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The Rise of 7-Eleven
There were 16,361 7-Eleven convenience stores around the world by the end of 1996. In terms of store count, this made 7-Eleven the largest multinational convenience chain around the world. With roughly 70,200 convenience stores operating on a franchise basis, Seven-Eleven Japan, a subsidiary of Ito-Yokado, is now the largest and most successful convenience store chain in Japan. The Southland Corporation, the US firm that invented the Seven-Eleven concept, is currently owned by Ito-Yokado and Seven-Eleven Japan. The headquarters are currently in Dallas, Texas. The typical outlet is relatively small, has a limited supply of food, beverages, and other high-turnover items, and is open for lengthy periods of time.
These stores trace their origins to 1927, when numerous icehouse businesses in Dallas joined to become the Southland Ice Company, which mostly offered block ice for preserving food to families without electrical freezers. One such icehouse began selling food products. This led to, Southerland Ice quickly expanded into general shopping, erecting eye-catching Native American totem poles in front of several of its locations and naming itself Tote’m Stores, a clever encouragement to shoppers to “tote” their products away. In 1931, Joe C. Thompson, Sr. was named president of Southland Ice. The firm declared bankruptcy during the Great Depression.
It arose with a renewed focus on food and drink, particularly following the repeal of Prohibition in 1933, when beer and liquor were first sold. The stores were renamed 7-Eleven in 1946 to emphasis its expanded operating hours—from 7:00 a.m. to 11:00 p.m., seven days a week. Southland began to branch out outside Texas in the late 1950s, building 7-Eleven locations on the East Coast. In 1961, Joseph Thompson’s son, John P. Thompson, took over as president and extended the company’s activities in the United States and abroad. Some stores began staying open 24 hours a day in 1963, and the corporation began franchising its stores the following year. In 1973, Southland licensed a Japanese affiliate, and by 1974, the company had 5,000 locations globally. Beyond food, drink, and conveniences, the corporation moved into other industries, buying companies like Chief Auto Parts (1978). Southland purchased CITGO Petroleum as a supplier in 1983 since many of its stores also operated as automotive fueling stations.
In 1986, the business sold half of its investment in CITGO. During the 1980s, when corporate raiders were at their peak, Canadian investor Samuel Belzberg threatened to take over Southland in a hostile takeover. In December 1987, the Thompson family used a leveraged buyout to take the firm private. Many subsidiaries, like Chief Auto Parts, were sold off to pay off the massive debt incurred as a result of the share repurchase. Despite this, in 1990, the firm went bankrupt for the second time, the same year it sold the remaining 50% of CITGO. The next year, Ito-Yokado Co., a Japanese retailer, and Seven-Eleven Japan, the company’s Japanese licensee, bought 70 percent of the company’s equity. In 1999 Southland Corp. renamed itself 7-Eleven, Inc. Continuing to expand, the company opened its 25,000th convenience store in 2003. In November 2005 the company became a wholly owned subsidiary of Seven & i Holdings, a diversified retailer formed only a few months earlier by Ito-Yokado.
The 7-Eleven Business Model
- CUSTOMER SEGMENTS: 7-Eleven has targeted mainly four consumer groups, first is Urban Consumers, comprising consumers located in larger metropolitan areas and cities who enjoy the convenience and efficiency of shopping at 7-Eleven stores; second targeted audience is Busy Professionals, including workers from a broad range of industries who have little time to shop at more traditional supermarket chains or prepare meals for themselves, taking advantage of 7-Eleven’s numerous snack, coffee, and food options; third is, Students and Low-Income Workers, comprising younger consumers and lower-income workers who take advantage of 7-Eleven’s cheaper products; and lastly, Families, including families with young children to whom 7-Eleven’s various branded promotions, and snack and beverage products – such as Big Gulp drinks – are particularly appealing.
- VALUE PROPOSITIONS:7-Eeleven’s core business, provides value to its customers in the following ways:
Convenience – 7-Eleven provides a convenient and efficient shopping experience to its customers, offering hot snacks, beverages, and other products quickly and conveniently, as well as offering other services, such as cash withdrawal, from convenient locations in commercial and residential areas.
Customer Service – 7-Eleven provides its customers with exceptional customer service, its staff aim to provide a friendly, in-person assistance to customers and a pleasant shopping experience.
Accessibility and Reach – 7-Eleven operates an extensive network of retail outlets across 17 countries, with an extensive presence across major cities making the company’s services easy to find and easy to access: and,
Brand Reputation – 7-Eleven has one of the most recognisable and popular brands in the convenience retail industry, and has a proven track record for providing high-quality, innovative services.
Customers are primarily served by 7-Eleven’s chain of 7-Eleven-branded retail shops. The corporation presently has over 66,500 outlets spread across Asia and the Americas. Consumers are served directly in these locations by the company’s large staff of in-store sales and service professionals, who sell items and services to customers. Customers may order things, such as hot snacks and beverages, and have them delivered to their house through the 7NOW delivery service. Customers may now access promotions, incentives, and advantages, as well as a speedier checkout experience, using the 7-Eleven app. The outlets of 7-Eleven are backed up by a huge distribution and logistics network that includes shared distribution facilities and delivery activities. This infrastructure enables the organisation to provide fresh food and beverages to its clients on a regular basis.
- COST STRUCTURE:
7-Eleven incurs costs related to the purchase, storage, and transportation of its items throughout its global network of shops, as well as the payment of salaries and benefits to its large global workforce spread among offices, stores, and distribution centres. Costs are also incurred in the creation and maintenance of the company’s IT and communications infrastructure, the management of its relationships, the procurement of external services and equipment, and the execution of marketing initiatives.
