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SEVEN-ELEVEN JAPAN CO.

SEVEN-ELEVEN JAPAN CO. Outline. 7-11 Profile 7-11 Japan Convenience store Industry Franchise system Store Information Information and distribution system Discussion Questions. Seven-Eleven.

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SEVEN-ELEVEN JAPAN CO.

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  1. SEVEN-ELEVEN JAPAN CO.

  2. Outline • 7-11 Profile • 7-11 Japan • Convenience store Industry • Franchise system • Store Information • Information and distribution system • Discussion Questions

  3. Seven-Eleven • Southland Ice Company in 1927, Dawley assembled the company by buying four existing Texas ice factories. From 1930, Thompson. • The main business was the sale and home delivery of ice blocks for use in domestic ice boxes. • 1932, in response to customer requests, some stores began to sell groceries on an experimental basis, which were to be the basis for 7-Eleven. • In 1945, the company was renamed The Southland Corporation.

  4. Seven-Eleven • The convenience stores were rethought and remodeled in 1945. The stores opened at 7am and closed at 11pm, hence 7-Eleven. Many more were opened and the chain grew. • In the mid-1980s, competition and over-expansion hit profits. A significant number of stores had sales which were well below average. • In 1987, Thompson acquired Southland in a Leveraged Buy-Out resulting in a substantial debt which was to bring down the company.

  5. Seven-Eleven (cont) • Southland sold 58 7-Eleven stores in Hawaii to SEJ in December 1987. • In March 1991, Ito-Yokado (the largest retailer in Japan) and its subsidiary, SEJ, then owned 70% of Southland. • 1999 The Southland corporation  7-Eleven, Inc. • In November 2005, 7-Eleven, Inc. became an indirect subsidiary of Seven & I Holdings Company (SEJ + Ito-Yokado + Denny’s Japan)

  6. Seven-Eleven Global Licensees -2006

  7. 7-11 Japan- case • Established in 1973 • Set up first store in 1974 • First listed on the Tokyo Stock Exchange in1979 • In 2004, Japan’s largest retailer in terms of operation income and number of store.

  8. The convenience store industry and Seven-Eleven in Japan • The number of convenience stores in Japan • From 1991 to 2002 increased from 19,603 to 42,000 • Consolidation>>Top 10 = 90% of all stores • In 2002 Seven Eleven – large & profitable • accounting for 21.7% of all convenience stores, but = 31.5% of total sales. • In 2004: each store avg. 30% higher sales than other chain store; no. of growth = 60% of total chain growth

  9. The Seven-Eleven Japan franchise system • Company-owned + franchise (60% of rev.) • Market-dominance strategy ~ 50~60 / DC • High-density strategy – advantages …. • 32/47 prefectures have stores, concentrated • <1/ 100 applicants awarded a franchise • High franchise fees • gross profits shares (45% SEJ; 55% store) • SEJ & franchise responsibilities

  10. Store information and contents • Table: financial figures for Seven-Eleven Japan • Store size = 150m2, 3000 items • Food, beverage, mag., consumer items, music, CD, … • The food items : Chilled-temperature, Warm-temperature, Frozen, Room-temperature items

  11. Table: financial figures for Seven-Eleven Japan

  12. Store services-1 • In 1987, was the in-store payment of Tokyo Electric Power bills. • In 1995, accept payment for mail-order purchase. • In 1999, payment for Internet shopping. • In 2004, ATMs had been installed in about 75% of the total store in Japan.

  13. Store services-2 • Other service: photocopy, ticket sales… • In 2000, Seven-Eleven Japan established 7dream, an e-commerce company. • exploit the existing distribution system • stores were easily accessible to most Japanese. • 92%of its customers preferred to pick up their online purchases at the local convenience store.

  14. Seven-Eleven Japan’s Integrated Store Information System • 1979 online network without point-of-sales (POS) • 1982 introduce a POS system- cash registers • 1985 jointly with NEC- PC+ color graphics • 1991 integrated server digital network (ISDN), linking >5000 stores • Daily sales data in by 11pm, analyzed overnight

  15. Seven-Eleven Japan’s Integrated Store Information System - hardware system at a 1994 • Graphic order terminal—manager Info. & order • Scanner terminal- receiving & inventory • Store computer- all data transmission device • POS register – real-time data on sales, customer, data analyzed overnight for company, district, and store. • Analysis used to match supply and demand; >50% items are replaced/year; new item tracks 3 weeks; best 3 brands kept.

