Can 'Late-Night Pricing' Keep the 24-Hour Convenience Store Alive?

Can 'Late-Night Pricing' Keep the 24-Hour Convenience Store Alive?
Credit: H.T. Yu / Flickr
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Convenience stores in Asia should look to the taxi industry to make their 24/7 operating hours profitable.

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Last month, Japanese media reported extensively on the conflict between major convenience chain 7-Eleven and one of its franchisees. 7-Eleven accused the franchisee of shutting down his shop at night without permission and asked him to pay a “breach of contract” fee amounting to 17 million Japanese yen (US$153,000). The franchisee complained that he was unable to hire workers for late-night shifts and, as his wife had died a few months earlier, he has been overworking himself just to keep the shop open 24 hours.

The underlying problem, as discussed in the article, is a significant shortage of labor faced by convenience store owners. With prices and wages set by the headquarters, franchisees, especially in more remote areas, are having a hard time recruiting people to work the undesirable graveyard shifts. The struggle of the franchisee in the 7-Eleven case shows that labor shortage is threatening one of the defining characteristics of the convenience store: The fact that it is open 24/7.

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Credit: Flickr / Nicky Fernandes
Staying open 24/7 is key to the business model of 7-Eleven.

The issue is certainly not one unique to Japan, but relevant throughout Asia. 7-Eleven and other open-all-night convenience store chains, as well as their local equivalents, can be found in Taiwan, South Korea, China, as well as many Southeast Asian countries. The ubiquity of these convenience stores has led to the emergence of social norms for making small purchases late at night. Indeed, as the president of 7-Eleven made very clear, keeping stores open late at night is very important for the overall sales of the stores. This is true in all countries where convenience stores remain popular.

So, given the financial need for 24-hour operations, what may be a solution to the lack of labor force needed to staff the convenience stores? In the long term, technologies such as automated self-payment systems – which have debuted at 7-Elevens in Taiwan – may render humans unnecessary for running stores in the wee hours, but in the short-term, the most critical issue remains how to attract the needed late-night manpower with greater compensation, while adhering to unified pricing of products on sale.

Here, the taxi industry can provide inspiration. Like convenience stores, taxis can be individually owned and must follow unified pricing. But the taxi industry incentivizes drivers to work all night by exacting a “late night surcharge” to standard fares, The surcharge gives graveyard shift drivers an additional income boost without damaging the taxi company’s bottom line or breaking pricing rules.

Why shouldn’t convenience stores adopt the same strategy? While keeping the labeled prices of goods the same throughout the day, stores should be allowed to charge a certain percentage in late night surcharge to boost sales revenue. At least some portion of the surcharge should be reserved to make pay more competitive for employees working the hours when the surcharge applies.

Ultimately, adopting the idea of “late night surcharges” hinges upon a wider recognition of the fact that there is a cost to convenience. If one wants to buy something at an hour that normal people are fast asleep, then there should be a more widespread consensus that one should pay extra for the very ability to make the purchase. Unfortunately, the convenience store industry, unlike the taxi industry, has yet to set such expectations for its customers. It is time that convenience stores do so, if only for the sake of maintaining the profitable 24-hour operation model.

Read Next: Is Airbnb Heading Into Regulatory Trouble in Taiwan?

The views expressed in this article are those of the author and do not necessarily reflect the editorial policy of The News Lens.

Editor: Nick Aspinwall (@Nick1Aspinwall)

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