- REVENUE STREAMS:
7-Eleven makes money through selling snacks, drinks, and other convenience items to customers through its network of retail locations. Direct in-store sales, as well as purchases made through its online shop and delivery service, account for the majority of its revenue. A part of 7-Eleven’s earnings comes from franchising fees collected from various corporations and company owners that run 7-Eleven locations as franchisees.
Why Reliance Bought 7-Eleven
After Kishore Biyani’s Future Group ended its association with 7-Eleven, Reliance Retail Ventures, the retail arm of Mukesh Ambani’s conglomerate Reliance Industries (RIL), signed a deal with the Texas-based convenience store chain to open locations across India within a few days.
On October 9, 7-Eleven opened its first shop in India, at Atul Blue Fortuna in Marol, Andheri East, Mumbai. The Big Bazaar had to terminate their partnership with 7-Eleven because they were unable to pay the franchise fees and satisfy the shop opening deadline. As Future Retail is embroiled in a legal battle against US retailer Amazon over its proposed asset sale to Reliance Retail for roughly Rs 24,700 crore.
The reason president and chief executive officer of 7-Eleven Inc, Joe DePinto was kneen on opening the stores in India because, India is the second-largest country in the world and has one of the fastest-growing economies. It’s an ideal time for the largest convenience retailer in the world to make their entry into India. He went on to add that the strategic relationship with Reliance Retail will bring 7-Eleven’s brand of convenient products and services to millions of Indian consumers starting in the city of Mumbai.
The acquisition is considered as the Reliance Group’s latest endeavour to achieve competitive advantage against Amazon.com and Walmart Inc’s Flipkart. The move is part of the powerful tycoon’s wider ambition to seize India’s growing formalized retail space. Reliance is expanding its foothold at a rapid rate, adding 1,500 new stores last year to a total of nearly 13,000, Mr Ambani said at a shareholders’ meeting in June. The shares of Mr Ambani’s flagship Reliance Industries rose as much as 1.6%
7-Eleven’s arrival is particularly timely, since India is experiencing a relative pause in Covid-19 infections following a disastrous outbreak that hit the country only months ago. As India’s vaccination programme gathers traction, daily instances are currently hanging near a seven-month low, and lockdown restrictions have been virtually relaxed across the country. Many international companies have long desired entry to India’s 1.4 billion-strong market, where discretionary spending is on the increase. Given the prevalence of the tiny stores, small-scale mom-and-pop businesses that represent for around three-quarters of India’s retail landscape, they have encountered significant entrance barriers and political opposition.
Many marketers feel that The deal between the two companies is a “good fit” that can harness Reliance’s digital reach and gives Mr Ambani a “last-mile linkage to the consumer, as the landscape is changing with small stores also becoming digitally assisted and that’s going to be the largest growing segment in India, Mr Ambani’s tie-up with 7-Eleven is also another sign of the increasing stranglehold a handful of dominant Indian conglomerates are exerting on India’s retail space, as they increasingly act as a gateway to major foreign investment.
Many global companies, from Facebook Inc. to Starbucks Corp. have gained entry to the country’s massive market in recent years via deals with sprawling Indian players, including Reliance and Tata Group, which have also aggressively acquired home-grown start-ups.
7-Eleven’s Future in India
The arrangement with 7-Eleven would increase Reliance Retail’s position in small-format stores, which account for the majority of the country’s unorganized retail activity. Analysts who follow the retail business said the move is “interesting,” considering Reliance Retail’s tight collaboration with tiny stores outlets. Last year, it introduced JioMart, a hyperlocal retail platform that allows orders to be fulfilled through the retailer’s network of shops and tiny stores.
Abneesh Roy, executive director, institutional equities, Edelweiss Securities. said that, neighborhoods convenience stores in India have been quite challenging with many failures. This step is negative for other retailers like Avenue Super-mart as Reliance Retail becomes all-encompassing.
The convenience store format may need to be tweaked, depending on their location in India, said other analysts.
“Convenience stores only work where you have a high density of these stores,” said Harminder Sahni, founder and managing director, Wazir Advisors. Such stores typically appeal to office goers and those on the move, but the format will need to be altered for residential areas, he said.
7-Eleven’s expansion is expected to significantly contribute to local employment and building the ecosystem for convenient foods in India, the company said.
RRVL, a subsidiary of Reliance Industries Ltd, reported a consolidated turnover of Rs 1.57 lakh crore ($ 21.6 billion) and a net profit of Rs 5,481 crore ($ 750 million) for the year ended March 31, 2021. It has been listed among the fastest-growing retailers in the world in Deloitte’s Global Powers of Retailing 2021 index.
“7-Eleven is among the most iconic global brands in the convenience retail landscape. The new pathways we build together with SEI will offer Indian customers greater convenience and choices within their neighborhoods,” Isha Ambani, director, Reliance Retail Ventures, said in a statement.
Adding to it, Reliance Retail Ventures has rapidly increased its footprint in the country, opening over 1500 outlets last year. The most recent discovery comes at a time when Covid-19 infections are at an all-time low and the economy is gradually returning to normality.
This collaboration might help Reliance develop a pan-India presence in competition with largely regional rivals. It would also provide a platform for them to market OTC medications and an outlet for their numerous enterprises. However, 7-Eleven locations may face competition from online delivery services such as Swiggy, Grofers, Dunzo, and others.