  16. Seven-Eleven’s Distribution System • Combined delivery system • Short replenishment cycle - 2-3 times a day • Cutoff for ordering, MTO>>DC>>stores • Temperature classified trucks, consolidation, quick drop-off • Time savings • Reduce the number of vehicles • 1970 each store visited by 70 trucks/day, 1994 reduced to 11 • 2004: 290 plants, 293 DCs, >10,000 stores • No inventory at DC

  17. Seven-Eleven Japan Store Supplier Store DC Supplier Store Supplier Store Store

  18. Discussion Question 1 • A convenience store chain attempts to responsive and provide customers what they need, when they need it , where they need it. What are some different way that a convenience store supply chain can be responsive? What are some risks in each case?

  19. Risk • High inventory cost • Utility of many DCs

  20. Discussion Question 2 • Seven-Eleven’s supply chain strategy in Japan can be described as attempting to micro-match supply and demand using rapid replenishment. What are some risks associated with this choice?

  21. Risk • High transportation cost • Low inventory in store

  22. Discussion Question 3 • What has Seven-Eleven done in its choice of facility location, inventory management, transportation, and information infrastructure to develop capabilities that support its supply chain strategy in Japan?

  23. Facility location︰ • Adhering to its dominant strategy,7-11 Japan opened the majority of its new stores in areas with existing clusters of stores. • Filling in the entire map of Japan is not 7-11’s priority. They look for demand where 7-11 stores already exist, based on the strategy of concentrating stores in specific areas.

  24. Inventory management： • 7-11 offered its stores a choice from a set of 5,000 SKUs (stock keeping units). • Each store carried on average about 3,000 SKUs depending on local customer demand. • The food items were classified in four categories • Chilled-temp. items • Warm-temp. items • Frozen items • Room-temp. items

  25. Transportation︰ • Three-times-a-day store delivery of all rice dishes；Bread and other fresh food were delivered twice a day • Flexible enough to alter delivery schedules depending on customer demand. Ex: ice cream. • The replenishment cycle time for fresh and fast-food items had been shortened to less than 12 hours. • four categories of temp.-controlled trucks. Each made deliveries to multiple retail stores. All deliveries were made during off-peak hours • did not require the delivery person to be present when the store personnel scanned in the delivery.

  26. Information infrastructure： • Total Information System • ISDN、POS • Graphic order terminal • Scanner terminal • Store computer • POS register

  27. Discussion Question 4 • Seven-Eleven does not allow direct store delivery in Japan but has all products flow through its distribution center. What benefit does Seven-Eleven derive from this policy? When is direct store delivery more appropriate?

  28. Pros • Simplify supply network • Concentrated management is more efficient • Reduce vehicles used • Cons • Can’t work for vast territory with a sparse population

  29. Discussion Question 5 • What do you think about the 7dream concept for Seven-Eleven Japan? From a supply chain perspective, is it likely to be more successful in Japan or the United States (or China)? Why?

  30. An e-commerce company. The goal was to exploit the existing distribution system and the fact that stores were easily accessible to most Japanese. • Japan！ • Japanese’s habit. 92 % of the customers preferred to pick up their online purchases at the local convenience store, rather than have them delivered to their homes. • The higher population density

  31. Table: stores and sales for Seven-Eleven Japan

  32. Seven-Eleven In The United States • Grow beginning in 1998 • Direct store delivery (DSD) • In 2000 Combined distribution centers (CDCs)

  33. 7-Eleven United State Store Supplier Store Wholesaler Store Supplier Store Store

  34. Risk • Complex network • High transportation cost • Low control of shipment

  35. Study Question 6 • The United States has food service distributors that also replenish convenience stores. What are the pros and cons to having a distributor replenish convenience stores versus a company like Seven-Eleven managing its own distribution function?

  36. Using 3PL (USA) • Pros • Concentrate on main business • Lower cost • Cons • Less control of distribution

  37. Seven-Eleven (cont) • Seven & I Holdings 164/Fortune Global 500 in 2006Wal-Mart 2; Carrefour 25; Target 29; Tesco 59; Kroger 73 • As 2006, 30,000+ stores worldwide • 6000+ in the United States (1000+ by company, 3,500 stores by franchisees, 533 stores by territory licensees) • 27,900+ stores elsewhere.

  38. Seven-Eleven United States Licensees 2006

  39. Seven & I Holdings • 1920– Yakado Men’s Wear • 1958– Yokado Co. • 1965– changed to Ito-Yokado • 1972– first Family restaurant • 1973– supermarket, Denny’s Japan (licensed from Denny’s of US), York Seven (licensed from Southland of US) • 1978– York Seven Seven-Eleven Japan • 1982– SEJ installs the world’s largest POS • 1985– POS are installed in all stores • 1991– acquires 69.98% of Southland • 1996– established in Chengdu, Shi Chuan, China • 2004– Seven-Eleven (Beijing) • 2005–Seven & I Holdings: SEJ, Ito-Yokado and Denny’s Japan

  40. Seven & I Holdings (cont) 2005

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