Lawson is one of the big guns in the Japanese convenience store channel. It boasts close to 15,000 outlets domestically, second only to 7-Eleven.
Lawson has not sailed untarnished through the pandemic. Its shopper traffic dropped, it sold fewer impulse items and as a consequence the profitability in its core CVS business declined.
In 2014 Lawson acquired Seijo Ishii (成城 石井), an upmarket food retailer which at the time was mainly present in the Tokyo Metropolitan area.
There are only 164 (fully owned) Seijo Ishii’s in the Lawson empire today* but they make a whopping JPY63million operating income per store, 40X what a typical Lawson convenience store makes!
Unlike Lawson, Seijo Ishii’s sales increased during the pandemic, as did its operating income. Now Seijou Ishii accounts for 25% of the group’s entire profit stream.
If you’ve ever been to a Seijo Ishii it’s not difficult to understand why.
Firstly they are in very high traffic flow locations; railway and subway stations are common. Young working, single households, female skewed, account for a large proportion of the shopper traffic.
Second, their store size is small. The smallest starts at 66m² yet are packed with high ticket items. I do not know the average basket size for Seijo Ishii but it would not surprise me if it exceeded JPY4000 which is considerably higher than your average convenience store.
Thirdly, Seijo Ishii has an eclectic product range. If you are searching for unique soy sauce, olive or flaxseed oils you will be spoilt for choice. Many items the buyers have selected themselves for direct import, the chain also operates a central kitchen with homemade fare. Seijo Ishii is much more vertically integrated than Lawson.
There are quite a few gourmet retail chains in Japan. Competitors include Meidi-ya, Jupiter, Ikari, Hankyu Oasis and of course the department store channel never mind online. However none has been able to achieve the scale nor brand imagery of Seijo Ishii.
Slowly the chain has expanded outside the Kanto region, last year it opened a store in Okayama for example. In my view its brand image is far higher than its footprint suggesting there’s significant upside growth available.
Lawson has also expanded its CVS franchise into Asia. There are around 3000 outlets in China, Thailand and the Philippines.
Most developed markets have at least one high end gourmet chain. City Super is famous in Hong Kong and Taiwan. Trader Joes and Wholefoods occupy this position in the US, as does perhaps Marks & Spencer in the UK.
I am tempted to say that the Seijo Ishii concept could work outside Japan in places like Singapore, Taipei and perhaps even Hong Kong.
If I was on the Lawson board, I’d be asking what work has been done to investigate this fully.
(Knowing what happened to SuperDry, I would also be ensuring the trademark has been properly registered too.)
*in addition there are also some franchised stores