Seven-Eleven Japan new, case-study/article.ppt

Title
contents
Background
franchise model
Distribution network
current global strategies
Recommendations
conclusions
Q/A
The end

1. Seven-Eleven Japan: A Convenience Store Success Story.

2. CONTENTS: Background 7-Eleven: A Franchise Model Distribution Network Challenges In Global Market Current Global Strategies Recommendations Conclusion Case Study: Q/A

3. GOOD EVENING EVERYONE  What if I told you that one company could sell over a billion rice balls annually, introduce 24/7 shopping to the world, and turn convenience into an art form? Welcome to the story of Seven-Eleven Japan.” “ Think about this: no matter where you are in Japan, you’re probably just a few minutes away from a Seven-Eleven store. But how did it grow from a single shop in Tokyo to over 10,000 stores in Japan alone? Let’s explore the magic behind Seven-Eleven Japan!”

4. SEVEN-ELEVEN JAPAN: A TALE OF EXPONENTIAL GROWTH : INTRODUCTION : Seven-Eleven Japan is a leading convenience store chain founded in 1973 under a licensing agreement with the U.S based Southland Corporation . The first store opened in Tokyo in 1974 , introducing a unique shopping model focused on convenience and efficiency. By 2004, Seven-Eleven Japan had grown to over 10,356 stores, making it the largest retail chain in Japan. The company’s customer-centric approach ensured it became a key player in the Japanese retail market. Business Model Highlights : Focus on high-quality service. Use of advanced technology to streamline operations.

5. COMPANY’S HISTORY & PROFILE : Masatoshi Ito, the founder , started his journey in retail after World War II with a small clothing store to building a retail empire. A trip to the U.S. in the 1960s inspired him to adopt the superstore model, leading to the creation of Seven-Eleven Japan. Role within Ito-Yokado Group : Seven-Eleven Japan became the most successful division of its parent company Ito-Yokado, significantly contributing to the group’s revenue and global expansion. Key Moments: 1973: Licensing agreement with Southland Corporation. 1974: First store opened in Tokyo. Rapid growth in the 1980s and 1990s cemented its position as a market leader.

6. THE CONVENIENCE STORE INDUSTRY AND SEVEN-ELEVEN IN JAPAN: Convenience stores, or “ konbini ,” as they are called in Japan, are a vital part of daily life in Japan, providing quick access to food, drinks, and services . Between 1991 and 2002, the number of stores doubled, reaching nearly 42,000 locations . Captured 31.5% of total convenience store sales in Japan by 2004 . Outperformed competitors with average daily sales of ¥647,000, which was 30% higher than rival stores . Success Factors : Superior logistics and inventory management. Focus on customer preferences through tailored product offerings.

7. STORE INFORMATION AND CONTENTS : Store Size : Increased average size from 125 to 150 square meters by 2004 to accommodate more products and services. Product Range : Stores stock approximately 3,000 items from a catalog of 5,000, tailored to local customer preferences. Key categories include processed foods, fast foods, beverages, and non-food items like magazines and detergents, Processed and fast foods account for 60% of sales, Items like rice balls, lunch boxes, and fresh bread are bestsellers, Focus on unique, store-specific items, which represented over 52% of sales by 2004.

8. STORE SERVICES Starting with utility bill payments in the 1980s, the stores gradually expanded their offerings to include: Credit card installment payments Ticket sales Internet shopping payment processing Parcel pickup for online orders Meal delivery services targeting Japan’s aging population ATMs installed in 75% of stores by 2004, aiming for 100% coverage

9. SEVEN-ELEVEN JAPAN: A FRANCHISE MODEL OF SUCCESS: Franchise Model : Combines company-owned stores and third-party franchises. Highly selective process, approving less than 1% of applicants. Franchisee Responsibilities : Managing daily operations, hiring staff, and maintaining customer service standards. Support for Franchise Owners : Comprehensive support in supply chain management, marketing, and staff training. Covers 80% of utility costs and ensures operational efficiency.

10. SEVEN-ELEVEN JAPAN: A FRANCHISE MODEL OF SUCCESS : DOMINANCE STRATEGY: Seven-Eleven Japan utilized a cluster-based dominance strategy, creating networks of 50-60 stores supported by central distribution centers. REVENUE SPLIT: This model generated significant revenue for the franchisor, with 68% of earnings coming from franchise commissions. SHARED RESPONSIBILITIES: Franchisees were responsible for store operations, staff, ordering, and customer service, while Seven-Eleven managed supply, infrastructure, and advertising.

