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There have been no reported cases of COVID-19 among the roughly 47,000 residents of Hioki, a coastal city in Kagoshima Prefecture, but that hasn’t prevented efforts to stop the spread of the virus.

At a 7-Eleven in the city’s Ijuin neighborhood, transparent plastic sheets hang between cashiers and customers to block any pathogen-laced droplets produced by coughing and sneezing. Face masks delivered from the convenience store chain’s headquarters are worn by employees, who are also asked to take their own temperature every day before work. Anything above 37.5 degrees Celsius and they stay home.

These anti-contamination measures have been introduced at many of 7-Eleven’s 20,938 outlets nationwide, but the more interesting changes are coming from consumers. Bananas and bottled water have been flying off shelves, for example, while previously popular onigiri (rice balls) and ready-to-eat sandwiches sit largely untouched.

Despite being relatively unaffected by the global pandemic, the number of customers at the 7-Eleven in Ijuin has dropped off as official stay-at-home requests are heeded. However, those that do visit the store typically spend more money. Franchise owner Masahiro Kubo says people are now opting to buy nonperishables such as instant noodles and canned tuna in bulk.

Masahiro Kubo (left) is the owner of a 7-Eleven franchise in Hioki, Kagoshima Prefecture. He says customers are purchasing nonperishables such as instant noodles and canned tuna in bulk. | COURTESY OF MASAHIRO KUBO
Masahiro Kubo (left) is the owner of a 7-Eleven franchise in Hioki, Kagoshima Prefecture. He says customers are purchasing nonperishables such as instant noodles and canned tuna in bulk. | COURTESY OF MASAHIRO KUBO

“We’re seeing a big shift in purchasing patterns,” Kubo says. “Locals are coming to get their daily necessities here rather than traveling to supermarkets that are farther away. We also offer deliveries of meal kits for those who’d rather stay home.”

It’s a trend that is repeating itself at convenience stores across Japan, with experts speculating that shifts toward cooking at home, shopping online and working remotely may continue even after fears surrounding COVID-19 die down.

Shopping habits

From Hioki’s countryside convenience stores to the malls of suburban Kobe and cluttered urban centers of Tokyo, retail outlets are trying to adapt to new forms of customer service in an age of social distancing, ouchi jikan (time spent at home) and mass restrictions.

Eat-at-home demand is soaring as e-commerce sites draw hordes of customers. Shoppers are shifting where they shop and what they purchase at an unprecedented pace, a sea change in consumer behavior that could impact marketing and distribution for years to come.

“We believe this outbreak will have a drastic and permanent effect on shopping habits,” Ryuichi Isaka, president of Seven & I Holdings Co., said during an earnings teleconference call in April.

Seven & I is the parent company of Seven-Eleven Japan Co., which operates the largest convenience store chain in Japan as well as supermarket chain Ito-Yokado and the Sogo and Seibu department stores. The retail giant reported year-on-year declines in March sales for many of its subsidiaries, and has decided against releasing fiscal 2020 forecasts due to uncertainty caused by the pandemic.

Isaka noted that while 7-Eleven outlets near business districts and sightseeing spots saw lower customer footfall, stores in residential areas experienced positive growth.

“There is a need for businesses to anticipate and adapt to the type of changes I have just mentioned,” Isaka said, describing the difficulties in navigating the unprecedented situation.

Different retail categories are meeting starkly different fates as the economic impact of the pandemic sweeps across Japan.

According to the trade ministry, sales at drugstores climbed 7.5 percent in March from a year earlier, following a 18.9 percent surge in February when shoppers lined up to buy face masks, toilet paper and other health and hygiene products as initial reports of the coronavirus outbreak stoked panic buying.

Combined data from three supermarket associations, including the Japan Supermarkets Association, showed that sales in March rose 7.4 percent year on year as the need to cook at home during self-imposed quarantines by concerned citizens pushed up demand for groceries.

A cashier wearing a face mask and gloves disinfects a table at a supermarket in Osaka on April 9 due to the new coronavirus pandemic. | KYODO
A cashier wearing a face mask and gloves disinfects a table at a supermarket in Osaka on April 9 due to the new coronavirus pandemic. | KYODO

Meanwhile, the Japan Department Stores Association said that the March sales among its 205 member stores fell 33.4 percent year on year — the largest drop on record — while those same citizens opted to stay home and the number of overseas visitors to Japan plummeted by more than 90 percent. April figures will likely be worse for department stores as many of them suspended operations during the state of emergency that went into effect in seven prefectures on April 7 and the rest of the country on April 16.

