Lawson plans to expand convenience store network further in China

22, Jan. 2019

TOKYO, NNA – Japan’s third largest convenience store chain Lawson Inc. is expanding its network in China through franchise contracts and plans to beef up the number of its stores by 50 percent within a year.

It has doubled the number of outlets in China to just over 2,000 in the past two years, and aims to increase it to 3,000 by 2020.

That should be achieved by “mainly focusing on areas we have already entered,” including Dalian and Beijing, Tsunekazu Tani, a Lawson spokesman in Tokyo, told NNA on Monday.

The share of directly operated stores in China varies from region to region, standing between 30 percent and 40 percent, but “the percentage is surely going down as we expand business with franchisees,” he said.

The company claims to be the first Japanese convenience store chain operator to have tapped the Chinese market in 1996.

But in terms of the number of stores, Lawson’s market share in China was limited to 2.9 percent in 2017, excluding those affiliated with gas station operators, according to the China Chain Store and Franchise Association.

It was behind its Japanese rivals FamilyMart Co. at 4.4 percent and Seven-Eleven Japan Co. at 3.2 percent.

The Chinese convenience store market grew 23 percent from a year earlier to 190.5 billion yuan ($28 billion) in 2017, with the number of stores at around 106,000, including those under gas station operators, according to the association.

In a bid to catch up, Lawson has shifted from direct management via its local subsidiaries in major cities toward more franchise contracts with local partners in developed coastal provinces.

In 2014, the company signed franchise contracts with local firms in various cities in the eastern provinces of Jiangsu and Zhejiang.

It also ventured into Wuhan, the capital of the central province of Hubei, in 2016 and Hefei, the capital of the central province of Anhui, adjacent to Jiangsu and Zhejiang, in 2018.

To check rising rents and labor costs, Lawson has introduced self-pay cashiers with smartphone and other digital payment options at all of its 1,220 shops in Shanghai, which is 61 percent of its total in China, as well as in Jiangsu and Zhejiang provinces.

Lawson has also tried to differentiate itself from local convenience stores by enhancing private brand items and selling boxed lunches and fast food including croquettes and fried chicken, which Tani said its Japanese rivals do not market in China.

Through its smartphone app, Lawson also offers discounts, coupons and membership point rewards, Tani said.

At the end of 2018, Lawson had 14,574 stores in Japan and 2,165 overseas, most of which were in China.