---
title: "7-ELEVEN in the Post-Bubble Era: 'Quality' Matters More Than 'Low Price'"
description: "In the post-bubble era, while hard discounters rose in Europe and the US, convenience stores benefited in Japan. This article explores how 7-ELEVEN navigated the shift from a seller's to a buyer's market by prioritizing quality over price, leveraging private brands, and evolving into a 'life infrastructure' for Japanese residents."
author: "元气资本消费组"
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# 7-ELEVEN in the Post-Bubble Era: 'Quality' Matters More Than 'Low Price'

> In the post-bubble era, while hard discounters rose in Europe and the US, convenience stores benefited in Japan. This article explores how 7-ELEVEN navigated the shift from a seller's to a buyer's market by prioritizing quality over price, leveraging private brands, and evolving into a 'life infrastructure' for Japanese residents.

********Click 'Read Original' for details********
In the downturn, hard discounters rose in Europe and the US, while convenience stores benefited in Japan.
**Core Content**
1. When 'oversupply' collided with 'weakened purchasing power,' Japanese retail shifted from a 'seller's market' to a 'buyer's market.'
2. The growth of single, elderly, and working women populations accelerated the decline of supermarkets and boosted convenience stores; with shrinking household sizes, consumers expected 'small quantity, high quality,' and 7-ELEVEN's private brand prioritized 'quality.'
3. In the 'buyer's market' era, companies compete fiercely for 'sales power.' The 'pencil-type' product life cycle forced 7-ELEVEN to frequently iterate products, and relying on 'services' to provide added value made 7-ELEVEN a 'life infrastructure' for Japanese residents.

After Japan's economic bubble burst, in addition to low-cost fashion represented by MUJI and UNIQLO, convenience stores like 7-ELEVEN also successfully navigated the economic cycle. In contrast, 7-ELEVEN's parent company, Ito-Yokado, has seen stagnant performance since 1990. **As a subsidiary, Japan 7-ELEVEN's market value exceeded that of its parent company.**

1974-2021 7-ELEVEN Japan market sales changes, growth accelerated after H20 (2008) (Source: Seven-Eleven)
1974-2021 7-ELEVEN Japan store count changes (Source: Seven-Eleven)
1974-2021 7-ELEVEN Japan market sales and store count data (Source: Seven-Eleven)

Ito-Yokado obtained the franchise from Southland, Inc. in November 1973, introducing 7-ELEVEN to Japan as the country's first convenience store. However, by 1990, the chairman of Southland proposed a takeover to Japan 7-ELEVEN, and the Japanese company acquired 70% of Southland's equity in March 1991.

Southland was born in Texas in 1927, originally as an American chain ice company; the brand name derives from its operating hours from 7 a.m. to 11 p.m. (Source: Texas State Historical Association)

**01**
**▶ Economic growth slowed, goods oversupplied: Japanese retail shifted from a seller's market to a buyer's market.**

In fact, after the 1990s, discount stores were not unable to establish a foothold in Japan, but there were huge differences between the Japanese and US markets on both the supply and demand sides. **From discount stores to convenience stores, the Japanese retail market could not copy the American model.**

Large supermarkets experienced unprecedented prosperity in Japan in the late 1960s. Post-war Japan's high economic growth brought with it surging consumer demand. **This period was called the 'seller's market' era.** Ito-Yokado grew rapidly during the 'heyday of large supermarkets.' In 1963, Ito-Yokado, operating emerging general merchandise stores, employed only about 500 people; in the 1970s, the company hired over 1,000 new graduates in a single year.

Ito-Yokado's expansion was once resisted by local shopping streets. Toshifumi Suzuki, then a company director, participated in negotiations between the two sides in September 1971. At that time, people generally believed in 'scale,' but Suzuki was committed to **'revitalizing existing small retail stores' and achieving 'coexistence and co-prosperity of large stores and small and medium-sized retailers.'** During an in-house overseas study tour, Suzuki encountered the convenience store format of Southland in the US, introduced it to Japan, and established York Seven.

To demonstrate the original intention of creating 7-ELEVEN—to protect small and medium-sized retailers from being squeezed out by large supermarkets—Suzuki insisted that the first 7-ELEVEN store be a franchise, even though choosing direct operation for the first batch of stores would have helped accumulate practical experience. In May 1974, 7-ELEVEN Toyosu Store opened as Japan's first convenience store.

