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    FamilyMart Changes U.S. Strategy

    Retailer to halve costs by moving some Famima locations to middle-class neighborhoods, reducing sales floor space by roughly 30 percent and modifying product mix.

    TOKYO -- FamilyMart Co., Japan's second-largest convenience store operator, announced it will open more outlets in middle-class U.S. neighborhoods to make the unit profitable by February 2012, according to a report by Bloomberg News.

    Since opening its first Famima-branded U.S. store in West Hollywood, Calif. in 2005, FamilyMart has tried to set itself apart from rivals such as 7-Eleven Inc. by projecting an upscale image and not offering services such as gasoline pumps for motorists.

    The strategy is yet to succeed, however, with the company's U.S. operations posting an operating loss of 686 million yen ($6.4 million) in the last business year, the report stated. For the first half of the current year ending in February, the company's U.S. unit, Famima Corp., reported an operating loss of 492 million yen.

    FamilyMart had originally aimed to have 200 shops by the business year ending February 2009. There are currently 13 Famima stores in the greater Los Angeles area.

    FamilyMart "focused too much on high-end clientele," a strategy which prevented the company from gaining wider name recognition, president Junji Ueda said in an interview with Bloomberg News on Jan. 29. The pace of U.S. store openings was slowed because of difficulties complying with diverse municipal zoning regulations, he noted.

    Faced with these issues and slumping U.S. consumer spending, the retailer will relocate stores with daily sales of less than $4,000 to the outer suburbs of the greater Los Angeles area, Ueda told Bloomberg. More stores with ample parking space will be built in areas with high car traffic, and the shops will have sales floors that are about 30 percent smaller. These steps will allow FamilyMart to halve store costs, said Ueda. The stores will also boost more offerings marketed to middle-class Americans, such as doughnuts.

    By the fiscal year ending in February 2010, Famima Corp. hopes to have as many as 50 directly operated stores, some of which will be converted into franchises.

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