FamilyMart warms up to its fastest growing market

FAMILYMART believes the local convenience store market remains “extremely underdeveloped.”

Anton Huang

It has been just over a year since the very first FamilyMart convenience outlet in the country was opened at Glorietta 3, but the Japanese convenience store brand has already grown by leaps and bounds here.

In fact, the Philippines is FamilyMart’s fastest growing market in Asia, Philippine FamilyMart CVS Inc. president Anthony T. Huang says.

In an interview last week, Huang expressed confidence that franchising would further speed up the expansion of FamilyMart’s store network into the provinces at a time when the country’s economy is in a sweet spot.

“The convenience store format is one that necessarily has to have a lot of locations all over. And just like many other similar types of retail formats, a lot of them rely on partnerships with franchisees to expand their network in a rapid manner. So we’re basically doing what is the norm in this industry,” says Huang, who is also the president of leading specialty store retailer SSI Group Inc.

The executive notes that the local convenience store market remains “extremely underdeveloped” with just less than 2,000 outlets in a country with a population of 100 million.

“There’s still a long way to go in terms of the number of convenience stores per capita [in the Philippines] compared to our Asian neighbors. With the way the country has a young population and a growing broader market segment, it’s a good time to expand FamilyMart and not only within the central business district but throughout the country,” he says.

To date, FamilyMart has more than 50 outlets, but the three stores in Cavite province are the only ones outside Metro Manila.

As FamilyMart ventures into franchising, more stores are expected to be established in the provinces.

“With the increasing urbanization that is happening in our country, and new real estate developments that are coming up, those obviously are great opportunities for convenience store development to take place,” Huang said.

By yearend, 90-100 FamilyMart outlets may be operational, most of which will likely be company-owned, according to Huang.

The bulk of the franchise-operated stores will be rolled out starting early next year.

Ambitious plan

“In the beginning, naturally you have more company-owned branches. But as the years go by I’m sure that the contribution of the franchised stores will increase as we expand our network,” the executive notes.

Franchising will help FamilyMart achieve an ambitious plan to expand its store network to 500 by 2018.

“That’s a business plan that you can meet or you can exceed. Right now, taking into account what is happening so far, we’ve managed to meet that business plan and we’re poised to be able to do hopefully better than the business plan in the next few years,” Huang says.

FAMILYMART branch in Fairview Terraces.

“But you know, we are focused on our first year. We are focused on making sure that we got the format right and, thankfully, we did. Feedback from our customers had been overwhelmingly positive to the point that we felt confident to launch franchising. And we’re going to do that within the next few weeks,” he adds.

While intent into expanding rapidly, Philippine FamilyMart CVS has put in place stringent requirements for potential franchisees.

Prospective franchisees should be at least 25 years old, a college graduate and capable of funding the venture personally or through bank financing.

The investment for a FamilyMart franchise will be between P4 and 8 million, which will cover the operational rights of the branch, leasehold improvements, equipment, franchise fee, initial merchandise, inventory and contingency fee.

Following a formal agreement with Philippine FamilyMart CVS, franchisees will have to go through a four-week training program “so that they can fully imbibe the culture of FamilyMart through a full-time program that involves classroom and hands-on in-store training,” Huang says.

“We want to make sure that the person that we’re partnering with is really dedicated enough and knows for a fact that this a long-term partnership.”

A good location will also be key to securing a FamilyMart franchise.

“Convenience store retail thrives in a more urbanized type of environment, where you have people that need convenience in their lives to be able to function properly. As such we had launched in central business district areas such as Makati, Ortigas and Bonifacio Global City. Ideally we’d like to be where the BPO [business process outsourcing] office workers and the young population work. But residential communities likewise do very well, and we have stores in residential developments. Office buildings and residential communities—those are really the locations that FamilyMart would thrive in,” according to Huang.

The executive says that all franchisees will enjoy the franchisor’s full assistance.

“We’re going to be using the Japanese FamilyMart system of franchising, the kind that calls for providing all-out support to franchisees and making sure there’s really no difference [in terms of delivery of services] between company-owned and franchise-operated stores.”

‘Twirl all you can’

Franchising is a means to generate more entrepreneurial activity, Huang notes.

“From a business perspective, we likewise also knew that, [with] FamilyMart, we wanted to use it as a platform for our group to be able to promote entrepreneurship in the Philippines,” he says.

“And we feel that finding the right kind of entrepreneurs who will want to operate or want to become retailers is key to the success of FamilyMart. We feel it will be a great opportunity for like-minded people.”

According to Huang, the interest among potential FamilyMart franchisees has been going up ever since they set up shop last year.

“From the day we opened, there have been inquiries as to when we were going to franchise. Part and parcel of the reason that we entered this business was really for us to not only provide employment but to likewise provide entrepreneurial opportunities. And since we said that, from the very beginning, people began to ask us ‘when are you going to franchise.’ We’ve always kept their names and passed them on to our business development team, and so now that we’re ready, our business development team has been calling them,” he says.

As for sales, Huang says, without revealing the exact figures, that so far they have been “extremely happy with the fact that we have achieved our business plans, not only in terms of the number of stores rolled out but likewise our average daily sales targets.”

A “large component than what we originally anticipated it to be,” he says, is the ready-to-eat food offerings, such as rice meals and noodles, sandwiches and salads, as well as Japanese favorites like cha soba, donburi, maki, onigiri and ramen.

Food outpaces grocery items, the executive reveals.

Of course, the “twirl all you can” promo for the ice cream is also attracting customers in droves, Huang shares.

FamilyMart also offers ATM and bills payment services.

“In the future, possibly just like in other markets, we may also be a logistics provider or a drop-off point for services that people or companies provide,” Huang says.

The positive reception among many Filipino consumers toward FamilyMart so far has made the Philippines its “fastest-growing market in Asia,” according to Huang.

Even as more convenience store brands enter the Philippines, FamilyMart will not be deterred—in fact, competition is very much welcome, the executive says.

“That you have the likes of Lawson and Alfamart coming in, despite the fact that 7-Eleven, Mini Stop and FamilyMart are already in the market, just really shows that there’s a great potential for the industry and for this kind of retail format in our country. I think there’s definitely a big enough market for multiple players.”

Familial

“Competition is good. If you just look at what has happened so far, we launched FamilyMart last year and I think we are very successful in differentiating ourselves from the existing convenience store retailers in the country,” he says.

“We came out with a very strong and differentiated merchandise offering, our ready-to-eat food, our ice cream and all of that. Our store environment was also likewise differentiated by having something more upgraded. It was a store environment that people would like to be seen in and spend time in. And we had a customer service experience that is very familial.”

The executive mentions how FamilyMart’s squeaky cleanliness has become sort of an industry standard.

“When we came in, we were the new competitor. We came into the market and existing retailers immediately started to clean up their stores, improve their merchandise offering, and everything started to become more upgraded,” he points out.

For Huang, FamilyMart’s innovations make everyone happy—not only the customers, but also, in some ways, even its competitors.

“At the end of the day, [FamilyMart’s innovations] benefit the consumer. If the consumer has a good experience overall, then it benefits the entire convenience store format because more people will begin to shop or continue to shop more in convenience store outlets. And that’s good for all of us.”

Established in Japan in the 1970s, FamilyMart is now the second biggest convenience store chain in the world with almost 16,000 outlets to date in eight countries.

Apart from Japan and the Philippines, FamilyMart has stores in China, Indonesia, Taiwan, Thailand, the United States and Vietnam.

The Japanese-owned convenient store chain is operated in the country by Philippine FamilyMart CVS, a joint venture between SSI Group, property developer Ayala Land Inc., and Japan FamilyMart.