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This in-depth guide to Japan explores the key trends in grocery retail and the growth strategies of the leading retailers in the country.

The four largest grocery retailers in Asia are 7&i Holdings, FamilyMart UNY, Aeon and Lawson, we reviewed their five year growth forecasts, strategic priorities and latest developments.

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We round up the latest trading updates and news for Japan's four largest retailers, Seven & i Holdings, FamilyMart UNY, Lawson and AEON.

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The Aeon Group, one of Japan's largest retailers, is to launch a network of smart stores that are capable of anticipating what customers are most likely to buy when they enter the store.

Data-driven smart stores

Facial recognition is widely used in China, mostly in cashless payment. Whereas in Aeon China’s smart stores, it is to be used to recognise shoppers upon entry.  This then triggers personalised product recommendations and digital coupons to be displayed on shoppers’ smartphones, based on shoppers’ shopping habits and digital payment history. This approach has the benefit of resulting in good redemption rate, which will in turn drive same store sales.

EPOS (electronic point of sale) data will also be used for automatic inventory management to make sure products are in stock. To further keep the costs down, all checkout counters are unmanned.

The retailer plans to convert 80 of its outlets in China into smart stores over the next few years.

Establish required capabilities to compete in China

The group is to set up Aeon Digital Management Centre this month in Hangzhou, where Alibaba’s HQ is also based. The centre is dedicated to the development of the technologies needed for the smart stores. Meanwhile, Aeon is planning an online supermarket and a cross-border ecommerce platform to be launched in China this year.

Data generated from these digital operations will increase the retailer’s expertise and capabilities to compete in China, a breeding ground of technology-driven retail businesses.

Aeon also has plans to bring the smart store concept to its stores in Japan and South East Asia.

 

 

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South Korea’s food manufacturing conglomerate Daesang Group is to sell its remaining stake in the convenience store chain, Ministop Korea, to its Japanese partner Aeon.

A deal estimated at US$80m

Daesang and Aeon are finalising the terms of the deal, which is estimated at US$80m. Both parties aim to complete the sale within March.

Aeon currently owns 76.06% Ministop Korea, Daesang 20% and Japan’s Mitsubishi the remaining 3.94%. Aeon’s ownership would reach 96.06% after Daesang entirely exits from the convenience store industry.

Daesang formed Ministop Korea with Aeon Group in 1997. It sold 55% stake plus management right to Aeon Group in 2003. Aeon Group had attempted to sell Ministop Korea in 2018. The sale process was suspended in January 2019 due to the disagreement over the sale price with shortlisted contenders including two Korean retail giants Lotte Group and Shinsegae Group. 

Competitive landscape

Ministop is South Korea’s fifth largest convenience store chain, with over 2,500 stores. CU operates 14,903 stores, GS25 14,900, Lotte 10,331 7-Eleven stores and Shinsegae 3,152 Emart24 stores.

Its performance has been deteriorating and suffered large profit decline (down by 23% year-on-year in 2017) due to fierce local competition and heavy royalties paid to Aeon.

Driven by an increase of single-member and two-people households, the number of convenience stores in South Korea has risen sharply in recent years. To curb excessive competition, South Korea’s FTC (Fair Trade Commission) approved a set of voluntary rules in December 2018 to ease saturation and prevent reckless new openings.

 

 

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AEONs Maxvalu in Hiroshima and a handful of 7-Eleven stores are reducing their operating hours in Japan.

Maxvalu in Hiroshima ending 24-hour operations

Maxvalu Nishinihon, a Hiroshima-based subsidiary of AEON, is ending 24-hour operations for 25 stores later this month. The company plans to refocus its staff members' attention on improving customer service. The move should also help the business cope with labour shortages in western Japan prefectures, including Hyogo and Hiroshima, where its stores are mainly located.

7-Eleven reducing opening hours in some stores

Seven-Eleven Japan has announced that it will reduce operating hours at some of its stores later this month. This will be tested on 10 company-run 7-Eleven stores across the country, operating only between 7am and 11pm rather than 24 hours.

Labour shortages driving change

Around 96% of 7-Eleven stores in Japan operate 24 hours a day, excluding any located inside external office buildings and train stations. Labour shortages for the night shift remains a challenge for convenience operators across the market.

Both Lawson and FamilyMart have experimented with reduced opening hours at their convenience stores. The former for example, has also launched self-checkout counters to support staff members. With increasing pressures, many franchise owners are trying to negotiate shorter operating hours and other subsidies.

Retailers are introducing a number of different initiatives to combat labour shortages in the market. Japan's Ministry of Economy, Trade and Industry is also helping drive automation in retail. Furthermore, 50 Japanese banks have recently joined Tokyo bank J-Coin to set up a cashless payment system developed by Mizuho Financial Group. J-Coin payments are processed via a mobile app using a QR code, a phone number or a LINE Messenger ID number. We expect Japanese retailers to further integrate cashless payments in-store to drive efficiencies and offer shoppers greater convenience. 

 

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American manufacturer and distributor Avery Dennison has announced that it will work with the Japanese government to drive RFID technology roll-out in convenience stores across Japan.

Roll-out across Japan by 2025

We have already seen some of the leading convenience operators, e.g. Lawson launch new style checkouts in recent years. This latest announcement should help accelerate the roll-out process announced back in 2017. The technology will help drive in-store effencencies, automate the check-out/payment process and support dynamic product pricing and advertising.

 

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