Can Japan’s love for 7-Eleven survive a Canadian takeover?

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TOKYO – At a 7-Eleven in the bustling Ginza district, Shunka Sugawara, 29, sits among a row of people in business attire and eats her usual lunch of rice balls and a red bean pastry. As cash registers bleep, fellow customers munch and store workers shout to keep the lines moving, Sugawara, a postal worker, praises the quality of the Japanese convenience store’s rice – and notes that she visits 7-Eleven for lunch multiple times a week.

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So when Canadian retail giant Alimentation Couche-Tard – which owns the Circle K chain of convenience stores and gas stations with locations in the United States – announced a proposal to buy 7-Eleven this month, Sugawara, like other fans of the store, had some concerns. She said she’s excited that new ownership could bring in new products and help the company grow, but she’s also worried. It might “detract from the … quality” and “Japanese style” of the stores, which for many have become “a part of their life,” she said.

In Japan, 7-Eleven is the largest chain of convenience stores, or konbini, as they are known locally. Its more than 21,000 locations are heavily relied upon, both in urban areas, where kitchens are tiny, and in the countryside, where chains have pushed out smaller stores.

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It’s a far cry from their reputation in the United States, where they are known for sugary Slurpees, greasy food and, as one expert puts it, as places you “don’t want to go after dark.” Here, they are a mainstay of Japanese life – where businesswomen flock at lunchtime for freshly made bento boxes, teenagers slurp ramen into the night and early-rising older folks can stop by for tea, pay their bills and pick up necessities.

7-Eleven, which has a market valuation of about $37.5 billion, started in the 1920s as Texas-based Southland Ice. It entered Japan in 1974, and Japanese supermarket and grocery store operator Ito-Yokado became its largest shareholder in the 1990s. It has been fully Japanese-owned since 2005 under the holding company Seven & I.

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“It’s rare for a Japanese company of this market valuation to be acquired by a foreign entity,” Mitsukuni Nishida, a marketing professor at Johns Hopkins University, wrote in an email. He attributed the bid, in part, to the yen’s devaluation against the dollar in recent years.

“Although the original concept came from the U.S.,” Nishida said, “Japanese firms adapted it to fit the specific business customs, customers’ preferences (e.g., rice balls, bento boxes), and other demands of the Japanese market,” such as by selling tickets for events and allowing customers to pay taxes and bills there.

While the store has been successful for years, some customers say it has lagged behind local competitors recently. Asked about the takeover proposal at a 7-Eleven in Tokyo’s Kanda-Jinbocho district, Ryo Narita, 24, said, “7-Eleven is a famous company in Japan, so, personally, it’s sad,” but the quality has “already been declining,” and he prefers chains such as Lawson or Family Mart.

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Gavin Whitelaw, executive director of the Reischauer Institute of Japanese Studies at Harvard, who has extensively studied convenience stores, said there’s “a great deal of pride in 7-Eleven in Japan because Japan really made 7-Eleven; they saved 7-Eleven.”

With an acquisition on the table, he wonders: “Does a foreign owner understand all the things that a convenience store does and means to people? And will they respect it?”

During the 2011 earthquake and tsunami in Tohoku, for instance, Whitelaw said, convenience stores met community needs faster than the government. And the stores excel at providing for their customers on a personal level, too – one convenience store Whitelaw worked at in Tokyo made a point of selling underwear because one person came in each Sunday to buy seven new pairs.

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The stores have a “certain sensitivity to the microclimate of a neighbourhood” and have “endeared themselves to a consumer base there,” he said.

Ulrike Schaede, a professor of Japanese business at the University of California at San Diego, said convenience stores can even be credited with the rise of Japanese career women. “You could even exaggerate to say that’s why fewer people get married,” she said. “They can get their food at convenience stores.”

While Schaede is skeptical that Alimentation Couche-Tard will make a big profit running Japan’s 7-Elevens given the saturation of the market, she offered a more hopeful alternative. It could export the Japanese model abroad, she suggested – an effort that has already started in the United States.

Japanese 7-Elevens are “the most efficiently run retail outlet in the entire world,” Schaede said.

“What an opportunity,” she added. Take a North American convenience store and “go in there and run that thing like they’re doing it in Japan. You’ll be king.”

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