7-ELEVEN opened as Japan's first franchise convenience store in Toyosu, Koto-ku, Tokyo (Source: Seven-Eleven)

**The 'seller's market' era gave traditional supermarkets the illusion that 'products sell well without effort.'** As long as companies completed wholesale and display, they had no worries about sales; there was no need for so-called 'sales power' to play a role.

In the early 1970s, changes had already appeared in Japanese social consumption behavior—**promotional products gradually began to have surplus. Previously, supermarket promotions were always sold out.**

The 1971 dollar crisis and the 1973 oil crisis caused Japan's economic growth rate to turn negative for the first time the year after the oil crisis, marking the end of post-war Japan's high economic growth. Slower economic growth meant slower growth in national consumption capacity, and the post-war economic boom moved Japanese society from 'material scarcity' to 'material surplus.' Thus, **the 'seller's market' gradually transitioned to a 'buyer's market.'**

Suzuki wrote in 'The Philosophy of Retail': 'Japanese consumers are full of contradictory 'duality' in their thinking: **even in an era of material abundance, they are reluctant to open their wallets... If sellers do not rack their brains and use every means to arouse buyers' desire to consume, companies will also head toward the end.'**

Large supermarkets that benefited from the seller's market in the past went bankrupt one after another because they could not adapt to fierce competition, while 7-ELEVEN is a representative of 'racking their brains.'

**02**
**▶ 'Quality' matters more than 'low price': Private brands become competitors to national brands, and channels hold brands hostage.**

**In the 'buyer's market' era under a declining birthrate society, the promotional method of 'more quantity for the same price' became ineffective because it deviated from the actual needs of Japanese consumers.** Ito-Yokado once implemented a promotion of adding extra black beans, but performance did not improve. However, when the strategy was changed to selling by weight, black bean sales surged.

With the increase in single-person households and shrinking family sizes, consumers expected **'small quantity, high quality.'**

Adding quantity is not so much a discount as it is forced selling. Large supermarkets, restaurants, and izakayas are suitable for consumption scenarios for two or more people, with consumers mostly being parents and children, couples, lovers, or friends. **At the same time, convenience stores provide dining solutions for single people.**

In 1999, 7-ELEVEN consumers were dominated by those in their 20s to 30s, accounting for 35%, with consumers over 50 ranking last at 14%; by 2009, consumers in their 20s to 30s had fallen to 22%, a decrease of one-third from 1999, while the number of consumers over 50 had doubled, accounting for 28%.

In addition, since the enactment of the Equal Employment Opportunity Act for Men and Women, the female employment rate in Japan has continued to rise.

The growth of single, elderly, and working women populations made **'buying on demand at a nearby convenience store' more attractive than 'traveling farther to a large supermarket for centralized shopping.'**

2004-2017 Changes in Japanese social structure (Source: SEVEN & i)

It is worth mentioning that the rise of convenience stores does not mean that other retail formats have evaporated. Suzuki pointed out that consumers in major Western markets exhibit distinctly different consumption behaviors based on class: middle-class and above customers visit high-end department stores, while the general public visits shopping malls; Japanese consumers, on the other hand, choose department stores, supermarkets, specialty stores, or convenience stores as needed.

PB (Private Brand), i.e., private label, in Western markets is an effective tool for large retailers like Walmart or hard discounters like ALDI to reduce costs, but in Japan it has become an innovative strategy for 7-ELEVEN to pursue product quality and even surpass national brands (NB).

7-ELEVEN created its PB 'SEVEN PREMIUM' in 2007, with quality and price similar to or even higher than NB, **breaking the stereotype established by leading Western retailers that 'PB products are necessarily more affordable than NB,'** and selling at the same price across three different retail channels: 7-ELEVEN convenience stores, Ito-Yokado supermarkets, and Sogo & Seibu department stores, becoming the common PB of the SEVEN & i Group.

SEVEN PREMIUM initially covered only 49 food items at its inception, had over 1,700 food items by 2014, and by 2019 had expanded to 4,150 products.

