Akihiko Ogawa: Developing Community-Based Convenience Stores That Compete with Major Chains

The characteristic of Orebo Station is that it is a complex store combining three business formats: a "traditional convenience store," a "specialty bento and side dish shop," and the "Orebo Cafeteria." We promote the Orebo Cafeteria with the catchphrase, "Delicious, cheap, and reasonably fast—a modern public eatery." Including affiliated stores, we currently have 12 locations throughout Fukui Prefecture. Each store is about 330 square meters and has an eat-in space with 40 to 50 seats.

Local people tell me, "Orebo is a convenience store, but it doesn't feel like one." When I was first creating Orebo Station, my mentor at the university, Professor Takeshi Shimizu, advised me to "think of a name for the business format." So, I named it a "Dining Convenience Store." You can eat food prepared in the store right there, and it also has convenience store functions. I intend for it to be a very convenient shop.

In 1981, I created Fukui's first convenience store called Orange BOX. Otsuya was originally a sake brewery founded in 1573, and I returned home purely intending to take over the sake shop. However, after trying to deliver sake by truck, I felt that this business was going to be quite difficult.

Upon graduation, Professor Shimizu advised me, "You must not let yourself get buried in the local area. Even when going on sales calls, go in a red sports car." So, while it wasn't red, I went on sales calls in a yellow Sunny California, which was a very novel light van at the time. But the more I did it, the more I thought this wouldn't work.

The world of commercial sake—and it might still be this way today—is a cutthroat place. Even if you make a promise between the manufacturer, the business, and the wholesaler, someone else might cut in immediately, or a bar owner might run away without paying. In that environment, I felt I had to do something new.

It's difficult with just sake, and since everyone works during the day on weekdays, I needed to make it so people could buy things early in the morning, late at night, and on weekends. By stocking bread and food other than sake, I thought starting a convenience store was the best way to go.

I had heard stories about 7-Eleven and Lawson opening in Tokyo. That said, Lawson at the time was like an American-style delicatessen, with hams and sausages hanging from the ceiling, and they called that a convenience store. Therefore, the biggest problem was that nobody knew what a convenience store was.

When I told my family I wanted to do 24 hours, they said, "Don't be stupid," and we had a fight (laughs). At first, we were open until 10 PM. Now, basically all stores are 24 hours. It's actually easier to manage that way.

Because you don't have to close and you don't have to open. For example, if you set the hours from 6 AM to midnight, even at midnight, there are people browsing magazines, and you can't just tell them to leave. By the time you finish cleaning up and managing the cash, it's about 1 AM. If you have to open at 6 AM the next morning, someone has to be there by at least 5:30 AM. What if that person oversleeps? Even if they don't oversleep, if they can't make it because of snow, the store can't open.

Also, for customers, it's easier to understand if it's "24 hours" rather than having them wonder, "What time does that shop close? I don't know."

In 1985, the store we opened in front of the main gate of what was then Fukui Institute of Technology was the first 24-hour store in Fukui.

We built the store in August 1981. On the first day, we sold 1 million yen; the second day was 800,000 yen, and the third day was 640,000 yen. I thought the fourth day might be around 500,000 yen, but it dropped to 80,000 yen. After that, days under 100,000 yen continued for a long time, and people around me said all sorts of things.

I thought about what was wrong and realized the biggest issue was a lack of understanding of convenience stores and a lack of culture for shopping at them. So, I ran TV commercials. I wanted to give the impression that something truly eccentric had started, so I made a commercial with English narration. Since we were open until 11 PM then, it said things like "Open till 11 o’clock, every day."

Exactly. From there, it spread gradually through word of mouth. Daily sales, which had been around 100,000 yen, exceeded 300,000 yen by the following summer. In about half a year, sales tripled.

Customers come to Orebo Station because they like the buffet or because the side dishes are delicious. Therefore, we don't stock the small daily sundries found in major convenience stores. We don't have bank ATMs or ticket machines either. Those systems can be built because they have 10,000 stores. We let people who want those things go to those shops, and we focus thoroughly on doing what the majors cannot do.

7-Eleven and Orebo are about the same, with daily sales of 600,000 to 650,000 yen. However, while 7-Eleven's national average is about 620,000 yen, it's nearly 700,000 yen in the Tokyo metropolitan area and about 500,000 yen in places like Fukui. So, I think we are putting up a good fight.

At our store scale, we can prepare onigiri and bento inside the store and serve them. However, major chains have stores, for example in Kabukicho, Shinjuku, with daily sales of 2 million yen. At that scale, in-store cooking is impossible. You can't make it in a single kitchen. You can't do it because it sells too much. In-store cooking is something you can't do in big cities, but you can do in regional cities.

By the way, have you heard of "Ichihomare"?

It's the name of a type of rice. Fukui is the birthplace of Koshihikari, but this was developed over six years to be the most delicious rice in Japan, and sales began on September 23rd this year. It caused such a fever in Fukui that it was called a "rice riot," and it disappears instantly from supermarket shelves. But people in Tokyo hardly know about it.

So, I spoke with them and said that while it's not available in supermarkets or convenience stores, I wanted to use Ichihomare for our in-store cooked rice for a certain period. We are now promoting that "all Orebo rice is Ichihomare," and it's going well.

