The Economics of 7/11

Introduction

• 7/11 known for rice balls, ramen, and collaborations with famous restaurants in Japan.
• In the US, it's more known for Slurpees and hot dogs.

Overview of 7/11

• World's largest convenience store chain.
• Over 13,000 locations in North America.
• Made over $72 billion in sales last year.
• Shifting focus to bring Japanese inspiration to US stores.
• Historical revenue sources: tobacco and gas; shifting focus to food due to declining sales in tobacco and gas.

History

• Started as an American company; went bankrupt twice (1932, 1990).
• Now owned by a Japanese company, Seven & I Holdings.
• Ito Yokado (Japanese supermarket chain) bought a majority stake.

Differences Between US and Japanese 7/11s

• Japanese model is more data-driven, focusing on what sells well at different times, by gender and age.
• US stores were larger and attached to gas stations; Japanese stores had more fresh food and no gas.
• Japanese stores stocked only fast-selling items with multiple daily shipments based on comprehensive data.
• US stores were less efficient, with two deliveries per week and many unsold items.

Changes in US 7/11 Operations

• US stores now have a distribution system similar to Japan’s, with daily orders based on national, regional, and store-specific data.
• Introduction of "tanpin kanri" – localization of store assortments.
• Focus on fresh and localized food options.

Food and Beverage Business

• American 7/11 sold over $17 billion worth of food last year – 24% of overall sales.
• Includes 315 million cups of coffee, 153 million Slurpees, and 99 million slices of pizza.
• Goal to increase store brand goods to one-third of sales by next year.
• Food sector targeted due to stable demand and higher profitability than gas and tobacco.

Commissaries and Partnerships

• Upgrading 17 commissaries across the US for better localized food production.
• Partnership with Warabeya for diversified food options like spicy miso ramen.
• Focus on data to track customer preferences and drive sales.

Marketing and Customer Engagement

• Use of data from 95 million loyalty members to target marketing and spur impulse buys.
• Targeted advertising based on time of day and customer preferences.
• Expanding delivery services with higher profitability than in-store purchases.

Future Prospects

• Aim to infuse excitement from Asian markets into the US market.
• Focus on meeting evolving customer needs and preferences.

Conclusion

• Continuous adaptation and innovation in both products and operations are key to 7/11's success.