Strategic Survival and Growth of Small-Scale Franchisers in the Japanese Drug Store Industry: A Case Study of a Japanese Drug Store Franchise

Abstract

The Japanese drug store franchising industry has experienced significant growth, but faces challenges such as market saturation, a declining population, and intense competition from convenience stores. This paper examines the strategies of mid-sized franchiser Souki Drug Store (SDS), which has successfully navigated these challenges through strategic alliances, a focus on high-margin products, and digital transformation. SDS’s approach includes partnerships with local supermarkets and specialty stores, a “scrap and build” M&A strategy to optimize market presence, and a commitment to operational efficiency through advanced logistics systems. Despite challenges such as workforce shortages, particularly in pharmacy staff, SDS plans to extend its store hours and focus on providing value-added services like healthcare and beauty counseling. The paper concludes that to thrive in the evolving market, SDS and similar mid-sized franchisers must embrace digital tools, expand their presence in key urban areas, and adapt to changing consumer needs, especially in aging populations.