Over 45 years have already passed since the birth of Japan’s convenience store industry. During this period, the convenience store’s role has diversified with changes in social needs, which have gradually transformed it from a quick shopping venue into an indispensable part of the social infrastructure supporting people’s lives.
From the opening of its first convenience store in 1975 to the present, Lawson has been exceptionally responsive to changes in the social environment in accordance with our Group philosophy, “Creating Happiness and Harmony in Our Communities.” In 2019, we adopted the New Lawson Declaration, “Hub of refreshment in every community” as our Corporate slogan. The Declaration reflects our efforts to give our customers, as well as the owners and crews of our franchise (FC) stores, a sense of relief stemming from Lawson’s presence in their regions.
Efforts to determine the ideal format for convenience store chain operation received heightened attention in fiscal 2019. With the continuing decline in the working-age population, worsening of the labor shortage and rise in labor costs,questions arose concerning the propriety of 24-hour operation. Intensifying competition emerged as a major issue as a number of chains implemented strategies aimed at domination. The Ministry of Economy, Trade and Industry responded in February 2020 by releasing a report by the “New Convenience Store Study Group” recommending restructuring of the stores’ business model for the new era.
At Lawson, we have been working to construct an ideal business model for the next-generation convenience store with a focus on reinforcing support for our franchise stores, improving our product offering, strengthening our store capabilities, and supporting our new stores in a manner that makes the store owners and crews as well as everyone at Lawson Headquarters happy. Reinforcing our communication channels to facilitate frank, intimate dialogue with the franchise stores on the front lines of our business has produced steady results.
Rather than adopting a domination strategy, Lawson has opened stores in communities that genuinely need them, extending its operations into every prefecture ahead of other chains and pursuing a transition to multiple-store owner management. We have provided reduced-hour options to conventional 24-hour operation from the onset, moreover, increasing the number of reduced-hour stores from 40 at end February 2019 to 204 on March 1, 2020. We have also experimented with New Year’s holidays at 102 stores nationwide and with unmanned nighttime operation at two stores.
*Machi (literally “town”) refers to the communities in which Lawson operates and, by extension, the global village as a whole.
Since the beginning of 2020, a major global environmental change in the form of the new COVID-19 pandemic has shaken domestic and foreign economies.
Our primary mission is to respond first and foremost to crises facing the communities in which people live and to support them from beginning to end. We began with efforts to prevent transmission of the disease in order to continue opening stores in response to community demand, even under the state of emergency. We moved quickly to implement measures such as installation of vinyl sheets at checkout counters, provision of information on diversified store hours, thorough store interior ventilation, and installation of alcoholbased hand disinfectant dispensers. We worked at the same time to expand the number of stores in which self-checkout is available or to which the LAWSON smartphone cash register system was introduced to enable customers to pay for purchases easily by smartphone. Our efforts to expand the number of stores implementing these measures have created an environment in which customers can continue to shop with peace of mind.
Lawson employees responded to the lack of school lunches due to nationwide school closures by personally distributing rice balls to daycare facilities. I deeply appreciate this immediate expression of a desire to help by our business partners and franchise stores. I participated with them in requesting the deliveries, and I shared in the delight inspired by the cheerful, energetic voices of the many grateful children. Other unique initiatives during the pandemic have included sales by LAWSON stores of agricultural products that have lost market opportunities, campaigns to increase consumption of milk, demand for which has plummeted with the discontinuation of school lunches, and increased donations of original Lawson products to food banks. We have also established a day of appreciation and support for medical professionals at some 320 Hospital Lawson stores nationwide.
The need to shelter at home has led to reduced movement of people in society and changed purchasing trends. The level of consumption has declined in urban areas as more people have turned to supermarkets and convenience stores in residential neighborhoods with growing daytime populations. In addition to reducing loss due to waste, and sharply cutting fixed costs such as labor, utilities and rent expenses, Lawson is providing financial support for stores in city centers whose sales have declined steeply as demand for food products such as lunch boxes has decreased. In residential areas, meanwhile, the good taste of our Machikado Chubo in-store kitchen items, which require time-consuming preparation in the stores, is more popular than ever. Demand for small-portion luxury products and health products is met by NATURAL LAWSON, SEIJOISHII, moreover, while daily foods and fresh produce are supplied at reasonable prices by LAWSON STORE 100.