11. TECHNOLOGY-DRIVEN EFFICIENCY: THE SEVEN-ELEVEN ADVANTAGE: INTEGRATED INFORMATION SYSTEM Seven-Eleven Japan implemented a sophisticated information system that connected point-of-sale (POS) data with headquarters and suppliers. Components: POS Data: Tracks sales and customer demographics in real-time, enabling precise demand forecasting. Graphic Order Terminals: Handheld devices that help store managers place accurate orders. Scanner Terminals: Streamline inventory management and delivery receipt processes. Store Computers: Centralize communication, track trends, and automate data analysis. KEY FEATURES Real-time sales and waste analysis Sales trends and customer demographics RESULTS This system enabled dynamic inventory management and tailored merchandising, ensuring optimal stock levels and product variety

12. THE SEVEN-ELEVEN DISTRIBUTION NETWORK: A MODEL OF EFFICIENCY: COMBINED DELIVERY: Seven-Eleven leveraged temperature-controlled trucks to deliver different product categories simultaneously, reducing the number of vehicles required DELIVERY FREQUENCY: The distribution system ensured frequent deliveries, with rice dishes receiving up to three deliveries per day, guaranteeing freshness and product availability. DISTRIBUTION CENTERS Seven-Eleven’s distribution centers operate without inventory, relying on a high-turnover model for efficient product flow.

13. CHALLENGES IN GLOBAL MARKET : 7-Eleven has currently expanded to more than 80,000 stores in 20 countries and regions around the world. In 2007, we became the chain store with the highest number of stores in the world, even when including fast food restaurants . Location : 72% of customers believe that the location of 7-Eleven stores is a crucial factor for its success. This could include convenient and easily accessible locations that are convenient for customers to visit. Convenience : 82% of customers feel that convenience is a critical factor for 7-Eleven's success. This could include factors such as 24/7 operating hours, a wide range of products available, and easy and quick transactions. Brand reputation : 36% of customers believe that brand reputation is an important factor for 7-Eleven's success. This could include customers' perception of the brand's image, trustworthiness, and reliability .

14. However, this news has raised concerns in the market. In its financial report, Seven & I Holdings acknowledged that " While the US economy is recovering strongly, consumers are still cutting back on spending due to persistent inflation, high interest rates, and deteriorating job opportunities . These factors led to a 7.3 per cent drop in footfall at 7-Eleven in August, marking the sixth consecutive month of decline. Additionally, tobacco sales, traditionally one of the best-selling items for convenience stores, have fallen by 26 per cent since 2019 . In response, 7-Eleven announced plans to shift its business model, moving away from its reliance on gas stations and tobacco sales to focus on food products, particularly fresh foods. "We believe that we need to shift our business model from relying on gas stations and tobacco sales to a supermarket model where customers choose us based on other products. The key to this shift is fresh food ," said Ryuichi Isaka , CEO of Seven & I Holdings.

15. 7-11 in JAPAN is known for High-Quality fresh (Rice balls, Ramen, milk tea) foods & now owned by Japanese company Seven & I Holdings. Japan model was a lot data driven (purchase & sale) break it down by gender n age and use all the info for next order decision making. Japan 7-Eleven didn’t sell gas/ Fuels in their stores. Japanese's stores only stocked items that would sell quickly They had proprietary distribution system that made multiple shipments to store everyday . 7-Eleven started as American company but it went bankrupt twice.( 1932, 1990 struggles with debt). US 7-Eleven is typically associated with gas stations, Slurpee's, hot dogs & pizza. Sales 72.5 Billion in sales last year. The revenue comes from tobacco, cigarettes and gas but eventually declining in sales U.S stores typically larger and attached to gas stations. American 7/11 stores were getting two deliveries per week and some items were never being purchased. JAPAN 7-Eleven US 7-Eleven

16. INCREASING COMPETITION : The convenience store market is highly competitive, with numerous players vying for market share. The rise of new competitors or the expansion of existing ones could threaten 7-Eleven’s dominant position. 64% of customers believe that 7-Eleven faces challenges from competitors in the convenience retail industry . This includes competition from other convenience stores, grocery stores, online retail platforms, and other retail formats . CHANGES IN CONSUMER BEHAVIOR : Shifting consumer preferences, such as a move towards online shopping, could reduce foot traffic in physical stores, impacting sales . 32% of customers feel that changing consumer preferences pose challenges for 7-Eleven. This includes shifts in consumer preferences towards healthier options, more sustainable products, or changing demands for convenience and technology. Cont…