7-ELEVEN stores began selling PB product SEVEN PREMIUM in August 2007 (Source: Seven-Eleven)

7-ELEVEN stores opened SEVEN CAFE in January 2013, selling 100-yen PB coffee, producing 1 billion cups annually (Source: Seven-Eleven)

In 2017, SEVEN PREMIUM categories expanded to daily necessities, clothing, and fresh food (Source: SEVEN & i)

Category revenue share (Source: Seven-Eleven)

The initial concept of SEVEN PREMIUM can be traced back to the time when the IY Group transformed into SEVEN & i Holdings. At that time, the retail industry was at a market low, with product supply far exceeding demand.

In January 2005, facing the decline of Ito-Yokado, Suzuki proposed restructuring and establishing a holding company; SEVEN & i Holdings was established in September of the same year, encompassing seven business segments including convenience stores, supermarkets, restaurants, and department stores.

**Due to product 'slow sales,' 'sales power' became the key to a company's survival.**

SEVEN PREMIUM's 'Golden Bread' was priced at 250 yen, more than 50% higher than NB bread, and twice the price of traditional PB products. However, sales of Golden Bread exceeded 650,000 units within two weeks of launch, and this number climbed to 15 million after four months.

In fact, before SEVEN PREMIUM was born, the company launched 'Golden Salmon Rice Balls' and 'Salmon Roe Rice Balls' in 2001, priced at 160 yen and 170 yen respectively. Although the absolute prices were not high, they were indeed high for convenience stores.

At that time, the macro economy was poor, and all industries were trapped in significant price cuts. During McDonald's weekday half-price promotion, hamburgers sold for only 65 yen; Yoshinoya's beef bowl was reduced from 400 yen to 280 yen. Convenience store rice balls were generally fixed at around 100 yen.

**7-ELEVEN abandoned the low-price strategy in PB product development and practiced 'quality first' to avoid fierce price wars.** Suzuki described entering the 'blank market' this way: 'If 60% of customers value price, then the vast majority of sellers are willing to sell low-priced products. As a result, 90% of sellers are providing products for 60% of customers... **Creating new product value allows you to avoid the market that 90% of sellers are fiercely competing for.'**

It is reported that SEVEN PREMIUM contributed 80 billion yen in sales to 7-ELEVEN within one year of its launch, and this figure had increased to 490 billion yen by 2012. As of 2020, SEVEN PREMIUM's cumulative revenue reached 10 trillion yen.

2007-2016 SEVEN PREMIUM annual revenue changes (Source: SEVEN & i)

2014-2020 SEVEN PREMIUM annual revenue changes (Source: Seven-Eleven)

In 2010, 7-ELEVEN further launched the high-end PB product SEVEN GOLD.

2012-2015 SEVEN GOLD revenue changes (Source: SEVEN & i)

As of 2021, the company's PB product lines include SEVEN PREMIUM, SEVEN GOLD, SEVEN CAFE, and SEVEN PREMIUM LIFESTYLE (Source: Seven-Eleven)

Since 2017, SEVEN PREMIUM FRESH once appeared as an independent PB product line for 7-ELEVEN (Source: SEVEN & i)

Japanese retail generally believes that brands indicating the manufacturer are not classified as PB. However, SEVEN PREMIUM cooperates with leading NB manufacturers and indicates the supplier's name on the product packaging. **

**7-ELEVEN's PB products developed based on 'quality first' have made it a competitor to NB, with 7-ELEVEN acting as both 'referee' and 'player.'** This may be the main reason why Japanese convenience stores 'hold brands hostage.'

Consumers' 'quality first' demand in convenience store consumption scenarios may be related to 'cheap self-reward.' Japanese media once attributed the significant decline in restaurant performance to the rise of convenience stores, saying 'the restaurant industry has been robbed of customers by convenience stores.' **Convenience stores replace restaurants, and 'small happiness' can compensate for huge losses at a minimal cost.**

In fact, Professor Kazuko Wada once pointed out that 'loss aversion' drives 'spontaneous consumption' and 'self-reward consumption.' Kei Ushikubo believes that spontaneous consumption and self-reward consumption may mean that people have moved from the era of 'shopping' to the era of 'buying experiences'—shopping is an entertainment activity.

