TOKYO -- Major Japanese convenience store retailer FamilyMart Co. will open more Famima outlets in middle-class U.S. neighborhoods to make the unit profitable by February 2012, reported Bloomberg, citing President Junji Ueda.
Since opening its first U.S. store in West Hollywood, Calif., in 2005, FamilyMart has tried to set itself apart from rivals such as 7-Eleven by projecting an upscale image and not offering services such as gasoline pumps for motorists. The strategy has yet to succeed; the company's U.S. operations posted an operating loss of 686 million yen ($6.4 million) in the last [image-nocss] business year.
"As its home market matures, it's important that the company finds business models with potential in overseas markets ripe for development," Jun Kawahara, an analyst at Shinko Securities Co. in Tokyo, told Bloomberg. "The company will face trials this year as it attempts to turn around its U.S. operations."
The Tokyo-based retailer is expanding outside of its home market, where the declining birth rate and population are curbing growth prospects. Of the company's 13,686 stores as of Dec. 31, 44% are located in South Korea and Taiwan. In the United States, where it has 13 Famima-branded stores in the greater Los Angeles area, FamilyMart had originally aimed to have 200 shops by the business year ending in February 2009.
For the first half of the current year ending in February, the U.S. unit, Torrance, Calif.-based Famima Corp., reported an operating loss of 492 million yen ($4.6 million).
FamilyMart "focused too much on high-end clientele," a strategy which prevented his company from gaining wider name recognition, Ueda said in an interview with Bloomberg News. The pace of U.S. store openings was slowed because of difficulties in complying with diverse municipal zoning regulations, he added.
Faced with these issues and slumping U.S. consumer spending, the retailer will relocate stores with daily sales of less than $4,000 to the outer suburbs of the greater Los Angeles area, Ueda said. More stores with ample parking space will be built in areas with high car traffic, and the shops will have sales floors that are about 30% smaller. The steps will allow FamilyMart to halve store costs, said Ueda.
The stores will boost their offerings of items marketed to middle-class Americans, such as doughnuts, he said.
By the fiscal year ending in February 2010, Famima Corp. hopes to have as many as 50 directly operated stores, some of which will be converted into franchises. By as early as 2010, the company plans to have 8,000 stores in Japan and 12,000 abroad, compared with its current 7,080 shops at home and 6,606 overseas.
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