High Convenience

Noritsugu Miyazaki is a clerk in a convenience store. Slacker job, right? Not. Miyazaki works for Family Mart in Japan, where the seemingly mundane task of running such stores has been raised to the level of a high and demanding art. Miyazaki, 22, does more than sell drinks and snacks. He also helps patrons with dry cleaning, package delivery and DVD rentals. He can accept payment for utility bills and issue tickets to Tokyo Disneyland, baseball games or movies. And when it's time to restock inventory, Miyazaki transmits his orders with the help of a tablet computer he carries with him as he walks the aisles. The computer's touchscreen can summon up details of individual products, sales data going back for weeks, even weather reports. "Stock up on plastic umbrellas," the computer admonishes him. "Rain is on the way." "It's pretty difficult," says Miyazaki. "I'm looking for a different job, to be honest."

Welcome to the demanding world of Japanese convenience stores. In other parts of the world the big-box chains, from Wal-Mart to Target, are setting the pace in retail. Convenience stores, by contrast, tend to be the poor stepchildren of the business, drearily linked in the popular mind, at least in their American homeland, with stale sandwiches, stickups and insomnia. Not so in Japan, where the 38,000 conbini, as they're known, use cutting-edge information technology to serve the spontaneous desires of their customers, from ski-lift tickets to banking services (which Wal-Mart is fighting a legal battle to offer in its U.S. stores). Japan's Seven & i Holdings bought a majority stake in the 7-Eleven chain in 1991 and turned it into a household word in Asia, thanks to the Japanese parent's profit margins of 31 percent.

And now the conbini are setting their sights abroad. The rationale for expansion is straightforward: the $61 billion convenience-store market is saturated in Japan, where the population is shrinking; the number of new-store openings has flattened as growth shifts to new Asian markets. Out of Family Mart's 12,000 stores around the world, nearly one half are located in Taiwan, South Korea, Thailand and China. The South Korean affiliate even has two stores in North Korea's free-trade zones. Now the company is pushing into the United States, under the name Famima, with four outlets open in the Los Angeles area and plans for 200 nationwide by 2009. "We are trying to be a premium grocery, quick-service restaurant and convenience store in one," says Hidenari Sato, who runs Family Mart's fledgling U.S. operation. "But we don't want the image of the gas-and-snack convenience store that America is used to."

Just visit one of Family Mart's stores in West Hollywood, and the differences immediately register. Wide aisles are neatly stocked with organic instant oatmeal, premium pastas and expensive artisanal teas alongside convenience-store staples like diapers, dental floss and dog food. A huge prepared-foods section displays ready-made sushi and hand rolls, crab cakes, fruit salad and dishes like beef with curry sauce, carrots and rice, as well as a variety of panini grilled to order. Sato says that the store is targeting customers between the ages of 21 and 44 whose household incomes top $80,000--and particularly women, who would never shop for lunch or dinner at an am/pm. Smiling faces behind the cash registers, soothing light and rigorous cleanliness are all part of the package. Family Mart turned away applicants for managerial jobs who said they would not clean toilets with the rest of the employees. "We believe that everyone must be equally committed to offering hospitality to our customers," explains Family Mart executive Takehiko Kigure.

The Japanese face tough hurdles in the crowded U.S. market, where there are already 140,000 convenience stores, mainly attached to gas stations. The Japanese believe their edge lies in mastery of information technology--much of it pioneered by market leader 7-Eleven, whose IT arm was so successful that it set up as a separate and highly profitable software company, selling database and inventory-management software and services to other companies. What distinguishes the Japanese approach from the American one pioneered by Wal-Mart--also famous for sophisticated use of information technology--is the level of detail and the way the data are used. At Family Mart, the tablet computers handled by all the clerks are intended less to cut costs than to raise profits by catering meticulously to the whim of every customer. (Family Mart's profit margins are about four times higher than Wal-Mart's.)

When a Family Mart clerk like Miyazaki sees a customer approach his cash register, he quickly keys in a visual profile--"Male between 30 and 40," for example--and matches the profile to the purchases. That info helps both the store and its suppliers refine marketing and inventory. The clerks also use tablet computers to track the freshness of every piece of sushi, every piece of fruit, so no one goes home with a sour taste. The Japanese call this tanpin kanri (item management). "Wal-Mart has an excellent inventory and order-management system," says Takayuki Suzuki, a retail expert who runs Primo Research Japan. "But the information used at Family Mart and other Japanese convenience stores is way more specific, placing live orders item by item, not case by case. Japan's is an effort to maximize sales per square meter. It's really the ultimate retail-business model."

In its assault on the U.S. market, Famima will be wielding IT mainly as a managerial tool behind the scenes, at least at first. Whether the in-store Web services that it offers in Japan will translate to the U.S. market has yet to be seen. So far the California stores offer digital photo enlarging, digital copying--techie stuff you won't find in a U.S. convenience store, but still nothing like the Family Port terminals at Family Mart's Japan stores. These offer services from booking travel packages to online gaming vouchers and are now ubiquitous in Japan, where fear of identity theft runs deep and many customers prefer to use cash for online purchases. That could prove a winner in the United States, too, as worries about stolen personal data rise. Family Mart is now surveying American customers on the U.S. potential for online in-store services. In meticulous detail, you can be sure.