On the supply side, the reason PB can become a competitor to NB is largely due to 7-ELEVEN's excellent **supply chain capabilities.** The company initially established NDF in 1979, whose members produce goods exclusively for 7-ELEVEN. This unprecedented model ensures that 7-ELEVEN can monopolize production technology.

In addition, since shared manufacturers find it difficult to avoid cross-contamination between downstream brand products, NDF can implement unified standards in ingredient procurement and quality management, ensuring production hygiene and safety. As of February 2021, the company had 180 exclusive production manufacturers within the NDF system in Japan, accounting for 92.2% of all suppliers.

It is worth noting that **7-ELEVEN does not invest in any NDF factories or production equipment.** Avoiding becoming 'close partners'—maintaining a bit of tension on the basis of trust—can ensure that manufacturers strictly review product development and achieve excellent manufacturing processes.

**On the demand side, the reason PB can become a competitor to NB may be related to Japan's more 'unified' consumption patterns after the 1990s compared to Western countries.** Yuanqi Capital previously mentioned that throughout history, Japanese society has not been without 'diversified' consumption, but the eccentric personalities of the bubble generation were completely erased by the disappointment brought by the sluggish economy.

However, Suzuki attributed the 'unified' consumption of Japanese society to its smaller wealth gap compared to major Western countries, as well as the similar level of education across the population under the compulsory education system. The author of this article believes that in the Japanese cultural context, **the public's loyalty to the collective** may also be one of the driving factors for 'unified' consumption.**

**03**
**▶ 'The more delicious something is, the easier it is to get tired of it': Product slow sales create a 'prosperous illusion,' and faster information dissemination shortens product life cycles.**

**In a buyer's market era of oversupply and saturated consumption, whether a product has added value, rather than a favorable price, is the key to determining consumers' purchase intention. People who 'tighten their wallets' have a very passive desire to consume. To awaken consumption desire, new product development emerges one after another.**

**Rapid product iteration may give people the 'prosperous illusion' that consumer demand is diverse and the Japanese economy is booming, but in reality, it is the result of product slow sales.**

As Suzuki said, 'The more delicious something is, the easier it is to get tired of it... The real competitor is the ever-changing customer demand.' 7-ELEVEN constantly updates the flavors of high-frequency foods such as bento, rice balls, and bread.

Similarly, 80% of Francfranc's consumers are 'repeat customers.' To avoid people getting bored, the brand updates its products or store layouts every two weeks. As of 2015, Japanese fashion home brand Francfranc updated about 30% of its products annually, while 7-ELEVEN updated as much as 70% of its products each year.

**Changing consumer demand makes consumers 'like the new and dislike the old.'** In response, Professor Kazunari Uchida of Waseda University's School of Commerce attributes the shortening of product life cycles to the acceleration of information dissemination and the improvement of consumers' ability to obtain information.

Suzuki used 'Fuji-type,' 'tea canister-type,' and 'pencil-type' to describe the changes in product life cycle length from the peak of the seller's market to the buyer's market era.

In the 1960s, **due to the long 'Fuji-type' product life cycle, supermarkets had ample time to adopt imitation strategies,** developing products based on department store sales conditions, and could still profit even if the timing was delayed;

After the collapse of Japan's economic bubble in the 1990s, the product life cycle changed to the 'tea canister type,' and the retail industry entered the buyer's market era, where success could only be achieved by increasing publicity; thereafter, **the product life cycle further shortened and evolved into the 'pencil type'—the iteration speed of hot-selling products accelerated, and imitation strategies would incur huge opportunity costs.**

Since consumer demand quickly rises to a peak in a short time and then falls to the bottom, if merchants develop products in large quantities only after consumer demand reaches its peak, they will inevitably miss opportunities, leading to product slow sales.

Therefore, **discovering consumers' 'future needs' is the key to capturing consumer demand.** To avoid the opportunity cost of missing opportunities and reduce the cost losses caused by product slow sales, the company 'strikes while the iron is hot' to increase publicity for hot-selling products and promptly remove slow-selling products whose life cycle has ended.