17. Cont.. ECONOMIC DOWNTURNS : Economic recessions or downturns can reduce consumer spending, adversely affecting 7-Eleven’s revenue . 32% of customers believe that 7-Eleven faces challenges due to evolving market dynamics. This includes changes in market trends, regulations, economic conditions, or demographic shifts that impact the convenience retail industry. SUPPLY CHAIN DISRUPTIONS : Disruptions in the supply chain due to natural disasters, geopolitical issues, or other factors could lead to stock shortages and impact customer satisfaction. Limited product availability: 46% of customers feel that 7-Eleven faces challenges related to limited product availability. This includes concerns about out-of-stock items, limited variety, or inadequate supply of certain products at 7-Eleven stores.

18. CURRENT GLOBAL STRATEGIES : 7-Eleven International LLC Pillar 1 of Global Strategies Support for existing countries of deployment Maximize the growth potential of licensees by fully leveraging the core competences of SEJ and SEI Strengthen 7-Eleven as a global brand to accelerate the growth of brand power and expansion of profitability Fill in the performance gap between overseas licensees

19. Cont.. 7-Eleven International LLC Pillar 2 of Global Strategies Strategic investments and financing for existing licensees Accelerate profit growth through strategic investments and financing, and involvement in business with licensees

20. Cont.. 7-Eleven International LLC Pillar 3 of Global Strategies Expansion into new areas Accelerate store openings in regions where 7-Eleven is absent Expand store deployment in new markets to increase growth potential and profitability

21. DIGITAL STRATEGIES : Using digital technologies helps improve the efficiency and productivity of store operations. As previously described, Mobile Checkout is useful for reducing work at the store. Digital technologies are used in a wide range of other areas as well, such as the Operation Workbench that supports Tanpin Kanri, AI ordering that Japan has pioneered, management of in-store cooking, and support for inventory management. Based on this foundation of success in the United States, we will introduce 7GT to existing licensees in order to contribute both to excellent customer service and to efficient store operations. Currently, testing is underway at SEH for using 7GT in global support in the same way as the value chain. In the future, we plan to develop 7GT as a tool for strengthening the competitive advantages of the 7-Eleven brand and adopt it as standard for 7-Eleven worldwide.

22. RECOMMENDATIONS: IMPROVE CUSTOMER LOYALTY Seven-Eleven could create a loyalty card system to reward customers with discounts or privileges after a certain number of purchases. This could help attract customers who are near other stores.  IMPROVE FORECASTING Seven-Eleven could improve their forecasting system by identifying available methods and technologies, comparing them, and selecting one to implement.  INCREASE PRODUCT VARIETY Seven-Eleven could increase the variety of products and exclusive items to attract different types of customers.  AUTOMATE INVENTORY PROCESSES Seven-Eleven could automate some functions of their Retail Information System Evolution (RISE) to make running stores more efficient. 

23. Cont.. IMPROVE SUPPLY CHAIN CONTROL Seven-Eleven could improve their supply chain control to free up cash for expansion plans and store upgrades.  USE TRANSPORTATION SEGMENT Seven-Eleven could use transportation to keep inventory close to zero. They could replenish stores at least three times a day to eliminate the need for safety stock.  USE INFORMATION SYSTEM Seven-Eleven could use their information system to better match supply with demand. They could adjust merchandising based on consumption patterns throughout the day. 

24. CONCLUSION: The case study on Seven-Eleven Japan highlights the company's effective use of data analysis to enhance its operational efficiency and competitive advantage. By systematically analyzing sales and stock movements on a company-wide, district, and store basis, Seven-Eleven Japan was able to optimize its ordering process and improve inventory management. This data-driven approach not only enhanced advertising effectiveness but also helped prevent competitors from entering their dominant market areas. The strategic decision to open new stores in clusters further solidified their market presence, as evidenced by the significant increase in new store openings in different regions. Overall, Seven-Eleven Japan's commitment to leveraging data for strategic decision-making has played a crucial role in its sustained growth and dominance in the convenience store sector

25. CASE-STUDY (Q/A)

26. A convenience store chain attempts to be responsive and customer provide what they need, when they need it, where they need it. What are some different ways that convince store supply chain can be responsive? What are risks in each case? STRATEGIES RISKS Local Inventory : Stocking products at each location to meet immediate customer needs.   High holding costs and potential waste if demand fluctuates unexpectedly. Rapid Replenishment : Frequent restocking based on real-time sales data Increased transportation costs and vulnerability to supply disruptions Flexible Supplier Relationships: Collaborating with multiple suppliers for diverse sourcing options Complexity in management and potential quality inconsistencies. Technology Integration : Utilizing data analytics for demand forecasting and inventory management.   Dependence on technology may lead to issues if systems fail or data is inaccurate.