I consider it Lawson’s greatest strength to stock just the right number of products all aligned with individual communities’ current needs in all kinds of neighborhoods, whether residential areas, office districts or suburbs. Compared to supermarket customers, who tend to shop for longer periods, LAWSON customers spend an average of about three minutes in the store at a time. The stores are safe places where people can purchase the products they need efficiently close to their home or workplace. Many customers seem to visit stores simply to refresh themselves. Even under current circumstances, it is important for people to find relief in smiles and eye contact, even when wearing masks.
We also seek to respond to what we call “shut-in” demand. Besides such daily necessities as lunch boxes, frozen foods, milk, eggs and seasonings, we have reinforced our offering of sweets to relieve the stress of self-restraint. In August 2019, we formed the first tie-up between a convenience store chain and Uber Eats, and we followed up in August this year by expanding the program to more than 1,000 stores. We also deliver items such as magazines along with food and other daily necessities.
People’s lifestyles can be expected to change, even after the pandemic is finally behind us. They will continue to avoid close contact with others, and working from home will become the norm. We see opportunities to create further demand in the “new normal” that emerges in the post-COVID era by leveraging Lawson’s ability to respond quickly to social change. We demonstrated our capability of thinking and acting quickly when faced with such challenges as the Great Hanshin- Awaji Earthquake, the Great East Japan Earthquake and the Kumamoto Earthquake. We are identifying the current requirements of every community this time as well, developing wellconsidered strategies for individual stores, and supporting the stores’ efforts to respond quickly to changes.
I view our Headquarters and franchise stores together as a family that is seeking stability and growth. There is, however, no denying the severity of the conditions surrounding today’s convenience store industry. The insufficient profitability impacting our franchise stores in an environment characterized by chronic labor shortages, increased expenses and sluggish sales threatens to reduce job satisfaction and create anxiety concerning the future. How, then, should Headquarters respond?
Our objective this year is to concentrate closely on our individual franchise stores to guide them to a V-shaped recovery in the new normal following the COVID-19 crisis. This does not entail a conflict within the convenience store industry but, rather, a victory for every business in the retail industry, including supermarkets and drug stores. I consider success in this well within our power. At a time when business configurations are changing, with supermarkets selling daily necessities in addition to fresh foods and drug stores adding food sections, I think this new model can be realized by creating unique value for LAWSON, and making it an indispensable part of daily life.
An additional facet of our basic policy for fiscal 2020 is “to improve our franchise stores’ profits” and “to make LAWSON the most recommended store by Japanese customers.” This means that all Headquarters employees should concentrate on and take responsibility for the profitability of our franchise stores. We are promoting this policy as the foundation for the strongest sense of mission and responsibility ever seen at Headquarters.
Lawson’s Way, a new action guideline applicable to the entire Lawson Group, was established in March of this year to motivate all our franchise store and Headquarters employees to seek an ideal path to becoming the convenience store of the future.
The contents of the five items of the Lawson’s Way are quite simple. In my view, their very simplicity brings them closer to the essence. Working sincerely to make each and every store a “Hub of refreshment in every community” in accordance with our Group philosophy of “Creating Happiness and Harmony in Our Communities” brings us happiness as well. But what actions should we take to make our communities and ourselves happy? The basic tenets of the path forward are clearly stated in Lawson’s Way.
Lawson’s Way also presents appropriate roles and action guidelines for everyone involved in the stores, from Headquarters employees to franchise owners and store crews. It comprises such simple, easily understandable contents aimed at grasping the attitudes and changes of our communities and creating stores our customers really need, and being prepared to welcome customers to clean, orderly stores. The first requirement of tomorrow’s convenience stores will be to reaffirm, and further refine, their commitment to staying close to the communities, a strategy that will lead to steady growth in the coming era. “A familiar store that brings smiles to faces in the community.” “A place where people can shop for things they want and interact with others.” “A part of the social infrastructure that supports people’s lives, even in times of disaster.” The value of having such an “indispensable place in our communities” will become more apparent than we can imagine with penetration of Lawson’s Way.
