This book was written by the founder of 7-Eleven, Mr. Toshifumi Suzuki. He has compiled over 40 years of experience leading 7-Eleven, which now has a presence of over 70,000 stores around the world. The book's title is "The Retail Strategy of 7-Eleven."
7-Eleven was the first mart to operate 24 hours a day, 7 days a week, for a full year. It was the first to have an ATM inside and also the first to use an excellent product management system. All of these innovations have completely changed the face of the retail industry. What is the reason that 7-Eleven has endless high innovation and can move forward faster than other marts?
When people talk about 7-Eleven, most think it's a Japanese company. In fact, this mart was established in 1927 under The Southland Corporation of the United States. In the late 1970s, Mr. Suzuki traveled to the U.S. and encountered this mart for the first time. He saw that this mart, although a bit small, had everything, from daily necessities to snacks. Later, he used every means possible to acquire the exclusive rights to operate in Japan.
After 7-Eleven experienced rapid growth in Japan, by 1999, 7-Eleven Japan bought its parent company, The Southland Corporation, and changed its name to 7-Eleven, Inc. To this day, 7-Eleven is the largest convenience store chain in the world. As of 2020, it had over 70,000 branches. Its annual revenue exceeds 60 billion dollars, ranking it number one in the global retail sector. It has the most branches and the most products, with a net profit of up to 20.8% of product value. In comparison, the average net profit for other companies in the retail sector is only about 3% of product value.
How did 7-Eleven achieve such tremendous success? Who is behind this operation? He is the author of this book and the founder of 7-Eleven Japan, Mr. Toshifumi Suzuki. Under his leadership, Seven & i, the parent company of 7-Eleven, became the largest retail company in Japan. The annual sales of this company are equivalent to the GDP of the entire city of Tokyo. In this book, Mr. Suzuki has compiled over 40 years of his experience in operations and marketing strategies from his time in charge of 7-Eleven.
I will explain two important key points. First, how did 7-Eleven achieve production efficiency and product quality? Second, how does 7-Eleven connect with its customers? And what definition do they give to the word "convenience"? In other words, for this type of store, how does 7-Eleven define convenience?
Let's look at the first point. How does 7-Eleven increase production efficiency and product quality? How does it make it easy for customers to buy products? To understand this, we need to go back to the context of Japanese life 50 years ago. In the 1970s, Japan experienced rapid growth. People had more wealth and enjoyed buying goods, which led to a gradual increase in sales for large-scale modern markets. As long as there were goods on the shelves, they would be bought out completely. But this only applied to modern markets; small shops on the street struggled to sell their goods.
At the time, Suzuki was the chairman of the board of a leading private retail company in Japan, which controlled many large modern markets. In this environment, he saw small shops closing down one by one. He told the owners of these small shops, "No one will come to buy from a shop like this. If you want to survive, you must cooperate in business together." When large modern markets were thriving, did small shops have any hope? Suzuki took this question to the United States and discovered 7-Eleven. He loved this type of store. It was small but had everything, from daily necessities to fresh snacks.
Therefore, he spent over two years to successfully acquire the rights to bring 7-Eleven to Japan in 1999. This action, if analyzed carefully, was very risky, as it went completely against the trend. Everyone was moving towards large-scale modern markets, but he was bringing small shops into the Japanese market. When Suzuki presented this proposal to the board, no one supported his idea. But Suzuki understood that the failure of small shops was not due to their size but their lack of efficiency. At that time in Japan, all small shops would close on weekends. While this seemed to guarantee work efficiency, it actually caused them to lose many customers. People also need to buy things on weekends, and often the demand is even higher than usual.
So, when 7-Eleven began operating, it was open 24 hours a day, 7 days a week, all year round. This made it extremely convenient for customers, allowing them to buy what they needed at any time. Some customers even nicknamed 7-Eleven the "night mart." By now, being open 24 hours a day is no longer a new concept. But in Japan in 1975, it was truly revolutionary for the retail industry.
Ensuring 24/7 operation for a full year wasn't something 7-Eleven could do alone. It required favorable conditions and full support from suppliers and the delivery chain. Especially during holidays, when most factories and companies would close, 7-Eleven had to negotiate with its suppliers extensively to ensure efficiency and sales. It took over two years before a bakery agreed to supply products 24 hours a day, all year long. Later, rice suppliers and other factories agreed to do the same, ensuring that the entire supply chain was highly efficient and stable in the long term.
