Japan’s Convenience-Store Sales Rise the Most in Eight Years

By Toru Fujioka and Maki Shiraki

Jan. 20 (Bloomberg) -- Japan’s convenience-store sales rose at the fastest pace in eight years in 2008 as a new law restricting access to vending machines sent smokers to 7-Eleven and other outlets.

Sales rose 6.7 percent to 7.86 trillion yen ($87 billion) from a year earlier, the Japan Franchise Association said in Tokyo today.

Smokers flocked to convenience stores to buy tobacco and other goods after a law in July required a smart card known as Taspo to purchase cigarettes at vending machines. The recession is also drawing budget-conscious consumers to the shops, where they can buy essentials without traveling far, analysts said.

“Besides the Taspo effect, convenience stores do well in a recession,” said Dairo Murata, a retail analyst at Credit Suisse Group in Tokyo. “Consumers don’t want to spend a lot and go far to shop.”

Seven & I Holdings Co., Japan’s biggest convenience store operator, expects profits and sales to rise this year in part because of increased cigarette sales.

“This is the turning point,” said Takeshi Niinami, chief executive officer at the Lawson Inc., the nation’s second- largest convenience store operator. “Households aren’t keen to purchase luxury goods anymore. They purchase daily goods little by little.”

Convenience-store sales exceeded department-store sales for the first time. Department store sales dropped 4.3 percent to 7.4 trillion yen, extending the longest losing streak in 12 years, the Japan Department Store Association reported yesterday.

Eroding Assets

Japan’s benchmark Nikkei 225 stock average declined a record 42 percent last year, eroding assets of wealthy households who are the main customers for department stores.

Department stores are facing increasing competition in areas they once dominated such as clothing sales, which account for 37 percent of their revenue.

Fast Retailing Co., the operator of the Uniqlo casual clothing chain, posted record monthly sales with a 32 percent increase in November. Rakuten Inc. in November reported a 22 percent increase in its revenue from January to September last year.

“Those various shopping venues such as Uniqlo and Rakuten are getting consumers from department stores as they provide for a cheaper and easy shopping,” Murata said.

To contact the reporter on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net