WEST HOLLYWOOD, Calif. -- When Shiro Inoue opened the first Famima store in West Hollywood, Calif., in 2005, he wanted to change the U.S. image of convenience stores from what he perceived as "a place to stop by if you had to" to "a place where locals want to stop by every day."
Inoue--the CEO of Famima, a subsidiary of No. 3 Japanese convenience chain FamilyMart--has introduced a new shopping concept to Americans: a health-conscious and upscale c-store with a unique Japanese flavor. The experiment is offering a case study in how to adapt successful [image-nocss] Japanese marketing and managing techniques to the U.S. retail market, said Investor's Business Daily.
Unlike in Tokyo, where c-stores compete at every street corner with an ever-changing product array, many U.S. convenience outlets have fixed images as "cigarette, hot-dog and beer" stores, Inoue told the newspaper. "Nobody talks about shopping at 7-Eleven in the U.S.," he said, opining that the shopping experience there isn't "memorable."
Famima focused on nurturing a niche clientele, said the report, mainly female customers and upper-middle-class shoppers who don't shop often at 7-Eleven. Famima features an urban hip design. Typical Famima stores have wooden floors and bright-green-colored walls with backlighting.
Deli foods such as spicy tuna rolls sell for $5.20, a dim sum combo goes for $5.98, and the pesto chicken panini is $5.75. All are placed in a six-foot chilled display gondola near the front door. All deli products are made at four commissaries in Los Angeles, using specific FamilyMart ingredients and manufacturing methods. Famima sells 30 different kinds of bottled water, including Voss brand water. At the front counter, customers can find steamed Japanese buns called nikuman, or pork-filled buns.
"It's like a convenience version of Trader Joe's," frequent customer Ashley Greene told the paper.
Famima has opened 12 stores in Southern California since 2005. It is aiming to have 30 in the Los Angeles area by the end of the year and 250 stores nationwide by 2009. FamilyMart has 13,122 stores worldwide, including 6,971 stores in Japan. It posted fiscal 2007 operating revenue of $2.5 billion.
Analyst Adam Sindler of Morgan Keegan said Famima's choice of locations in California was wise. "L.A. is more like an international city than an American city," Sindler told Investor's Business Daily. "Los Angeles has a very diverse population and they are serving a very distinctive market which has been underserved."
Sindler added that it would be tough for Famima to compete in less-diverse regions like the Midwest. Its big appeal is in urban centers that have cosmopolitan tastes.
Famima is also finding that expanding in the United States is not easy, said the report. Inoue said it takes three times as long to open a U.S. store, for various reasons, compared with Japan, where it usually takes only three months to open an outlet.
Analyst Robert Gregory of Planet Retail said Famima may have a hard time meeting its goals. "They are very slow, and maybe they won't be able to achieve the target [of 250 U.S. stores] by 2009," he told the paper.
But one of Famima's secret weapons is Japanese-style customer service, the report added. "We instruct store managers and staff to greet customers saying 'good morning' or 'good afternoon' each time they come into the store," Inoue said. Such greetings are an integral part of running retail stores in Japan. But it's less common at U.S. c-stores, said the report.
Being helpful is also par for the course at Famima. When Inoue sees a customer struggling to open a package of sushi, he dashes over to help open it.
Famima trains store manager candidates intensively for 30 days to teach them how to interact--part of a "customer-first" approach, Inoue said. Customer-first service includes filling up empty spaces with products as soon as possible. That's how stores in Japan do it. Junko Cox, a 61-year-old Famima employee, said she often asks customers what they're looking for, which items they liked, and what kind of products they wish to find in the store.
Famima's prices are higher than those at supermarkets, but no more than Trader Joe's and Whole Foods Market, Inoue said. The average customer spends $5 to $6, according to the report. Famima's Santa Monica, Calif., store sees more than 1,000 customers walk through its doors a day.
Jason Rinka, a Famima regular, spends an average of $15 per visit. He goes to the store three times a week. He said he doesn't cook at home, so he buys sushi, curry bread and imported snacks. "It's a little expensive, but it's worth it," he told the paper.
Famima lays out its products carefully to attract customers, using product placement as a marketing tool, said the report. "You see familiar beef jerky at your eye-level on this shelf, and if you look just below that, you'll find some new Japanese snacks you might want to try," Hidenari Sato, vice president of Famima, told the paper.
Not everything that works in Japan works here, the report said. C-stores in Japan compete by quickly culling less popular items and replacing them with new ones. But Inoue found that U.S. shoppers don't like switches. "In terms of food choices," Inoue said, "I realized American consumers tend to be more conservative than typical Japanese customers. So here, we keep regular items much longer than we do in Japan."
Famima also sells Japanese-language fashion magazines. These are meant to catch the eye of trend-savvy Americans, not just Japanese customers. "We take advantage of the current 'Japan boom,' as Japanese fashion, animation and movies increasingly gain popularity in the U.S," Inoue said.
Famima's goal is to expand its franchising in the United States and be recognized as a neighborhood store, not just as an ethnic food store, said Investor's Business Daily. Inoue's current challenge is finding corporate partners for franchising. "Franchise stores always perform better than company-owned stores," said Gregory. "It's good that Famima is looking into franchising, because it will allow them to expand much more rapidly."
Click here for CSP Daily News coverage of Famima, including a slide show (use Download Now button below story) of the Long Beach, Calif., Famima store.
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