But it's not easy work, since the stores offer so many different services that require different interactions with customers. There's also physical labor involved too, since the shelves have to be stocked. It's especially difficult to get workers for the nighttime hours. In addition, in some quarters franchise konbini stores have acquired a reputation for being worse places to work in than chokuei-ten (直営店), stores operated directly by the company.

What ends up happening is that the franchise owners work inordinately long hours to keep their stores open. It's no surprise that some franchisees, can't keep up with that demand and burn out. In February of this year, a 7-11 franchise in the city of Higashi Osaka, Osaka prefecture decided to close the store between 1am and 6am because the owner, a Mr. Matsumoto, was unable to hire anyone to work those hours, despite offering higher wages. 5 of his part time workers, all college students, had quit at the same time last year because they'd graduated, and his wife, who worked with him in the store, had passed away due to cancer right after that. The company sent the owner a notice saying that they would fine him 17 million yen (nearly US$160,000 or143,000 euros) unless he resumed 24 hour operations, because he was in breach of his franchise contract. The owner went to the press, and 7-11 was roundly criticized for being a "black company" (ブラック企業) - a company with policies that are seen to be abusive towards their employees, contractors, franchisees or even customers.

Facing a barrage of bad publicity, the company backed down somewhat. In March they announced that they were starting a months-long experiment at 10 of their directly owned stores, reducing their hours of operation to 16 hours a day[3]. But franchise stores are still not allowed to reduce their hours until this experiment is concluded, despite requests by the franchise owners' association.

So what can we see from all this turmoil in the konbini business[4], and how does it reflect what's going on in Japan as a whole?

A shrinking, aging population

A 7-11 Japan store.

A 7-11 Japan store. (Photo by zenjiro, CC BY 2.0)

If there is one certainty about Japan in 2019, it's that the population is shrinking and getting older at an alarming rate. The birthrate is at an all time low, old people are living longer, and while immigration requirements have been amended recently, there isn't a wide-open border policy by any means, and still a lot of societal resistance to the idea of accepting a lot of immigrants. This means that there is a labor shortage in the country that is growing to critical proportions.

Konbini are like the canaries in the mine in the labor shortage woes, since the pay is quite low for the work involved. In places like Tokyo, there do seem to be more immigrant workers at konbini these days, but as I mentioned briefly previously, being a konbini worker is quite difficult for non-native speakers, because of the varied ways in which one has to interact with customers. Other so-called blue or pink collar industries in Japan are suffering too. It remains to be seen if this will end up eroding the quality of customer service, or the quality of work done in general, in Japan in the upcoming years. Already older people are being asked to remain in or re-enter the labor force - will that be a solution? Younger women are already being asked to do a lot - keep working full time as much as possible, come back to work soon after having children, and oh yes, keep on having those kids too, for the future of the nation.

Or will immigration policies be amended yet again? Can Japan become a country open to immigrants?

Going up against the big guys

Another sign of the changing times that can be observed from the konbini situation is that that franchise owners are standing to what they see as the harsh policies of the companies, whether it's about food waste or 24 hour operations. Until fairly recently, the "little guy" just did not go up against the "big guy". Employees worked long hours without much complaint until some literally dropped dead; female workers stayed quiet if they were sexually harassed or discriminated against; small companies who relied on getting work from bigger companies were at their whim. Civil lawsuits were very rare. That has all changed. Lawsuits are far more frequent, complaints are made loudly, and employees, especially younger ones, do not stand for being poorly treated by their supervisors or employers. (It helps of course that they are in a sellers' market due to the labor shortage.) Terms like pawahara (power harassment) and sekuhara (sexual harassment) are bandied about freely, and hatarakikata kaikaku (働き方改革) or 'work condition reform', which prohibits things like excessive overtime and preventing employees from taking the vacation days they are allowed to illegal. Hatarakikata kaikaku has not yet reached small business owners, independent contractors or franchisees however.

What's the future of konbini?

For the near future at least, konbini should still be the oases they are. The market is still expanding, albeit at a smaller pace than before. But unless the labor shortage issue can be addressed[5], konbini might be facing trouble sooner than we may think. And it may not be such an exaggeration to say the same about Japan in general.

Further reading

Back in May 2011, a couple of months after the devastating Great Eastern Japan Earthquake on March 11, 2011, I wrote an article about how konbini had really risen to the challenge, helping people in the most affected areas as well as doing their best to keep things calm elsewhere. Konbini are still as awesome as they were then for the most part. My hope is that they will manage to surmount their problems and continue to be the bright, inviting oases that they are.

  1. As of June 2019 the three top convenience store chains by a wide margin are Seven Eleven (20,973 stores), Family Mart (15,517 stores) and Lawson (14,691 store. Source.  ↩

  2. The 7-11 near my base in Yokohama always has a wanted ad displayed. They offer 1,000 yen per hour for around 20 hours of work per week, which is a smidgen more than the 983 yen per hour minimum wage for Kanagawa prefecture, where Yokohama is located.  ↩

  3. The no. 2 konbini chain, Family Mart, has also started similar reduced-hours experiments, and no. 3 Lawson has reduced the hours of a few of their stores. But all 3 of the top companies still have an official mandatory 24 hours of operation policy for their franchises.  ↩

  4. I haven't dug too deeply here into another major problem facing 7-11 - serious data breaches. Seven Pay, their cashless payment system, was hacked as soon as it was operational; just a day after it was launched on July 1, customers reported having money stolen from their accounts. Seven Pay Co., the subsidiary of Seven & i Holdings, the parent company of 7-11 and other companies, was unable to fix the problem, and on August 1 they announced that the service would be shut down at the end of September. Seven & i Holding's Omni7 online shopping site was also compromised, which affects customers of their other retail operations such as the Sogo and Seibu department stores, the LOFT stores, Ito Yokado supermarkets and the Akachan Honpo baby goods chain.  ↩

  5. If you're wondering about automation, robots and unmanned stores, there are developments in that direction too. Lawson started experimenting with unmanned stores in April at 3 locations in Tokyo, and will be expanding to more in August, from the hours of 0:00 to 05:00. (Press release (Japanese)). Customers will enter by scanning a QR code with smartphones with a dedicated app installed, and items can be purchased by scanning the bar code. Payment is made with Apple Pay, Rakuten Pay or credit cards.  ↩

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