Starbucks Caffeinates Plans for New Stores in Japan

1 min readJun 26, 201712:39 AM

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Starbucks Coffee Japan plans to open new outlets at an accelerated pace while shifting its focus from urban centers to suburban areas. Over the next three years, the company will spend roughly 15 billion yen ($146 million) to open 260 new coffee shops, which is 60% more than were opened during the last three years. Starbucks now operates some 1,000 stores in Japan, of which around 10% are located in suburban areas along main streets.

Now that the urban market has become saturated, and even convenience stores have become rivals offering quality coffee, the company is looking to expand outside cities. The plan is to open 75 new outlets in fiscal 2014, 85 in fiscal 2015 and 100 in fiscal 2016. These will be located mainly along arterial streets in suburban areas and near residential districts.

The stores will offer both seating and drive-thru windows, and they will be open longer hours than the urban stores, which close at 11 p.m. Some of Starbucks’ existing suburban outlets are open until 2 a.m. and remain busy until closing.

In a typical day, the stores capture business from people on their way to work in the morning, seniors at lunchtime, housewives in the afternoon, as well as from workers and students returning home at night. Rents are cheaper than in the city, and sales tend to be 30-40% higher, with the average suburban store generating annual revenue of 150 million yen.

But Starbucks is not alone among companies making the push outward to suburban markets, where coffee shops are filling the gap left by the demise of roadside family restaurants. For example, Hoshino Coffee, owned by Doutor-Nichires Holdings, is opening more coffee shops with sit-down service, hand-dripped coffee, and sweet and savory foods. Thirty-five new branches are planned for the current fiscal year. And Komeda is opening coffee shops with brick walls, wooden tables and other cozy touches.

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Questions & Answers

What is Starbucks Japan's total investment for its new store expansion plan?

Starbucks Japan plans to spend approximately 15 billion yen, which translates to $146 million, on its new store expansion. This investment will fund the opening of 260 new coffee shops over the next three years, marking a significant acceleration in their growth strategy.

Why is Starbucks Japan shifting its focus to suburban areas for new store openings?

Starbucks Japan is shifting to suburban areas because the urban market has become saturated, with even convenience stores offering rival coffee. Suburban locations offer cheaper rents and higher sales, filling a gap left by the closure of some roadside family restaurants.

How do sales and operating hours differ between Starbucks' urban and suburban stores?

Suburban Starbucks stores typically generate 30-40% higher annual revenue, averaging 150 million yen. They are also planned to be open longer hours than urban stores, which close at 11 p.m., with some existing suburban outlets staying open until 2 a.m.

Which other coffee shop chains are also expanding into Japan's suburban markets?

Hoshino Coffee, owned by Doutor-Nichires Holdings, is opening new shops with sit-down service and hand-dripped coffee. Komeda is also expanding, creating coffee shops featuring brick walls, wooden tables, and other cozy design elements.