Where Did All the Magazines Go?
Major wholesaler to stop supplying magazines to Lawson and FamilyMart.
What’s new: On November 24, 2023 Nippan Group Holdings (日販グループホールディングス), a major wholesaler of books and magazines in Japan, announced that it would withdraw from supplying magazines to two of the three major convenience store chains, called konbini (コンビニ) in Japanese. #No. 2 ranked FamilyMart (about 18,000 stores) and No. 3 ranked Lawson (about 14,000 stores) will stop receiving magazines from Nippan by the end of February 2025. Together, these two channels account for nearly 60% of Japan's total convenience store network of more than 56,000 stores nationwide. The bold decision to completely withdraw from the convenience store distribution channel has sent shockwaves through the industry and signals a major shift in Nippan's strategy.
Longtime rival Tohan (トーハン), which has the rights to distribute books at 7-Eleven, Japan's largest convenience store network, has announced that it will take over Nippan's convenience store distribution network by the end of 2025. However, there are concerns that there will be a gap in the transition.
Why it matters: Japanese companies tend to make incremental changes to their business models over a long period of time, rather than making abrupt changes that could affect millions of consumers at once. This is a sign of serious distress (and lack of profitability) by a major player. It is also likely to be yet another indication of how online retailing continues to disrupt and largely replace traditional retail distribution channels.
Context: As any longtime observer of Japan can attest, at certain times of the day it used to be common to see 20 or more "customers" casually reading (without necessarily buying anything) the magazines on sale in a long rack usually located along the front window of virtually every convenience store. Convenience stores used their wide selection of publications as a magnet to attract customers who would naturally purchase other items in the store. A line of consumers - even if they were not paying - near the window would also give potential customers outside the impression that the store was thriving. Some would also interpret such a scene as evidence that a particular store was a safe place to shop. Those days are long gone. While most convenience stores still have magazine racks, the amount of floor space devoted to this part of the store has been greatly reduced.
The trend is not new. Sales of magazines through the convenience store channel have been declining for more than 20 years. It is likely that casual browsing on a mobile device has slowly but surely replaced this habit. In addition, convenience store operators have drastically reduced in-store space for most special-interest magazines, including adult-oriented magazines, almost all of which are now wrapped in tamper-resistant packaging to prevent casual browsing.
By the numbers: Nippan's decision was no doubt based on a hard look at the numbers and the lack of profitability.
Decision Came down to Dollars and Cents: Over the past decade, the company has seen annual sales from convenience store transactions decline from 80 billion yen (approximately $563 million) to 30 billion yen ($211 million). Meanwhile, the number of konbini in its distribution network has remained high at about 30,000 locations. Freight costs are essentially fixed due to the need for daily delivery to each store. Thus, Nippan is faced with the untenable situation of high fixed costs in the midst of declining sales. Of course, the company has reduced other fixed costs, but these are offset by the fact that freight rates have risen year after year. Against the backdrop of ever-increasing operating losses, the company has been discussing with the top management of its major convenience store customers the possibility of exiting the magazine distribution business since January of this year.
Not Likely to Upset Consumers: The declining position of magazines in convenience stores is evident in the results of a survey of convenience store shoppers. Although magazines have traditionally been the first item that shoppers see when they enter a convenience store, they rank low on the list of items consumers would be upset about if they were removed from the product selection. While the most recent publicly available data are from ten years ago, it appears that consumers would only be mildly upset if magazines and manga were no longer sold in convenience stores. In 2013, 24.7% of consumers said they would be upset if such items were removed from convenience store shelves. In the decade since the data were published, it is highly likely that the readership of print magazines in general has declined. Therefore, it is fair to say that most consumers are unlikely to notice any change at all.
Meanwhile: To increase profit margins, Nippan is trying to become Japan's number one stationery wholesaler. The company is also experimenting with an entirely new distribution model for selling books and magazines.
In July 2023, Nippan acquired a manufacturer of educational toys and stationery from Gakken Holdings. It was a strategic move to increase the proportion of stationery in its product portfolio. Stationery has become an increasingly important source of revenue for most bookstores, and Nippan believes there is still room for growth.
"We have developed a relationship with the presidents of Kokuyo and Mitsubishi Pencil (two major manufacturers of stationery in Japan), with whom we can discuss various matters. We want to become the number one stationery wholesaler in Japan by expanding into stationery stores and mass merchandisers, as well as bookstores, for which Nippan is the distributor." - Keiji Okumura, Senior Managing Director of Nippan Group HD, who also serves as President of Nippan Hanbai, a core subsidiary of Nippan.
In September 2023, the company opened Hontasu, a completely unmanned bookstore. Physical access to the store is by smartphone, and all payments are cashless. The tagline is "easy to enter, easy to use, easy to choose, easy to buy.” The impetus behind this new venture was an attempt to sell books and magazines in a relatively low-rent location without labor costs, the two financial burdens that drive most traditional book and magazine sellers into the red.
"We are getting a lot of interest from existing bookstores that are wondering if we can make it without these labor costs. As a business model, we will be able to sell Hontasu as a package, and most importantly, we will be able to create a commercial distribution channel for publications. There is also the possibility of partnering with non-bookstores. - Keiji Okumura
What’s next: While Japan's ubiquitous konbini will likely remain the go-to place for a quick snack, drink, and ready-to-eat meal - not to mention wasabi-flavored Kit Kats, green tea-flavored ice cream, and a fresh pair of underwear after an all-night bender - it seems that killing time by thumbing through a magazine rack at a convenience store is about to get a lot harder. That is, if your favorite magazine is still in print and your local convenience store carries anything other than skin magazines. At the same time, if the Hontasu concept catches on, buying books and magazines from the equivalent of a walk-in vending machine may soon become the norm.
Links to Japanese Sources: https://toyokeizai.net/articles/-/720473 and https://news.yahoo.co.jp/expert/articles/f6a51e5bdc8c0767c293fb976eb5a4f0e1bf892f
#Nippan #Hontasu #unmannedbookstore #KeijiOkumura #Lawson #FamilyMart #conveniencestore #konbini #日販グループホールディングス #ほんたす #無人書店 #奧村景二 #ローソン #ファミリーマート #コンビニ
Here's another data point from an article that I shared with my readers earlier this year: Magazines account for only about 1% of sales at convenience stores, so store chains would rather make room for other items. It's likely that FamilyMart and Lawson are the ones forcing Nippan's hand. https://mag.minkabu.jp/politics-economy/18436/
Mark - With the konbini channel volumes going down, do you think the newsstands at the stations will pick up a lot of the slack?