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2009年6月24日 (水)


--The Asahi Shimbun, June 23(IHT/Asahi: June 24,2009)
EDITORIAL: Seven-Eleven under fire

One of the main retail revolutions in the postwar era is the advent of the convenience store business, which has grown by leaps and bounds. The hugely successful business model has apparently reached a major turning point, however.

On Monday, the Fair Trade Commission ordered Seven-Eleven Japan Co., the operator of the nation's largest convenience store chain, to put an end to its unfair business practices. According to the antitrust watchdog, Seven-Eleven put pressure on franchisees to stop them cutting the prices of perishable food items like bento box lunches and onigiri rice balls when their expiration dates approach.

Under the Anti-Monopoly Law, the owners of stores belonging to a franchise chain like Seven-Eleven are entitled to determine the prices of individual products sold at their outlets. The FTC concluded that Seven-Eleven abused its dominant bargaining position to trample on the franchisees' right.

Restricting discount sales at outlets has actually been common practice among major convenience store chains, including Seven-Eleven's main rivals. The FTC's action against the industry leader is likely to have a huge impact on the future of the sector.

Behind Seven-Eleven's alleged antitrust violation is its business model in which products not sold at their marked prices are dumped. This results in a huge amount of unsold perishables. From the viewpoint of consumers, the case has raised serious questions about the merits of such a system.

An unusual method is used to calculate profits and losses for most convenience stores. The franchiser deducts a certain percentage of the profits from the sales at its chain stores as royalties, which are listed as "charges."

The problem is that franchisees effectively have to bear the cost of unsold items. In short, the operator of a convenience store chain doesn't take on the risk of unsold products nor covers any of the losses from such leftovers while taking a percentage off their profits from actual sales.

For the chain operator, which wants to maximize its profits, it is far more important to ensure that no item is out of stock when a customer comes to buy it. That far outweighs the amount of unsold perishables that need to be thrown out. So the franchiser puts pressure on franchisees to always be well-stocked, fully aware that this business approach increases the risk of items having to be thrown out.

It is estimated that the average value of goods unsold and disposed of at Seven-Eleven stores is equivalent to about 3 percent of sales.

Store owners who regard this system as wasteful criticized the chain operator for putting pressure on them to stock to excess. Some of them say Seven-Eleven officials told them to regard the disposal of unsold goods as investment or to abandon their scruples.

Most consumers have been enjoying the convenience of the around-the-clock operations of these ubiquitous small markets without recognizing the seamy side of the business. Could convenience stores continue doing business in their current way if, for instance, they put up posters at their checkout counters, honestly informing customers of the total value of goods discarded every month?

Seven-Eleven should disclose accurate information about how much goes to waste. The public should be told the total value and quantity of perishables that are thrown out at the chain's 12,000 stores nationwide. Seven-Eleven should also explain how many people could be fed with that amount. The company also needs to clarify how it intends to deal with this problem and thereby fulfill its social responsibility.

Discount sales should be seen as a worthwhile proposal. It would allow franchisees to reduce the amount of unsold products that must be discarded. It is clearly time for Seven-Eleven to change its ways.


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