“Department stores will likely suffer the most as the business model relies on promoting expensive, high-end merchandise and the pleasure of shopping,” says Takayuki Kurabayashi, a partner at Nomura Research Institute and a retail industry expert. “That’s a hard sell during a crisis.”

Convenience stores, supermarkets and drugstores with the scale and supply chains to provide essential goods and services will likely remain at the forefront of positive retail activity, Kurabayashi says.

But amid the declining population and labor shortage, they may need to consider adjusting operations depending on regional characteristics rather than offering identical services across the board.

Last year, a dispute erupted between Seven-Eleven Japan and one of its franchise stores in Osaka after the outlet shortened its opening hours due to a lack of workers, triggering a national debate over the business practices of the 24-hour convenience store industry. In response, Seven-Eleven Japan agreed in October to end round-the-clock operations at some of its branches.

“Cracks are already showing in the one-size-fits-all chain operating model, and the coronavirus will likely accelerate that change,” Kurabayashi says.

A clear acrylic board separates a cashier and customers at a do-it-yourself store in Fukuoka on April 9 in the middle of the coronavirus crisis. | KYODO
A clear acrylic board separates a cashier and customers at a do-it-yourself store in Fukuoka on April 9 in the middle of the coronavirus crisis. | KYODO

Online demand

Larger companies are already experimenting with new approaches in response to the growth in online shopping. In March, Seven & I Holdings set up refrigerated delivery lockers at two 7-Eleven outlets in Tokyo. Customers purchasing goods on Ito-Yokado’s online store can have them sent to the 7-Eleven lockers and they can pick them up at their convenience, rather than having to wait for a delivery at home.

Meanwhile, Lawson Inc., which operates 14,425 convenience stores in Japan, plans to expand delivery partnerships with Uber Technologies Inc., which operates the food-delivery service Uber Eats, from the current 18 to around 500 stores in the Kanto and Kinki regions by the end of May.

“Uber Eats orders jumped 60 percent and sales doubled in the week of April 6 compared to the same week in January,” says Ken Mochimaru, a spokesman for Lawson. “Beverages including water, tea, soft drinks and alcohol accounted for eight of the top 10 goods sold. Alcoholic beverages logged a 40 percent growth in sales from the previous week, reflecting how many are opting to drink at home.”

A plastic sheet curtain is placed between a cashier and a shopper at a Lawson convenience store in Tokyo on April 13 to avoid coronavirus infections. | KYODO
A plastic sheet curtain is placed between a cashier and a shopper at a Lawson convenience store in Tokyo on April 13 to avoid coronavirus infections. | KYODO

According to an online survey conducted between April 10 and 12 by Persol Research and Consulting Co., 27.9 percent of a sample of around 25,800 workers nationwide in their 20s to their 50s said they were working from home. That figure climbed to 49.1 percent in Tokyo, which was among the prefectures covered in the April 7 emergency declaration.

While telecommuting is still widely seen as a temporary measure, experts say it could be here to stay if employees find they can do their jobs from home, which would then have widespread impact on consumption.

Market research firm Gfk Japan reported that over-the-counter sales at home electronics stores fell 13 percent in March year on year. On the other hand, online sales rose 18 percent over the same period as people purchased cooking appliances and refrigerators, as well as webcams to facilitate video conferencing.

“I was already a heavy user of both Amazon and Rakuten, but I’m finding myself buying even more things from them,” says Miho Tsukuda, a 38-year-old working mother of two in Osaka, who’s referring to the American online retail behemoth and the Japanese e-commerce company. “I’ve been stress-buying things online that I’ve wanted but haven’t purchased yet, like shelves and things for the kids.”

People stand in a checkout line while keeping distance from each other at a supermarket in Osaka on April 9 amid the spread of the new coronavirus. | KYODO
People stand in a checkout line while keeping distance from each other at a supermarket in Osaka on April 9 amid the spread of the new coronavirus. | KYODO

Online shopping hasn’t been a completely smooth experience for Tsukada, though, as she believes the jump in digital activity might be straining retailers.

“I think there’s a new wave of people buying groceries on the internet,” she says. “The online supermarket I’ve been using is often out of stock.”

