Labor Shortage Threatens Japan’s Convenience Store Growth

As the population declines, so too has its workforce and availability of part-time workers.

April 27, 2017

NEW YORK – Reuters reports that Japan's growing labor shortage is threatening the nation's ubiquitous convenience stores (combini), an industry that relies on “an army of part-timers packing bento lunch boxes, manning cash registers and delivering goods 24/7.”

The largest three operators, 7-Eleven, FamilyMart and Lawson, are scrambling to ease the pressure on franchisees by offering a mix of financial aid and labor-saving automation, writes Reuters. Japan boasts roughly 55,000 convenience stores, or one for every 2,300 people, which require about 20 part-time employees. The news source notes that some store owners are struggling to fill shifts and end up working day and evening shifts to cover the gaps.

"The labor situation is starting to get health-hazardous," one store owner told Reuters.

As Japan's population declines, so has its workforce. The population shrunk to 77.2 million in 2015 from a peak of 87.2 million in 1995, and by 2065, the population is expected to drop to 45.2 million. Reuters notes that the declines have hit labor-intensive sectors such as delivery services, restaurant chains and retailers. A Lawson franchisee in Tokyo commented that the labor shortage started last year. Part-time wages, meanwhile, have increased, and some convenience stores have to pay more overtime to fill shifts. "Labor costs are rising precipitously," said Ryuichi Isaka, president of Seven & i Holdings.

To ease the burden of payroll costs its store owners, Reuters wrote that 7-Eleven would, for the first time, reduce the royalty fees it charges franchisees. "We want to turn this into an opportunity to boost store owners’ management drive, and attract new owners," Isaka said.

Japan’s c-store industry is also looking to automation and technology to help overcome a labor shortfall. For example, 7-Eleven is bringing labor-saving dishwashers to all stores this year, while Lawson is issuing tablet computers to help store management, and installing automatic change counting machines.

The industry also plans to introduce RFID (radio-frequency identification) tags that can track individual items from warehouse to store - hoping this may usher in an era of low-cost distribution networks and unmanned cash registers. With the government pledging to help roll out the technology by 2025, 7-Eleven estimates RFID tags, which it will trial around August, could save 8 billion yen ($73 million) annually in labor costs.

"Rather than simply focusing on increasing profits, we are critically looking at what shape Lawson should take," company president Sadanobu Takemasu told Reuters, adding, "By making the necessary investments we will reap the rewards."

Meanwhile, the labor shortage expands beyond the stores into the intricate supply chain network that services Japan’s convenience stores. This labor-intensive business model extends to “a vast network of third-party suppliers” and transportation crews that make deliveries to c-stores multiple times a day and night. 

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