We will move to improve the stores’ profitability by further strengthening the support that has long been an element of special concern.
There are a number of actions that only Headquarters can take to improve our franchise stores’ profitability. These include working to solve problems facing individual stores from a longterm perspective. Since every store is unique in terms of the circumstances surrounding its location and customer base, we do not provide uniform nationwide guidance, but instead seek comprehensive solutions to the particular issues facing individual stores. Our franchise stores and Headquarters cannot coexist in mutual prosperity without the continued powerful, unobtrusive support of Headquarters employees.
In another important action, we have established a new support system to encourage multiple store owner management, while continuing to support our single store owners. We also provide contract matching for new store openings and training support for store managers. Going forward, we will continue our efforts to expand multistore ownership, which now accounts for about 45%.
A continued focus on the “Three Promises” we introduced last year as “indispensable”
Our first promise is “Superior taste.” Lawson is adept at developing products that attract customers with their delicious taste, as evidenced again last year by such hit products as BASCHEE Basquestyle cheesecake and Kinshari onigiri rice balls. Nor is our superior taste limited to foods. It extends to giving optimal value to everything we offer customers, including our product lineup, quality and service. In honoring our second promise, “Human kindness,” we are strengthening our evening and nighttime product offering to enhance its convenience for working mothers and singles. We have also launched foods that are free from salt and chemical seasonings, and cosmetics that contain no additives. Our third promise, “Environmental (Machi) friendliness,” is expressed through our many social infrastructure initiatives that promote coexistence with the local community. These include adopting paper packaging for LAWSON original products to reduce plastic use, food loss reduction programs, and RCO2 emission reduction and other environmental conservation activities.
These efforts have led to the birth of various changes from the inside, as exemplified by our new product development at Headquarters. We eliminated the complicated processes required to realize ideas by creating a team with direct ties to the President, an approach that has engendered such great successes as our Machino Pan (“community bread”) series. Headquarters has responded to this opportunity by becoming remarkably active. Development lead times have been shortened, creating a tangible stir among customers. And ideas generated by young employees, who are themselves core convenience store customers, can be expected to become even more powerful as Lawson’s Way takes hold beginning this year.
What do I mean by job satisfaction?
This begins, of course, with providing appropriate employee benefits, but that is only part of the answer.
It is also essential that we offer social value with tangible benefits that workers appreciate as well as amenable working environments. These are just a few of the responsibilities the Company must reliability meet without reliance on the opinions of individuals.
Besides introducing business chat tools, Lawson Headquarters supplies employees with Company-owned mobile terminals that enable browsing of in-house documents to support remote work.
We have been working to digitalize our store operations since the advent of the digital era. By now, every store manager knows what products to stock in what quantities depending on the location and daily sales conditions at the store in question. We have installed tablets as well as POS cash registers with multilingual automatic change dispensers that are easy for foreign crew members to use at all the stores. Self-checkout systems and LAWSON smartphone cash registers introduced to reduce the burden on store crews have acquired particular significance during the pandemic due to the reduced interpersonal contact they permit at checkout. We recognize our responsibility for sincerely and reliability ensuring environments in which both workers and customers feel at ease. A fusion of warm hospitality that provides customer relief with digital technologies that support store crews in their jobs is one of our long-standing strengths.
Implementing these detailed measures has enabled our franchise store crews and Headquarter employees to conduct their daily work with peace of mind, and simultaneously facilitated sharing of the fruits of our foresight with our many stakeholders into the future. I believe that our actions from a long-term perspective will engender job satisfaction in the present for all concerned.
We continue to pursue our mission of realizing the SDGs in accordance with our position as Japan’s leading convenience store chain. The steps we are taking now will lead at the same time to realization of our Group philosophy of “Creating Happiness and Harmony in Our Communities.” Lawson created the SDGs Committee in fiscal 2019 to make proposals for resolution of social issues in its business activities and to put them into practice. In April 2020, for example, we endorsed the TCFD (Task Force on Climate-related Financial Disclosures), which requires companies to analyze and disclose information on the risks associated with climate change that exert a significant impact on their business activities. We are currently preparing our analysis and disclosure information regarding the impacts of climate change.
