Convenience (done cheap) is the King of Cool

Video giant Tsutaya and convenience chain Lawson send coupons via keitai, calling out to deflation's kids.

WHAT DO A VIDEO rental shop and a convenience store have in common? That's what many were asking themselves when Culture Convenience Club (CCC), which operates Japan's largest video rental chain, Tsutaya, and Lawson, one of the country's biggest chains of convenience stores, announced in March that they would form an alliance beginning in August of this year. As the presidents of both companies launched a flashy presentation complete with computer graphics and photo ops at the Westin Hotel in Tokyo's Ebisu, it became quite clear: Both companies cater to the cost-conscious, ultra-hip 20-somethings of Japan.

"When we looked at statistics of our core market, we found that the largest percentage was in the 20- to 29-year-old bracket, which was exactly the same market makeup as those who shop at convenience stores," said Muneaki Masuda, president of CCC. Masuda noted that 93.8 percent of the 20-somethings who rent videos at Tsutaya regularly shop at convenience stores, making them an ideal target market. "It was only natural to think of the next step, which is to consolidate our point-accumulating card systems," Masuda said.

In other words, beginning this August, the card that gets you a video rental from Tsutaya will also let you accumulate discount points if you buy an onigiri (rice ball) at Lawson's. While the two companies have not yet worked out the details on how these points can benefit consumers, some of the ideas being floated vary from receiving advance ticketing privileges for concert events to having Lawsons act as ubiquitous outlets for customers returning Tsutaya's videos, DVDs and CDs -- 24 hours a day.

"I've learned a lot about
the market just watching
my 19 year-old son"

Lawson's president, Takeshi Niinami, stressed that there was a "need to differentiate" themselves from other convenience store chains, such as Seven-Eleven. More importantly, he added, "I've learned quite a lot from Masuda-san regarding the retail business, and I feel most comfortable working with him on this alliance." Niinami became president in May of last year, after coming to Lawson from its major shareholder, Mitsubishi Corporation. Lawson was originally under the management of the Daiei group. But after Daiei ran into financial problems, the convenience store portion of the giant retail group has been under reconstruction by Mitsubishi.

Meanwhile, Tsutaya has also been a pioneer of sorts in the keitai-coupon scheme. The company regularly sends out discount messages to i-mode carriers. "This is the only way to go in an age of those who use their thumbs," says Tsutaya's Masuda. "I've learned a lot about the current market just watching my 19 year-old son. When I was young, it was cool to spend a lot of money on expensive things. But for young people nowadays, it's cool to save a lot of money and figure out ways to enjoy yourself cheaply. Young people love to accumulate points, so I've adopted their lifestyle into my business."

CCC announced in March that it was now listed in the Tokyo Stock Exchange's First section, switching over from Mother's, a market for venture business capital. The company was able to make the change in just three years, a relatively short time span for a venture business. And later in the month, CCC made another point-card alliance with Nippon Oil Corporation, which runs the country's largest network of gas stations.

Masuda, who started out as a salaryman for a clothing manufacturer before launching his own business (a bookstore in Osaka) is a happy man for the moment -- and maybe of the moment. CCC is slated to post JPY4.4 billion in consolidated pretax profits for the business term that ended in March 2003. It will be a record high in the company's 20-year history. @