Another thing I think is that the idea that running out of stock is bad is wrong. For buyers at major chains, it is an absolute requirement that suppliers and producers do not run out of stock. If they say they can't restock because it sold too much and they ran out, there would be boos from stores nationwide.

For a chain with over 10,000 stores nationwide, the amount needed for a popular item is enormous. If they are told never to run out of stock, the manufacturers who can supply them are limited. Places making good products in small quantities cannot do business with them. But customers often want those kinds of things—things that are truly delicious but cannot be made in large quantities.

Orebo sells those things bit by bit at a few stores in Fukui City. Customers are happy, saying things like, "Orebo is the only place I can buy this." For example, local chicken from Miyazaki or Atka mackerel from Rebun Island. We can stock Atka mackerel with meat so thick you've never seen it before because we are medium-sized.

I think we are doing very well in meeting the demand for lunch. However, I believe there is room to grow regarding dinner demand.

I'm sure you all have days where you go home and there's no dinner ready. In those cases, I'm thinking about whether we can create a format where people can eat a freshly made set meal for 800 or 900 yen instead of a 500-yen convenience store bento, or take home a grilled fish bento. I'm considering what the kitchen and partner businesses should look like for that.

Fukui is a place for fish, but unlike vegetables or meat, the difficulty with fish is that the catch is not stable at all. Therefore, it's very hard to systematize, and major chains are not good at it. For example, even at a breakfast buffet in a large hotel in Tokyo, the fish might only be mackerel fillets. In contrast, I'm wondering if we can do something like, "We caught a lot of small horse mackerel today that wouldn't normally enter regular distribution, so let's fry them and serve them."

In the old days, at the butcher shop, you could say, "I'll be back later, so fry five croquettes for me." We recently started a service to reproduce this via smartphone ordering. When convenience stores were created in the 1970s and 80s, there was a saying that "convenience stores are modern general stores." Thanks to those convenience stores, the town's greengrocers, liquor stores, fishmongers, and butchers disappeared, and public eateries disappeared in the same way. But the demand exists. I'm thinking of converting those things into a modern version and evolving them further.

Since I was at a regional high school, the mainstream was to go to a national or public university. I liked mathematics, and I had an image of Keio being free and bright. There was something that felt like a fit for me. Then, I happened to pass the entrance exam.

When I was reading an original English book, the term "convenience store" came up. I was still a junior and wasn't thinking about returning home to take over the liquor store. Professor Shimizu said, "Ogawa-kun, your family home is a grocery store, so it might be good to keep this in mind for the future."

However, that literature said, "convenience stores operate 24 hours a day." I couldn't connect the current state of my family's commercial liquor store with the idea that "grocery stores called 24-hour convenience stores are being born in America." So, I thought, "Give me a break with the 24-hour thing." To think that would become a reality (laughs).

Management also requires simulated experience, so I studied cases of various companies using the case method. Based on that experience, I thought that by creating an environment where people can speak their minds freely and engage in discussions, it would become easier to speak up about actual operations at Otsuya. So, I took Professor Haruo Takagi's course on the case method teaching style and introduced the case method into employee education.

I built a room similar to the KBS classroom in Hiyoshi. I even made the height of the tiers in the lecture hall the same as those at KBS (laughs). Employees in career-track positions study there regularly.

At the recruitment stage, I emphasize from the start that "this is a company where we do these cases and continue to study." From there, if the person is open-minded, they will be influenced by the seniors around them. They are advised in group discussions and supported well. It's exactly like the image of seniors supporting juniors in Professor Takahashi's seminar. I feel that the experiences I had in the old Shimizu seminar are coming to life.

Many good things remain in Fukui. The original scenery of Japan remains, and the people are honest, simple, and serious. Things that are disappearing from modern Japan still exist in Fukui. That is precisely the point of differentiation, so I want to bring that to the forefront.

As a dining convenience store, I want to be even more particular about the feeling of being freshly made. In other words, making things after receiving an order and serving them piping hot. Whether in the cafeteria or for takeout, you can order or reserve freshly grilled yellowtail teriyaki or salted tilefish. I want to provide things in Fukui as a matter of course that people in Tokyo would find unbelievable for just 1,000 yen.

Another thing is that I think supermarkets will become harder to sustain in the future. When the population decreases and store sales drop, chains try to increase the number of stores even further to compensate. Each supermarket section must have a full lineup of about a hundred items, like cabbage, carrots, and tomatoes. They can't just say, "We don't stock cabbage." But as the number of stores becomes excessive, it will become difficult to maintain such comprehensive, fresh sales floors.

At that time, while Orebo cannot provide everything, I want to take the stance of "please come only when you want to eat delicious meat and potato stew or fried horse mackerel." It's a strategy of concentrating on specific parts and lining up only delicious seasonal items.

I feel that we have achieved certain results by competing with major convenience stores. I would like to apply that thinking and method to the urban development of Fukui and, by extension, regional cities, and propose it as a business model.

The reason why Orebo in a regional city can survive among 7-Eleven and Lawson is that customers come saying, "Orebo has what I want." In the future, I want to clearly capture the targeting of what customers from the Tokyo metropolitan area or overseas coming by Shinkansen are looking for and provide things that match that.

I have always made it a theme that there is no social progress unless we continue to create new things. To do that, we have no choice but to develop human resources who can think about such things for themselves. After learning the basics at school, I want them to continue learning after entering society and create new things. I hope to see people of "independence and self-respect" who can take on challenges even if there is some risk.