Case study-1

Seven-Eleven Japan Co.

by Sunil Chopra
GROUP-6
1. SUDARSHAN SINGODIA
2. SUDHANSHU SINGODIA
3. SUDHANSHU MADHAV
4. URVASHI MISHRA
 COMPANY OVERVIEW

1979, Seven-Eleven
Founded by Mr. 1960 (sole control) 1974 1st seven-
1979, First listed in Japan had 591 stores
single store had Eleven convenience
Masatoshi Ito, Post grown into a store opened in
Tokyo stock & Experienced rapid
world war ll. exchange. tremendous growth
$3million company. Tokyo.
of 10,356 stores.
1985-2003 annual sale increased from 386
billion to 2343 billion yen, net income
increased from 9 billion to 91.5 billin yen,
• 2000-2004 company return of equity averaged
around 14 %.
• 2002 the number of convenience stores reached
42000.
• 2004 the standard size of new stores changed from
125 to 150 sq. mt.
• Seven-Eleven Japan contributed 87.6 percent of
the total income received from convenience stores
by Ito Yokado.
 7-ELEVEN JAPAN’S COMPETITIVE STRATEGIES

• To provide high availability of a variety of quality products at a reasonable prices.

• To have cluster of stores (50-60) in the small geographical area supported by a distribution
Centre.
• Commitment to customers and friendly service. Greater familiarity with customers
• Outsourcing policy and ability to manage suppliers relationships.
• Customer checkout process. The clerk records the customer's gender,(estimated) age and
purchased items. These Point of Sales (POS) data are transmitted to the database at the
headquarters.
• Headquarters aggregates the data by region, products and time and passes it to suppliers and stores
the next morning. Store managers deduce trend information.
• Preventing entry of competitors.
• Combination of both company owned and 3rd party Franchisee Stores, gross profits shares ratio
(45% : 55%).
Area/Market Dominance Strategy and its advantages were :

• High Distribution Efficiency

• Brand Awareness

• System efficiency

• Franchisee Support Services

• Advertising effectiveness

• Entry barrier for competitors

 STORE INFORMATION AND CONTENTS STORE

• size = 150m^2, 3000 items.

• Average inventory at the store of 3000 Stock Keeping Units (SKU), with a max capacity of 5000
SKUs.

PRODUCTS INCLUDED:
FOOD ITEMS MAGAZINES SEASONAL ITEMS
BEVERAGES GAME,SOFTWARES SOAPS,DETERGENTS,ETC.
 STORE SERVICES
 Seven-Eleven Japan gradually added a variety of services that customers could obtain at its stores:

• The first service added: in-store payment of Tokyo Electric Power bills (October 1987).
• Company later expanded the set of utilities for which customers could pay their bills in the stores to include gas, insurance
premiums, and telephone with more convenient operating hours and locations than banks or other financial institutions.

• Began to accept installment payments on behalf of credit companies (April 1994).

• Started selling ski lift pass vouchers (November 1994)

• Began to accept payment for mail-order purchases (In 1995).

• Accepted payment for Internet shopping (November 1999)

• Meal delivery service company (Seven-Meal Service Co.,Ltd.)to serve the aging Japanese population (August 2000)
• In 2001, IYBank Co. was established through a joint investment with Ito Yokado.

• By April 2004, ATMs Installed was about 75 percent of the total store network in Japan.
• Other services: Photocopying, Ticket sales using multifunctional copiers, and being a pickup location for
parcel delivery companies.

• In February 2000, 7dream.com (an e-commerce company) was established.

