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Monday, September 30, 2013

No. 35: Secrets of Seven-Eleven’s growth (September 30, 2013)

Management:
Seven-Eleven creates excitements incessantly.
Since the first convenience store was opened in the early 1970s, convenience stores added new services and functions to satisfy social demand. Added services include installing an ATM inside the store and selling movie and concert tickets. As the number of added services increases, convenience stores have become a vital infrastructure in daily life. The Great East Japan Earthquake that occurred on March 11, 2011 made people renewed this recognition.  

The market leader Seven-Eleven worked out a new strategy for further growth. The company focuses on the senior generation and working women. It will open 1,600 stores in 2014 with an investment of 90 billion yen. Seven-Eleven has 15,800 stores in 42 prefectures at present and 37% share in terms of sales in 2012. With the 1,600 new stores, it plans to increase the share to 40% in 2014. To develop the market for the senior generation, it designates each store as the base of door-to-door delivery service. It introduced Toyota’s COMS to increase the efficiency of the door-to-door delivery service. It delivers such daily necessities as detergent and packed lunch to the households of the aged.

Women account for more than 40% of shoppers at Seven-Eleven stores, and Seven-Eleven successfully doubled the share of shoppers older than 60 years old to about 20% in five years. Making the best use of its delivery system, it started to deliver packed lunches to public junior high schools in Kanagawa Prefecture. Seven-Eleven has daily average sales of 668,000 yen per store, while the followers have average daily sales of a little more than 500,000 per store. Surprisingly enough, only 1% of all Seven-Eleven stores have daily sales of less than 400,000 yen, which barely prevents a store from being closed. The strength of Seven-Eleven lies in the ability to create original products unavailable from suppliers. Seven-Eleven places more importance on value than on price and launches high quality products that are little bit higher in price.

Japan has 50,000 convenience stores as of the fall of 2012, and some industrial sources say that the market is saturated. However, it is noteworthy that Seven-Eleven increased sales on a year-on-year basis for 13 months consecutively up to August 2013.

As Seven-Eleven shows, it is not too much to emphasize the importance of segmentalizing your market and focus on the promising markets with investment. The world is changing fast, and every business has to adapt itself to the change. As long as you develop new markets and scrap obsolete markets, the word “saturation” will not irritate you.  

Seven-Eleven regards a store as the base
of the door-to-door delivery service.

Shoppers get excited with Seven-Eleven's coffee.

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