BLUE STAR DONUTS’ risky store expansion in Japan

camdens_blue_star_donutsIntroducing recent chain store expansion case in Japan that we went “oops…”, hoping that others will not follow their path.

Let’s take a look at the store expansion of BLUE STAR DONUTS (branded CAMDEN’S BLUE STAR DONUTS in Japan).  They opened Japan’s first store in April 2015 at LOG ROAD DAIKANYAMA, shibuya-ku, Tokyo.

BLUE STAR DONUTS operates 7 stores in Japan as of November 2016, as listed below.

No. Store Name Prefecture Opened Date
1 Daikanyama Tokyo April 2015
2 Yokohama Kanagawa March 2016
3 Shinjuku LUMINE1 Tokyo September 6th, 2016
4 Umeda Hanshin Osaka September 7th, 2016
5 Shibuya HIKARIE Tokyo September 16th, 2016
6 Shinsaibashi OPA Osaka September 16th, 2016
7 Shinsaibashi* Osaka September 21st, 2016

* First stand-alone store

1st and 2nd stores are in-shop stores built inside Fred Segal, the fashion retail from Hollywood California.  They were expanding in one-store-per-year pace then, but they proliferated in September this year with 250% store count growth in a month.

Oops, they opened 5 new stores in September, and 3 of them opened in Osaka.  Especially in Osaka, 2 new stores opened around Shinsaibashi within 5 days.

They not only increased the store count rapidly before building enough brand awareness, but also expanded the geographical coverage suddenly.  Moreover, they built multiple stores in the same area almost simultaneously.  It is a very risky move.

Increase in brand total transaction can hardly be expected by opening new stores such an incorrect way.  As transactions disperse across the stores, it is estimated that they would struggle to grow per store sales.

Shinsaibashi is a difficult market that even Krispy Kreme, a doughnuts chain with much more brand awareness than BLUE STAR, failed to be profitable and closed the store.  BLUE STAR’s first stand-alone store in Shinsaibashi is expected to struggle in sales.  Moving forward, this store could become their bottleneck for growth in Japanese market.