• Stores served as drop-off and collection points for Japanese customers as the stores were easily
accessible to most Japanese, and the major thrust for offering these services was to make Seven-Eleven
stores in Japan more convenient places to shop.
• A survey by eSBook discovered that 92 percent of its customers preferred to pick up their online
purchases at the local convenience store, rather than have them delivered to their homes, which was a joint
venture between Softbank, Seven-Eleven Japan, Yahoo!Japan, and Tohan, a publisher.
 SEVEN-ELEVEN JAPAN’S INTEGRATED
STORE INFORMATION SYSTEM
• Seven-Eleven Japan used advanced information technology.
• Company attributed a significant part of its success to the Total Information System installed in every outlet and linked to headquarters, suppliers,
and the Seven-Eleven distribution centers.
• The first online network linking the head office, stores, and vendors was established in 1979,
• In 1982,It was the first company in Japan to introduce a POS system: POS cash registers and terminal control equipment.
• In 1985, the company jointly with NEC, developed personal computers using color graphics that were installed at each store and linked to the
POS cash registers.
• In July 1991, an integrated services digital network (ISDN) was installed. Linking more than 5,000 stores, it became one of the world’s largest ISDN
systems. Seven-Eleven Japan spent 2.4 billion yen setting up this network.
• ISDN enabled Seven-Eleven Japan to collect, process, and feed back POS data quickly. Sales data gathered in each store by 11:00 p.m. was
processed and ready for analysis the next morning.
• The hardware system at a 1994 Seven-Eleven store included:

a. Graphic order terminals: it was a handheld device with a wide-screen graphic display, used by the store owner/manager to place orders and this
information when placing was directly entered into the terminal that were linked to the store computer and the orders were relayed by the store
computer to both the appropriate vendor and the Seven-Eleven distribution center.

 
b. Scanner Terminal: These scanners read bar codes and recorded inventory. They were used to receive product coming
in from a distribution center.
This was then automatically checked against a previously placed order and the two were reconciled. Before the
scanner terminals were introduced, truck drivers waited in the store until the delivery was checked.
c. Store Computer: This linked to the ISDN network, the POS register, the graphic order terminal, and the
scanner terminal. It communicated between the various input sources, tracked store inventory and sales, placed
orders, provided detailed analysis of POS data, and maintained and regulated store equipment.
d. POS Register.
• In 1997, Seven-Eleven Japan introduced its fifth generation of the Total Information System, which was still in use in
2004.
• The information system allowed Seven-Eleven stores to better match supply with demand. Store staff could adjust the
merchandising mix on the shelves according to consumption patterns throughout the day.
• More than 50 percent of the items sold at a Seven-Eleven store changed in the course of a year. Part of this related to
seasonal demand and part to new products. When a new product was introduced, the decision whether to continue
stocking it was made within the first three weeks. Each item on the shelf contributed to sales and margin.
 7-ELEVEN’S DISTRIBUTION SYSTEM

 Firmly backed by end to end information system

 Cross docking of products at DCs into temperature controlled
trucks
 No inventory held at DCs
 At DC, delivery of like product were stacked in one temperature
controlled vehicle and delivered to multiple stores
 Reduce no. of vehicles
 2004: 290 plants, 293 DCs,> 10000stores
 1970 each store visited by 70 truck/day, 1994 reduced to 11
 Supply Chain Management
Store managers place Flow of The Started production to fill
information to
orders using graphic suppliers order and sent the order to Mode of
order terminal DCs by truck transport

Outcomes
Distribution Matches supply with demand
centers Rapid replenishment
Increases delivery efficiency
Each store order was Increases system efficiency
separated & loaded
into

Temperature Temperature Temperature Temperature

controlled truck controlled truck controlled truck controlled truck
(frozen foods) (chilled foods) (Processed food) (Warm foods)

Deliveries were received using the scanner terminals

Delivered to mulitiple
Retail Stores
(50-60 in a cluster)
 7-ELEVEN IN THE UNITED STATES

 In US, Distribution was through direct store delivery(DSD),

wholesalers and CDC’s.
 CDC followed Japanese approach of delivering perishables one a
day.
 Fresh-food sales in North America exceeded $450 million in 2003
 In 2003, revenue in the United States and Canada totalled $10.9
billion
 Compared to Japan, greater quantity of hot food(Pizza, wings)was
prepared in store
 Inventory turnover of 17 compared to that 50 in Japan
Temperature Controlled Combined
Distribution System