Key Developments: New products; continued growth of same-store profits.
What's Next: Tech development; 100 to 150 new U.S. stores.
With 27,900 stores worldwide, 7-Eleven, Dallas, has found its 28 million daily customers' tastes vary by region. Detroit customers purchase the most Slurpees; Long Island, N.Y., patrons consume the most coffee; Colorado customers prefer nachos; and Washington, D.C., shoppers are partial to hot dogs.
Replenishment needs as varied as this required a new approach. Thus, over the past few years, the convenience retailer has bucked its tradition of manufacturer-controlled ordering and put inventory decisions in the hands of its individual stores.
"The approach that we have is 'managed entrepreneurialism,"' explained Jim Keyes, president and chief executive officer, 7-Eleven. "There are certain proprietary products that we encourage all stores to stock, but based on local preferences stores have the discretionary capability to select certain products."
The strategy -- called "Retailer Initiative" -- is facilitated through use of 7-Eleven's proprietary decision-making technology.
"We put a tremendous amount of information in an easy-to-use tool for store operators," Keyes said. "It allows them to see exactly what they're selling while accounting for outside factors like if there is a parade in town, and an access ramp will be closed."
About 40% of 7-Eleven stores have at least begun adoption of this store-centric model, which was developed in the mid-'90s with Keyes' help. The 50-year-old CEO, who joined the company in 1985 and became its top executive in 2000, acknowledged that resistance to change has slowed its progress.
"Taking control back from suppliers is not something we can control store by store and market by market," he explained. "We've experienced supplier reactions ranging from outright hostility to warm embrace."
Still, the program is counted by Keyes as one of the direct contributors to 7-Eleven's impressive 34 consecutive quarters of improved same-store profits.
"We've maintained a steady 5% improvement every quarter," Keyes said. "Our primary goal is to continue this trajectory." During 2004, 7-Eleven's worldwide stores generated sales of approximately $41 billion.
Product innovations have helped boost those numbers. The most recent addition, called Stir Crazy, is the first shelf-stable ice cream that stays soft in the freezer case. 7-Eleven is also focusing on healthier grab-and-go options. In March, it rolled out a new line of wraps under its "Big Eats" label and plans to introduce more of the same in the coming year. "You'll see a new convenience store emerge where fresh foods take on a different character," Keyes said.
The convenience retailer's spirit of innovation has been carried through to its customer-facing technology offerings, such as its "Vcom" kiosks and "contact-less" payment options. The kiosks, installed in 1,050 stores, allow customers to cash paychecks, purchase money orders and send wire transfers. "The kiosk is challenging since we're a bit ahead of our time," observed Keyes, citing the difficulty of educating customers on the kiosk's applications.
7-Eleven has developed "contact-less" payment-acceptance programs with all of the major credit-card providers. Contact-less payment, powered by radio frequency technology, enables customers to pay by simply holding their credit-card key fob next to a special reader at the checkout.
In the coming year, 7-Eleven plans to increase its U.S. store count by 100 to 150, as well as internationally. Currently, 3,200 of the company's 5,300 U.S. stores are operated by franchisees, and an additional 485 are operated by licensees. 7-Eleven returned to New York City earlier this month with a new store in Manhattan.