27. 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 Increased Costs : Frequent deliveries and the need for a robust IT infrastructure to support real-time demand tracking can significantly increase operational costs. Inventory Fluctuations : Rapid replenishment relies heavily on accurate demand forecasting. Inaccurate forecasts can lead to either stock outs or excess inventory, both of which negatively impact profitability. Dependence on Technology : The system is highly dependent on technology. Any disruptions to the IT systems or communication networks can severely disrupt the supply chain and lead to significant losses. Environmental Impact : Frequent deliveries can increase fuel consumption and emissions, raising environmental concerns. Vulnerability to Disruptions : The system's reliance on a just-in-time approach can make it vulnerable to disruptions in the supply chain, such as those caused by natural disasters, supplier issues, or labor shortages.

28. 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 ? SUPPLY CHAIN STRATEGY IN JAPAN : Facility Location Market Dominance Stores are clustered in high-traffic areas to optimize distribution and enhance accessibility for customers. Inventory Management Just-in-Time (JIT) Inventory is minimized through frequent deliveries, with fresh goods delivered multiple times daily, allowing for quick response to customer demand. Transportation Combined Delivery System  Products from various suppliers are consolidated into temperature-controlled trucks, ensuring timely and efficient deliveries to stores. Information Infrastructure Real-Time Data Analytics Advanced POS systems collect sales data that informs inventory decisions, enabling local managers to tailor stock based on immediate customer preferences.

29. Seven-eleven does not allow direct store delivery in japan, with all products flowing through its distribution center. What benefit does seven-eleven derive from this policy? When is direct store delivery more appropriate Seven-Eleven Japan: Centralized Distribution Benefits Enhanced Control and Visibility Real-time tracking of inventory and product movement Improved Efficiency and Cost Savings Optimized transportation routes Reduced fuel consumption and delivery costs Standardized Quality and Service   Consistent product handling and delivery Minimized spoilage Reduced Risk of Stock outs and Overstocking Minimized risk of stock outs and overstocking Maximized sales opportunities Reduced waste Direct Store Delivery is More Appropriate Perishable Goods: Faster delivery, reduced spoilage Local Products: Eliminates additional transportation and handling Small or Remote Locations : Cost-effective for limited infrastructure or small store numbers Time-Sensitive Delivery: when lead time is critical.

30. 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? Why? 7 Dream.com concept

31. No of stores in japan=Around 21,000 No of stores in USA= Around 12,000 More convenient in Japan to pick delivery from any store because of no of stores. Transportation cost increase in US as there is different distribution structure and consumer prefer home delivery Store density area ratio is higher in Japan then us thus making it inconvenient for US customer to pickup from the stores.

32. Seven-eleven is attempting to duplicate their successful Japanese supply chain structure in the united states with the introduction of CDCS. What are the pros and cons of this approach? PROS CONS Efficiency: CDCs can streamline deliveries, ensuring timely replenishment of stores with fresh products, thus enhancing customer satisfaction Cultural Differences : The U.S. market may not adapt as smoothly to the Japanese model due to differing consumer behaviors and expectations Control : Centralized management allows for better oversight of inventory quality and demand forecasting, potentially reducing waste. Operational Complexity: Managing CDCs in diverse U.S. regions can be challenging and costly , especially in less densely populated areas Improved inventory management: CDCs can enable better inventory management, as products can be tracked and managed m ore effectively in a centralized location. Limited flexibility : A centralized distribution system may be less flexible than a decentralized system, making it more difficult to respond to changes in demand or supply chain disruption

33. The united states has food service distributors like McLane 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 PROS Freedom regarding distribution control Cost Effective Distributors able to aggregate deliveries across many competing stores Reduction in cost of storing, maintenance and distribution of inventory. CONS Less control over replenishment cycle and quality of items Less margins to the franchisee as well as to the manufacturer Less degree of responsiveness relatively