Convenience stores are often seen by the media as the 'culprits that shorten product life cycles.' However, convenience stores do not have the decision-making power to control the life cycle of retail products. **7-ELEVEN's frequent product changes** may be the result, not the cause, of the 'pencil-type' product life cycle transformation.

Yasushi Akimoto interpreted the essence of 'sales power' this way: **'The core charm of the retail industry lies in constantly breaking the 'pre-established harmony' of innovation,** which makes consumers feel, 'Oh, what new surprises will there be next time.'

Despite the extremely frequent changes, 7-ELEVEN's product development is not blind. In an era of oversupply and a buyer's market, asking low-desire consumers about their consumption needs is futile. Before seeing the finished product, respondents often say one thing and do another. To capture consumers' 'tomorrow's needs,' **'hypothesis' and 'verification' are crucial.**

7-ELEVEN stores order for the next day every morning, so they need to speculate on potential best-selling products. This hypothesis is not imagined out of thin air, but is based on existing sales data, next-day weather, events, and other forward-looking information. Although POS (Point of Sales) provides consumers' past data, not future data, this system is designed to verify whether the hypothesis is correct, thereby making 'single-item management' possible.

As mentioned above, even if slow-selling products are removed, the replacement of products has not brought a huge SKU to 7-ELEVEN. 'Selected products,' i.e., 'recommended products,' thus **save consumers the effort of choosing, becoming a 'life solution' and a service.**

**04**
**▶ The evolution of convenience: How 7-ELEVEN became 'life infrastructure'**

In fact, in addition to the excellent quality of the products themselves, an effective way for retailers to provide 'added value' to consumers to awaken consumption desire is through 'services.'

From ATM withdrawals, free Wi-Fi, to photocopying documents and collecting public utility fees, how does 7-ELEVEN decide when and where to provide which service items? **The choice of service items depends on how 'convenience' is defined.** Supporting the expansion of 7-ELEVEN's service items over the years is the change in consumer convenience needs.

When 7-ELEVEN first entered the Japanese market, longer business hours were convenience. 7-ELEVEN promoted 24-hour operation, setting its slogan as 'It's great that you're still open.'

Since the 1980s, more and more young Japanese and office workers have regarded 24-hour convenience stores as 'another refrigerator at home.' After the bubble economy period with abundant supply, consumers could not compromise on product quality, and 7-ELEVEN developed products based on 'quality first.'

As aging problems intensified, the number of elderly people with mobility difficulties and living alone increased. In 2000, 7-ELEVEN launched the SEVEN MEAL delivery service to address the shopping inconvenience of vulnerable groups.

7-ELEVEN's delivery service is not limited to special groups. 'Easy Delivery' usually dispatches regular employees from the store closest to the consumer's residence for home delivery. **With the sharp increase in single and solitary people, 'warmth' has become a consumer demand.** 'Familiar faces' can eliminate consumers' doubts about the quality of delivered products. This 'sense of security' makes the delivery service surpass the mere 'convenience' function, and strengthening trust helps promote consumer behavior.

In 2001, IY BANK began operations, and the fees paid when withdrawing from financial institution accounts were the main source of income for ATMs in 7-ELEVEN stores. However, the original intention of 7-ELEVEN in introducing ATMs was not to 'enter the banking industry'; providing convenience was the ultimate purpose.

At that time, Japanese banks closed at 3 p.m. on weekdays, and financial institutions gave people the stereotype that 'you cannot enter casually if not properly dressed.' A 'narrow bank without financing business' located in a nearby 24-hour convenience store like 7-ELEVEN allowed consumers to withdraw money without worrying about attire or time. 'Existing banks are rental cars, while the bank established by 7-ELEVEN is a bus.'

The establishment of ATMs brought unexpected derivative effects to stores, as most consumers who came to withdraw money would 'incidentally' shop. In fact, services that bring traffic to stores also include Seven Spot free Wi-Fi provided by the group in 2011 at 7-ELEVEN, Ito-Yokado, Sogo & Seibu, and Denny's stores in Tokyo's 23 wards.

In 2009, 7-ELEVEN replaced its initial positioning of 'a store that brings convenience to customers' with 'nearby convenience,' **believing that as aging and declining birthrate problems worsen, consumers do not have the ability or willingness to travel to farther shopping places.**

For consumers, current surprises will quickly become commonplace in the future. Therefore, for retailers, providing added value is not a one-time thing; 'creating surprises' must be sustained.

