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In December 2003, Japan's largest convenience store operator, Seven-Eleven Japan, announced it had agreed a joint venture with ExxonMobil, whereby 7-Eleven stores would be sited on petrol forecourt sites. While ExxonMobil will operate the petrol side of the business, the shop will carry the 7-Eleven fascia, with Seven-Eleven Japan also responsible for issues such as prices and product range in the shops. Trial stores will be launched in early 2004 and a full roll-out could commence soon after if the initial tests prove successful.

This is just the latest example of grocery retailers linking up with petrol companies in order to gain a presence on forecourts. The tie-up makes good sense for both parties as they are able to take advantage of the expertise and brand of their partner in their respective sectors. In this instance, the combined stores will be equipped with ExxonMobil's advanced technology such as Speedpass (Pay-at-the pump) and expertise at selling fuel, while Seven-Eleven Japan brings a unique product range as well as invaluable experience in the Japanese convenience store sector.

Although the presence of grocery retailers on petrol forecourts is relatively common in North America and Western Europe, the sector is still in its infancy in Japan. Japan's second largest convenience store operator launched a tie-up with Nippon Oil Corp in April 2003. Meanwhile, am/pm Japan Co Ltd, a mid-sized convenience store operator, launched its first Delice-town combined convenience store, restaurant and self-service petrol station in 1999. Though the company currently operates only two outlets, am/pm Japan intends to expand the Delice-town concept over the next few years. Another mid-sized convenience store operator, Three F Co Ltd, has also been operating two pilot stores combined with Idemitsu self-service petrol stations.

One reason why Japan's grocers have so far failed to gain a strong presence on petrol forecourts is because until 1998 Japan's petrol distribution sector was fully regulated and rigorously licensed so that self-service petrol stations were prohibited. However, following deregulation of the sector in 1998, the number of self-service stations has grown and so has the competition between operators. Faced by increasing competition and declining margins, many oil companies therefore view a link-up with convenience store operators as an important way of differentiating themselves from rivals.

Meanwhile, in a saturated market, Japan's major convenience store players are on the lookout for new, often unconventional locations in order to open stores. The likes of Lawson and FamilyMart have already opened stores in hotels, office buildings, hospitals, banks, factories and universities, so opening a store at a self-service petrol station has become increasingly attractive.

Until the trials have been completed, the implications of the tie-up will be unclear. The fact that the number of customers at a petrol station is much lower than the level needed by a c-store to break even, and with car parking spaces limited, success is by no means guaranteed. It certainly seems likely that the venture will be concentrated in large cities where there is adequate customer traffic.
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