CASE STUDY: 7- Eleven: Strategies for Success
NEW YORK -- Jim Keyes, president and CEO of 7-Eleven Inc., spoke at Merrill Lynch's Retailing Leaders: Household Products and Cosmetics Conference in New York on Wednesday, highlighting the company's successful transformation of its business model. "We are transforming dramatically what was a good business into what we believe can be a great business with growth opportunities, now that we've fixed the business model to be able to continue improving our traditional business while adding new segments like fresh foods or services," Keyes said.
According to Keyes, proof of success is evident in the company's operating statistics, namely that it is in its 34th quarter of improved same-store sales. The key to 7-Eleven's successful model, Keyes explained, has been to enact a centralized business strategy to leverage the company's buying power. "We decided to concentrate all of our stores in geographic areas that allow us to support our stores with a much more effective daily distribution system -- a nationwide network of commissaries, bakeries, fresh food, facilities in each market," Keyes said. "So it's a hub-and-spoke system that is dramatically different."
Another successful strategy for the company has been its 12-week training programs designed to put more decision-making tools in the hands of store operators, according to Keyes. "It's a centralized entrepreneurialism that we're trying to foster as individual stores make individual product decisions," Keyes said. "We have technology to have every item, every day, measured and tracked in eachstore. Yet our challenge remains the people?giving our folks the training and tools necessary to make better buying decisions."
In addition to its focus on same store-sales, Keyes said an equally important aspect of the business model is the company's ability to be "proactive" by implementing new products and partnering with manufacturers to extend product life cycles. 7-Eleven works with manufacturers to test deploy and improve products. The company's recent initiatives, Keyes said, include its new focus on its fresh foods category and electronic services, such as prepaid phone cards and the ability to sell money orders online. Another significant endeavor is a partnership with Anheuser-Busch Inc. to develop an aluminum bottle that will eventually be rolled out nationally.
"We represent distribution opportunities for products, but we also represent a distribution opportunity for electronic services now that we have a network and a telecommunications pipeline to every store," Keyes said. Keyes said that the proof of the company's success is evident in its steady same-store sales increases of 3 to 5 percent, and last year's same-store sales increase of 5.3 percent. "We have a much more stable balance sheet, a continually improving cash flow and earning model," Keyes said. "We have very strong confidence that our strategy is working and that we will continue to be able to deliver continued improvement in same-store sales and overall financial performance."
There is probably a 7-Eleven store in your neighborhood, and it’s a convenient place for picking up a can of Coke or a quick ham-and-cheese sandwich. It’s the largest convenience retailer in the world and the number one convenience store chain in the United States, with 5,300 stores. This company started out about 75 years ago as a nice-dock operator. When refrigerators started replacing ice boxes, the manager of each store asked customers one-by-one what items they’d like to stock in their new appliances. By asking customers directly and stocking only the items customers most wanted, the company grew and prospered. Over time, the company moved away from its roots, losing touch with customers along the way. It had no means of knowing what sold in each store and allowed vendors to decide what to stock on its shelves. Although large vendors, such as Coca-Cola and...
References: • http://www.allbusiness.com/retail-trade/food-stores/4484810-1.html
• Porter, M.E,”Strategy and the internet,” Harvard Business Review, March 2001.
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