I received a letter recently from a 14-year-old girl who asked, “Why are convenience stores filled with plastic?” I mentioned some reduction measures we are taking earlier, but these represent only a very small part of the efforts required to deal with this issue. Her letter reminded me that plastic reduction is an urgent issue for the generations who will inhabit Earth in the future. Conventional thinking will not suffice if we are to fulfill our responsibility to future generations. I believe we must go beyond conventional thinking and sharpen our focus in order to reduce the environmental burden.
There is another important aspect of Lawson’s thinking I wish to convey.
I am referring to localization. The conventional standardized convenience store business model with its uniform product lineup in stores throughout Japan and 24-hour operation is already a thing of the past.
You can buy bakery items made from local ingredients by a group of local agricultural high school students at a LAWSON store in Akita, for example, or rice balls unique to the region containing Hakata jidori chicken at a store in Fukuoka. Considering Japan as a whole, we recognize that it is only natural that every community should have its own local culture, values and lifestyle, and that it is equally appropriate that the stores and their product lineups should be different as well. To me, this kind of diversity is extremely attractive. There is also value in the ability to buy products made under the supervision of famous stores that were previously available only in Tokyo at LAWSON stores nationwide. Thus, both limited local specialties and nationwide product availability are worthy concepts, but it is incumbent on Headquarters to consider the opinions of our franchise owners in order to strike a balance. We should continue to promote a style of diversification that places the emphasis on individual stores by taking advantage of regional characteristics. I am convinced that linkage between localization and the digital technologies that support it will be essential to future growth.
Lawson is pursuing a variety of new initiatives.
We are also strengthening our products to meet new demand in the wake of the COVID-19 crisis with a focus on entertainment-related businesses and in collaboration with such Group businesses as NATURAL LAWSON, LAWSON STORE 100 and Seijo Ishii.
As of May this year, points accumulated in KDDI CORPORATION’s au WALLET points program have been integrated with Coalition Loyalty Program Ponta. Use of data for the membership base of over 100 million customers made available by integrating these point systems has made the process of predicting consumption trends smoother and provided a broader database for development of attractive products. We are also continuing efforts to deal with the chronic labor shortage by leveraging support from Lawson Staff Co., Ltd. as well as by moving ahead with the use of digital technologies to conduct unmanned store experiments.
As concerns the ideal form of the new convenience store of the future, meanwhile, the location of the community is expected to create a polarization between stores that favor close human interaction and unmanned 24-hour stores in urban centers that make full use of digital technology. We are confident of our ability to advance along both paths simultaneously, however, due to the many measures we have already put in place and our close ties with our individual franchise owners.
In closing, Lawson recognizes the support of our business partner Mitsubishi Corporation as an extremely valuable asset. We benefit from Mitsubishi Corporation’s strengths in our international operations, including our overseas store development, raw materials procurement and collaboration with global brands such as GODIVA. Such Mitsubishi facilities as its strong, stable logistics infrastructure, manufacturing bases and overseas networks provide powerful underpinning for Lawson’s business activities in general. Headquarters, which stands at the forefront of our operations, has the responsibility for determining the optimal strategic use of the partnership and for linking it directly to the profitability of our individual stores. In the future as well, we will continue to maintain our unique character as a listed company, while effectively leveraging our partnership with the Mitsubishi Corporate Group and making optimal use of its resources to become our customers’ mostrecommended franchise chain as a clear route to profitability.
People and businesses worldwide began to suffer from the COVID-19 pandemic just as 2020 began. We see Lawson’s most appropriate response as continuing to work resolutely to do what has to be done. All of us at Lawson are treating this social transformation as an opportunity to do everything we can to prepare for the post-pandemic era. Seen in retrospect, the accumulation of actions occurring throughout the Group today will come to be viewed as comprising a major change. All these separate actions will combine to bring about “a new convenience store for a new era.”
Lawson will continue to raise one challenge after another as the future unfolds.
