Finding a Balance

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Finding a Balance

By Linda Lisanti

In February 2008, nearly three years into the venture, Japanese convenience store operator FamilyMart Co. announced it was changing the strategy of its U.S. c-store concept, Famima!! As CSNews Online reported then, FamilyMart realized the stores focused too much on high-end clientele, a strategy which prevented the brand from gaining wider name recognition. The retailer planned to relocate select stores to the outer suburbs of greater Los Angeles, open more outlets in middle-class neighborhoods and boost the number of products marketed to middle-class Americans. CSNews recently caught up with Famima!! to find out how the new strategy is taking shape.

The approach outlined last February is moving ahead, according to Famima!! Vice President Pervez Pir. The Torrance, Calif.-based retailer is trying to attract both middle- and upper-class consumers by operating stores in middle-income neighborhoods and significantly changing the product assortment to make it more localized.

Pir said he was brought on by Famima!! in January 2008 and given the task of varying the merchandise selection to better reflect U.S. trends. At the time, Pir was working for 7-Eleven Inc. as a merchandising manager in the chain's Brea, Calif., office.

"The Japanese, they know the [convenience] business, but they didn't have a diverse customer base before because the product mix was very skewed toward Asian products," he said. "You can't have all Asian products when there are no Asians in the area."

Before the strategy shift, the average mix was roughly 60 percent Japanese products vs. 40 percent mainstream items -- and much of that was high-end merchandise. "We sold a notebook that cost $15. Not many people want to spend that much on a notebook," Pir noted. Now, Famima!! stores offer a Mead-branded notebook priced at $5.99.

"It's a balance," he explained. "When I look at a set, I never want to see a typical convenience store set. We still want to be different than your average convenience store. Famima!! started out that way, and we want to stay that way. But you also want to make sure you have an assortment that includes high-end, mainstream and value lines."

Today, what Pir refers to as "Famima-ish items" account for 20 to 35 percent of the mix depending on the store. Some Japanese products, such as HI-CHEW, a fruit chew candy, and Famima!!'s expanding line of Japanese teas, have performed extremely well.

At the same time, Famima!! added such mainstream products as Arrowhead Water, a Nestle Waters brand, while also keeping the higher-end Glaceau Smartwater. Likewise in energy drinks, stores now stock widely known Red Bull alongside Rubyy, an energy drink Pir said lights up under black lights and is popular in L.A.'s club scene.

Health & beauty care is another category tweaked to include more traditional items. Famima!! stores previously carried some basic necessities like Tylenol, but were missing other mainstays like Advil, according to Pir. Energy shots, which none of the stores sold before, were also quickly added to capitalize on their increasing popularity.

Overall, Famima!! is concentrating more on the specific demographics of each store and tailoring the product mix accordingly. Based on the results so far, the plan appears to be working. Customer counts are significantly higher than before, Pir said, and sales in packaged beverages, salty snacks and health & beauty care -- the categories most heavily modified -- have shot up significantly as well, and are still posting increases.

Famima!! currently operates 12 c-stores in Southern California, with two more opening this month. The company is eying further growth in Southern California, specifically downtown L.A., and expects to have a store count of 20 by the end of the year.

As part of the strategy laid out last year, Famima!! planned to move stores with daily sales less than $4,000 to the outer suburbs and open additional outlets in middle-class neighborhoods. As of now, the chain has four "roadside" stores, which it describes as neighborhood stores with parking vs. its "downtown" stores with no parking.

The retailer, however, recently decided to forego building any more roadside stores because the Famima!! brand is not resonating in those areas as hoped. Going forward, all new stores will be built downtown where walk-up traffic is high.

"Just driving by, you have to know the Famima!! name to be compelled to stop as opposed to a walk-up downtown location," Pir said. "Research has shown again and again it's most effective when you build really strongly in a pocket. We can strengthen our brand if we stay downtown and build awareness with the people who work there, so when they go home and see a Famima!!, they'll know the name and stop."

Also contributing to this decision is the fact that Famima!!'s roadside stores are being hit harder by the recession than its downtown stores. Pir said the customer pattern at roadside stores is dropping and he believes it's because consumers in these areas are doing more pantry-stocking at club stores and not frequenting c-stores as often.

Famima!! recently lowered the prices of popular products at its roadside locations in an attempt to boost customer traffic. The temporary markdowns will continue through this month.

Going Forward
While the new strategy is producing positive results, there is still more work to do.

To educate potential shoppers about Famima!!, Pir said they are investing a lot in external marketing geared particularly toward the younger generation, including a presence on MySpace and Facebook and developing new interactive features for its Web site.

In terms of merchandise, this year's concentration is on the stores' fresh food offering. Whereas fresh foods account for 8 to 10 percent of sales at a traditional convenience store, this category makes up almost 40 percent of Famima!!'s total business.

"Customers come to Famima!! for the food. The crucial part now is to ask, "What else do we need to do to grow the deli because we don't want to lose that business?" Pir said, noting recent additions to the category included corn dogs, a hot dog grill and traditional sliced bread sandwiches filled with egg, chicken and tuna salads. "We need to work on our deli and get customers to continue to be excited about our food."

As Famima!! learned from past experience, success lies in giving customers what they want and need. To identify what those products are, the company intends to work on its business intelligence system, making it more accurate and specific. If the data shows purchases are going more toward value brands, the focus will go there.

"The challenge with this recession is staying focused, asking if we're working for ourselves in headquarters or for our customers," Pir said. "We have to listen to our customers."