Your average convenience store is a small shop with just 100 sq. meters of floor space.

But leading companies in a wide variety of industries see a bright future in those little stores and are rushing to form alliances with them to establish footholds in e-commerce retailing.

Industry watchers say that Japan’s ubiquitous convenience stores have great potential as a base for e-commerce, linking “virtual” online shopping malls and “real” shopping space where consumers receive and pay for goods.

One reason for this, according to Toru Osawa, a researcher at the private think tank Saison Research Institute, is that the use of credit cards is less common in Japan than other countries.

“Consumers tend to prefer the face-to-face style of shopping with cash,” rather than making payments over the Internet with a credit card, he said.

Seven-Eleven Japan Co., NEC Corp., Sony Corp., Japan Travel Bureau and four other firms have established a joint venture — 7dream.com — that will launch a Web shopping site this month.

Not to be left behind, rival convenience store chain operator FamilyMart Co. last month set up a joint venture, famima.com, with Toyota Motor Corp., NTT Data Corp., Pia and three other companies.

The reason for their zeal is understandable: Convenience stores’ seeming omnipresence in consumers’ daily lives.

At the latest count, the seven major convenience store chains have more than 12,000 stores nationwide, which allow most urban residents to find one within a short walk from home.

Indeed, if Seven-Eleven Japan’s fiscal 2001 sales projection of 2.54 trillion yen proves correct, it will become the nation’s largest retail company, surpassing supermarket chain giant Daiei Inc., which has held the No. 1 position for nearly three decades.

The Ministry of International Trade and Industry predicts that the size of domestic e-commerce retailing will expand from the current 190 billion yen in annual sales to 3.16 trillion yen in 2003.

7dream.com alone aims to capture 300 billion yen of that figure, and famima.com aims to achieve sales of 120 billion yen in fiscal 2003, which combined would account for about 13 percent of the retail e-commerce market, MITI predicts.

Seven-Eleven, by far the nation’s largest convenience store chain, has already started an online book-shopping service with partner Softbank Corp.

Although online shoppers can receive and pay for items via a home delivery service, much to Seven-Eleven’s surprise, 93 percent of customers have opted to settle their transactions at a nearby convenience store, according to Makoto Usui, head of the firm’s information system department.

“Consumers harbor anxiety about receiving (services) from unknown people via the Net,” Usui said. “They are not used (to online shopping) because of Japan’s business customs,” which value face-to-face transactions, he added.

In addition, almost all convenience stores are already equipped with the state-of-the-art computer systems to manage inventory and distribution. These can easily be linked with computer systems for e-commerce networks.

“The information and distribution systems of convenience stores are greatly advanced,” said Osawa of Saison Research Institute. “I think it’s well-suited for e-commerce.”

Consider Lawson, another convenience store chain that has already introduced a multimedia terminal and launched a Web site handling 300,000 compact discs, videos and DVD software.

Customers choose the item they want, place the order via the Internet and are sent a code number for the goods via e-mail.

To receive and pay for goods, customers go to a nearby convenience store and input the code into the multimedia terminal, which in return prints out a bar-coded payment slip.

Shop clerks — most of whom are short-term part-time workers without special technical training — can easily complete transactions with a bar-code reader.

Both 7dream.com and famima.com plan to introduce multimedia terminals in convenience stores, which will mainly sell digitally processed goods and services ranging from music data and concert and travel tickets to digital photo printing services.

Thirty-six banks, including Bank of Tokyo-Mitsubishi and Dai-Ichi Kangyo Bank, have also established a joint venture with five convenience store chain operators to develop common advanced automatic teller machines for convenience stores.

Many convenience store group executives, however, stress that the focus of their business will remain brick-and-mortar shops, and that online marketing and e-commerce will merely complement their traditional business.

“Our emphasis is on the reinforcement of ‘real’ shops, not the launch of a totally new business with virtual shops,” said Shigeharu Tanaka, general manager of FamilyMart’s e-retail division.

Saison Research’s Osawa agrees with that approach, saying that in his view e-business “will never” account for more than half of convenience stores’ business.

Some observers also say convenience stores’ advance into the new realm of cyberbusiness reflects the reduced growth in sales caused by the apparent saturation of the brick-and-mortar market.

Fiscal 1999 earnings released in April showed that for the second consecutive year, four of the seven major convenience operators suffered a decrease in sales at existing shops, excluding stores newly opened during the past year.

“The size of convenience stores limits their inventory to a bare minimum,” Osawa said. “As such, it is highly likely that payment-settlement services will become a mainstay for them.”