To adapt to changes in consumer needs, the company provides services such as collecting public utility fees for water, electricity, and gas, collecting taxes, and photocopying documents, making 7-ELEVEN a 'life infrastructure' for Japanese residents.

Suzuki believes that Japan's economic situation is severe and the consumer market is difficult to recover. Therefore, **'self-service' needs to transform into 'service-oriented hospitality,' and 7-ELEVEN should shift from 'waiting-type management' to 'offensive-type management.'**

**05**
**▶ Dense store placement strengthens recognition: 'Not communicated equals nonexistence'**

Since the opening of its first store, 7-ELEVEN has consistently implemented the 'dense store placement' strategy. It is reported that Suzuki once required market development personnel to 'not step out of Koto-ku' when selecting store locations.

The reason Suzuki insisted on laying out a network of stores close to commercial areas was first to strengthen consumer brand recognition.

'Recognition is linked to trust, which promotes purchase intention.' Suzuki firmly believed in the 'tipping point'—when the display scale of a single product reaches a critical point, consumer recognition forms instantly, and purchase intention reaches its peak. Publishers usually set a first print run of over 10,000 copies for publications with selling points. Books increase exposure through sales channels, supplemented by media hype, and can quickly enhance consumer recognition in a short time, thereby triggering the 'tipping point' that generates consumer behavior.

In addition, **scattered store openings nationwide are clearly not conducive to improving the production, distribution, and management efficiency of small convenience stores.** The higher the store concentration, the more nearby dedicated factories, and the easier it is to realize economies of scale.

To ensure food freshness, 7-ELEVEN only opens stores within a 3-hour drive from dedicated factories; at the same time, logistics distribution efficiency also improves with increased store density.

Although 7-ELEVEN adopts a franchise model that expands extremely quickly and is difficult to control quality, rather than the opposite direct operation model, it has made great efforts in franchise store management to ensure the implementation of headquarters' management policies.

Store operation consultants (OFC) from across the country—the communication medium between the company headquarters and franchise stores—gather at regular 'area consultant meetings' held every two weeks. As the distance between stores shortens, the travel time between stores for store operation consultants, who aim to improve franchise store performance, also decreases, and management efficiency improves.

Therefore, the number of 7-ELEVEN stores increased to 100 within two years of entering the Japanese market, while Southland took a full 15 years to reach that number.

To enhance 'sales power,' design as a tool to strengthen brand communication capabilities cannot be ignored. Products and services can show individual excellence, while design can shape 7-ELEVEN's overall image and convey brand value. After being invited to be responsible for brand design, Kashiwa Sato said, 'The most indispensable thing in brand design is the philosophy that flows at the foundation... **Not communicated equals nonexistence.'**

Similar to design, the significance of dense store placement is not only to improve efficiency but also to serve as an important tool for information transmission.

**06**
**▶ China's high e-commerce penetration limits the convenience store market capacity; family consumption scenarios and car culture make the retail industry coexist with multiple models.**

China's current retail market has both commonalities and differences with Japan's past retail market.

In Japan, the rise of convenience stores came at the expense of large supermarkets and restaurant companies. In China, it is highly doubtful whether convenience stores can have a crowding-out effect on large supermarkets and restaurant companies.

In Japanese society, the increase in single, elderly, and working women populations, and shrinking family sizes, make 'buying on demand at a nearby convenience store' clearly more attractive than 'traveling farther to a large supermarket for centralized shopping.' However, **this logic is based on offline scenarios, premised on Japan's e-commerce penetration rate being far lower than China's.**

2018/19 Comparison of e-commerce penetration in grocery retail by country (Source: Financial Times)

The reason China's grocery retail e-commerce penetration rate far exceeds Japan's may be because at different stages of development, before the popularization of smartphones, Japan's offline retail system was already highly efficient, and online business models found it difficult to shake existing offline companies.

The high penetration of online channels in grocery retail means that even if Chinese consumers have no intention to shop at farther large supermarkets, they can still buy groceries through online channels.

