NEW YORK – Despite a dramatic downturn in the economy, plans are in place to expand the number of 7-Eleven stores throughout the North American market with an eye to utilizing some successful formulas that have worked in Japan.
Chief among them is the concept of increasing store density in profitable areas by enticing customers with new products, including offering more variations of fresh-food options — and doing so more effectively.
The world’s largest operator, franchisor and licensor of convenience stores, with about 35,000 worldwide, privately held 7-Eleven Inc. became a wholly owned subsidiary of Seven-Eleven Japan Co. in Tokyo in November 2005.
“We’ve known that fresh food is an opportunity, but what we really learned from Japan is how to operationalize that and make it efficient,” Darren Rebelez, the U.S. subsidiary’s chief operating officer and senior vice president, said at a recent launch of a green commissary and combined distribution center.
The new center, a 12,077-sq.-meter facility, is located on Long Island and supplies products to 674 7-Eleven stores in New York, New Jersey and Pennsylvania each day.
The items, ranging from a mixed array of sandwiches, including those made with local Italian deli meats, salad selections and a new line of wraps to other fresh foods, are made, prepared, packaged and shipped daily out of the facility operated by Norris Food Services while making use of energy-saving techniques to cut down on costs.
“Operations like this are something that they have throughout Japan because of the much higher store density,” Rebelez said, explaining how Japan, which is roughly the size of California, has almost twice as many stores as the United States, Canada and Mexico combined.
Japan, he said, has built up its market concentration and has streamlined its logistics infrastructure to the extent that it has refined a “type of synergy over a number of years, and we are taking advantage of that.”
As Japanese live in smaller spaces, there is a greater tendency to eat out more often, he explained. This translates into a greater demand by customers for fresher and more innovative entree selections that stores must cater to.
“Conceptually, we can take those same concepts that they use there and apply them here in our market concentration strategy,” he added.
Pointing to the new operation at the Long Island center, he noted that colocating a commissary with a distribution center in the midst of a heavily populated area means the distribution and production system is as “efficient as it can be.”
Seven-Eleven Japan, which opened its first store in Koto Ward, Tokyo, in 1974, leads the world in the number of stores, with more than 12,000 outlets. In North America, there are some 7,700 stores, but executives see the promise of new business opportunities.
Masaaki Asakura, 7-Eleven Inc.’s executive vice president in charge of international operations, said there is potential potential for growth in the North American market that no longer exists to the same degree in Japan.
As well as the New York area, other profitable regions with higher populations and greater disposable incomes include large metropolitan centers such as Los Angeles, as well as areas in Florida and Virginia.
“The time has come for the U.S. market,” he added. “That is why opportunity here is greater than in Japan because they are saturated in Japan — yes they can grow, but not at the speed they used to have,” he said.
He likened the Japanese market to a “dry towel,” from which no more water can be wrung out. The North American market, on the other hand, he described as a “wet towel that hadn’t even been squeezed.”
With that concept in mind, he explained a short-term plan to add 150 to 200 new stores in North America over the next three to four years, with even greater expansion envisioned in the long term. Some 20 stores are to be opened in the New York area alone this year.
In the U.S. and elsewhere, there is also a focus on a “Japanese way” of approaching existing businesses to convert them to 7-Elevens rather than purchasing properties and trying to find franchisees.
Asakura explained the particular interest in targeting the plentiful family-run gasoline stations in North America, as well as approaching other existing small businesses.
Asakura explained how that strategy paid off in the rapid buildup of stores in Japan and hoped to emulate that.
On top of the expansion plan, Asakura is also focused on increasing the amount of fresh food sold at stores.
Currently such selections comprise 10 percent of sales nationwide, but he aims to double that number. “It’s a dream of mine,” said Asakura, who started his career with Seven-Eleven Japan in 1976 and has been working in Dallas for the past 18 years.
Having also weathered hard times when Japan’s bubble economy burst in the early 1990s, Asakura said he could see signs of coming economic woes about three years ago.
Proactive changes were made. The company bought out minority shareholders in an effort to privatize so that longer-term investments, rather than short-term results, could be focused upon.
“It is not wise for us to scale back and just stay in the hole until the perfect storm just goes away,” he said. “It is not going to work that way.”
Even as other businesses are downsizing, his company is focusing on increasing its store volumes, particularly in highly concentrated areas, while also developing new products with an increased efficiency.
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