Without disclosing specific figures, a spokeswoman for Aeon Retail Co., a subsidiary of Japan’s largest retail group Aeon Co. that operates around 400 supermarkets and other stores, says sales in February and March at all 180 online stores were significantly higher than the same period last year. She says the company hasn’t been able to fully cater to the growing demands of online shoppers, with certain products such as sanitary goods frequently in shortage or out of stock.

“I believe this isn’t a phenomenon limited to us, but the growth in online customers has congested portions of our operation and led to shortages of some products,” the spokeswoman says. “Our online supermarket business has been growing and is an area we plan to continue strengthening.”

Cashiers work at a supermarket in Nagoya with transparent vinyl sheets separating them from customers to prevent the spread of the new coronavirus on April 24. | KYODO
Cashiers work at a supermarket in Nagoya with transparent vinyl sheets separating them from customers to prevent the spread of the new coronavirus on April 24. | KYODO

Distribution networks

While consumers are adapting to the new shopping landscape, the essential workers providing crucial services — supermarket and convenience store clerks, truck drivers and postal workers, among others — are risking their health as they keep the economy running.

The National Supermarket Association of Japan has been printing posters and using its social media accounts to call on customers to wear masks, avoid crowded hours and shop alone.

Unyuroren, a labor union for delivery workers, has reported cases in which drivers have been harassed by customers concerned about catching the virus from them. Post offices have been forced to close after employees tested positive for COVID-19, leading to delays in deliveries of hundreds of thousands of pieces of mail and highlighting the impact of the pandemic not only on workers’ health and welfare, but on distribution.

Tetsu Maruki, a senior researcher at the Mitsubishi Research Institute, says the pandemic will likely accelerate existing trends, including a shortage of drivers and the march toward driverless cars and drone deliveries.

“The majority of trucking businesses are small and midsize companies or self-employed drivers,” Maruki says. “Unless necessary measures are taken and support is provided in the event of contagion, entire firms could shut down and impact distribution.”

Under such circumstances, Maruki says there is a high probability that deliveries may need to rely, at least temporarily, on a network of gig economy workers.

In March, Uber Eats recorded a 20 percent increase in restaurant contracts in Japan from a month earlier. A labor union representing Uber Eats employees also called for hazard pay and coronavirus protection in April, citing the threat of infection. In response, Uber Eats began providing workers with masks.

Hiroaki Watanabe, a freelance marketing analyst and a regular television commentator, says the pandemic is highlighting the limits of the retail sector. | IMAGE
Hiroaki Watanabe, a freelance marketing analyst and a regular television commentator, says the pandemic is highlighting the limits of the retail sector.

Hiroaki Watanabe, a freelance marketing analyst and regular television commentator, says Uber Eats is being flooded by applicants interested in joining its delivery crew.

“I’m thinking of applying as well,” Watanabe says. “For freelancers juggling jobs like myself, it’s nice to have that option to work when you have spare time. As telecommuting becomes mainstream and corporations begin allowing their employees to have side jobs, I think more and more people will sign up with similar services to earn some extra income. That will simultaneously ease some of the logistical issues facing home deliveries amid the labor shortage and the surge in demand.”

Watanabe, author of a book titled “If Convenience Stores Disappeared from Japan,” says the pandemic is highlighting the limits and possibilities of the retail sector.

“There’s no question that online shopping will grow,” he says. “Convenience stores and supermarkets may want to concentrate on providing goods and services that cannot be ordered via the internet, including take-home meals and side dishes. Drugstores selling general merchandise will likely focus on their core pharmaceutical business, and department stores will need to target the wealthy and offer concierge services to survive. The virus is going to change many things.”

Those changes have already trickled down to 7-Eleven outlets, like the one in Hioki. Its shelves are now stocked with bottles of locally produced soy sauce and vinegar, right next to the mainstream brands customers are used to. And near the cashier is an extensive lineup of paper, filters and loose tobacco for hand-rolled cigarettes, a rarity in convenience stores.

“A customer asked if we could sell hand-rolled tobacco necessities, and I contacted a wholesaler who agreed to do business with us directly. Now we’re known for them through word of mouth,” says franchise owner Kubo. “Luckily sales haven’t been affected too much during this pandemic. There are so many convenience stores out there, I suppose it helps to differentiate ourselves from the others.”

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