In fact, **Chinese convenience stores not only face alternatives in the grocery field, such as large supermarket delivery services with richer categories and more convenient receipt, and online supermarkets, but also face the booming food delivery as an alternative in the catering field.** Except for breakfast consumption scenarios, ordering food on platforms like 'Ele.me' is low-cost and diverse, and delivery services further deprive convenience stores of their 'convenience' advantage.

Admittedly, the number of single people in China's first- and second-tier cities is increasing, and the demographic trends of declining birthrate and aging are beginning to emerge. But so far, suburban and lower-tier markets still have many family-based consumption scenarios, and car culture is becoming increasingly common. As consumers' expectations for product quality continue to rise, a new generation of large supermarkets has been able to achieve rapid growth.

Compared with Japanese convenience stores, Chinese convenience stores have extremely limited ability to 'divide up' the large supermarket and restaurant markets. This determines that China's retail formats tend to 'coexist with multiple models,' and **convenience stores are only part of the 'vertical' formats.**

The intersection of the Chinese and Japanese retail markets lies in the fact that consumers cannot compromise on quality. However, in Japan, the driving factors behind this phenomenon include the lost economic prosperity—consumers who experienced the bubble economy period of material abundance cannot make concessions on product quality—and the added value provided by companies in response to product slow sales;

In China, what drives this phenomenon is the sustained high-speed economic growth over many years and the resulting improvement in national consumption capacity—at least before the latest round of the epidemic this year.

It is worth noting that the increase in purchasing power not only raised Chinese consumers' expectations for product quality, but also strengthened their demand for NB, i.e., national brands. However, the latest round of the epidemic may break this trend. Yuanqi Capital previously mentioned that since the beginning of this year, Chinese residents' deposits have increased significantly, and their willingness to consume has declined.

Although consumption capacity has been greatly weakened, Chinese consumers who have experienced a period of material abundance and economic growth have not diminished their expectations for product quality. If economic growth further slows, 'oversupply' may accelerate the Chinese retail market's entry into the 'buyer's market era.' **Companies cannot survive by relying solely on low-price strategies; only by accurately capturing consumer demand and increasing the corresponding 'added value' of products can they enhance 'sales power.'**

When Suzuki first stepped into American convenience stores, 7-ELEVEN sold ready-to-eat products such as sandwiches and hot dogs, which are American national foods. Differences in food culture made it impossible for the Japanese market to copy the American model. Ready-to-eat products including rice-based items like rice balls and bento, bread-based items like sandwiches and pastries, noodle-based items like Chinese cold noodles and Italian pasta, and hot items like oden and buns were all unique original products of Japan 7-ELEVEN—PB in a broad sense.

Suzuki was determined to 'shift from home-style flavors to flavors that are difficult to achieve at home,' following the principle of 'developing products with high added value,' and rejecting the management attitude of 'as a convenience store, this flavor is barely acceptable.'

**Because of slow sales, they refine.**

However, when entering the Chinese market, Japanese convenience stores copied the Japanese model, making far less effort in product development and localized innovation than in the Japanese market. The continuous emergence of local Chinese convenience stores may break this comfort.

**References** (slide):
 _Suzuki Toshifumi. 2015. Retail Psychology. Jiangsu Literature and Art Publishing House._
_Suzuki Toshifumi. 2014. The Philosophy of Retail. Jiangsu Literature and Art Publishing House._
_Seven-Eleven. 2022. Sales, store count trends. [online] Available at: <https://www.sej.co.jp/company/suii.html> [Accessed 21 June 2022]._
_Seven-Eleven. 2022. The origin of 7-Eleven's 'strength' Product power. [online] Available at: <https://www.sej.co.jp/owner/contents/product-appeal/> [Accessed 22 June 2022]._
_Seven & i. 2017. Seven & i's Challenge. [online] Available at: <https://www.7andi.com/company/challenge/2685/1.html> [Accessed 22 June 2022]._
_Financial Times. 2020. Coronavirus: Southern Europe discovers digital shopping. [online] Available at: <https://www.ft.com/content/26416b7a-6a89-11ea-800d-da70cff6e4d3> [Accessed 22 June 2022]._

Source: Yuanqi Capital
(ID: Yuanqi Capital)
Analyst: Valerie Lin

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