Furthermore, Suzuki understood that the reason small shops were closing was price competition. We know that good things can't be cheap, and cheap things are often not good. For 7-Eleven to establish itself in the market, it had to provide customers with high-quality products. So, to achieve high efficiency and find high-quality products, what did 7-Eleven do? I have summarized the key points from the book into three main ideas. Let's listen.
Point 1: Break the old formula. Choose a location and open many branches clustered in that area. You've surely seen some franchise stores that open their branches far apart, spread across the country, with one in each province. But 7-Eleven does the opposite. They choose an area with potential and open stores densely packed together, with a 7-Eleven almost every 500 meters. You might think that opening stores so close would just create competition among themselves, right? And how could they ever cover the whole country this way? Mr. Suzuki saw it differently. He believed that this was the only way to conquer the market quickly.
Opening stores this way has three big advantages. First, it makes customers quickly recognize the brand. Wherever they go, they see the 7-Eleven logo, making it famous in that area. Moreover, stores that are close together make delivery and supply of goods very convenient. When a store has a promotion, it creates a buzz in the area, simplifies transportation, and saves on labor costs. Nearby stores also benefit from this. Not only that, the choice of location must also consider the distance from the factory to the store for production and delivery. The stores should not be too far from the factory; delivery should not take more than 3 hours, otherwise, food and consumer products will lose their freshness. This is the first unique point of 7-Eleven: opening stores clustered together like a beehive.
The second unique point is combined delivery to increase supply efficiency. Large modern markets import goods in huge quantities. If they don't sell out, they don't worry because someone will eventually buy them. Also, the supplier is usually responsible for delivering goods to their warehouse. For a small store like 7-Eleven, having over 70 delivery trucks a day parking in front of the store was a problem. Imagine if each truck took 3 minutes to unload; 7-Eleven would spend a huge amount of time just receiving goods. This kind of delivery is inefficient.
7-Eleven revolutionized its delivery and supply chain. Take milk, for example. There are many different brands from different factories, each with its own delivery. Suzuki had the factories in nearby areas combine their deliveries into a single truck, since it was all milk. At first, the factories refused and were even angry. Why? They didn't want to deliver their competitors' products. They still thought like they did when supplying to modern markets—that whatever they had would sell out. So, when they delivered, they would push their competitors' products to the back and put their own in the front.
To solve this, Suzuki arranged the products in his stores on shelves in rows, by brand and product type. Customers could easily see all the choices at a glance. As a result, sales of all brands increased. The factories then agreed to the combined delivery because, "I deliver, you deliver, we all sell out." This increased efficiency in delivery and supply. The number of delivery trucks per day dropped from 70 to just 9.
Furthermore, Suzuki implemented a system of managing goods by temperature. Different products require different storage temperatures. He divided products into four temperature categories: frozen (like ice cream), chilled (like canned goods), warm (like rice), and so on. Storing by temperature is not only easier to manage but also extends the products' shelf life. This kind of grouped delivery is also more convenient. This method is still in use today.
Now for the third unique point: researching new products and ensuring the best product quality. By choosing store locations that are close together and increasing delivery efficiency, what truly sets 7-Eleven apart is its high-quality products. Suzuki always told his staff, "Quality is our life. If our store doesn't have quality products, customers will not come back a second time." A mart is a place people visit frequently. If you buy an expired or poor-quality product at a 7-Eleven, you won't return and will likely tell others not to go either. For 7-Eleven, poor quality can threaten the very existence of the company.
To maintain product quality, 7-Eleven and its suppliers created an association called NDF, a group of suppliers who supply goods exclusively to 7-Eleven. Usually, factories supply to many different stores. For example, a bakery might produce various types of bread with different fillings. When a single factory supplies to stores with different demands, the quality of the bread can suffer because the same machine is used for different fillings, leading to cross-contamination that affects the final product's quality.
However, 7-Eleven's suppliers in the NDF association produce goods exclusively for 7-Eleven, which allows for excellent quality control. You might think that if these factories only supply to 7-Eleven, they would lose money. What about other stores and market segments? As long as the product is good, the vast number of 7-Eleven stores will ensure it sells out, especially since these are daily-use products. As a result, these factories strive to improve their product quality to be sold in 7-Eleven stores.
Besides creating this special association, 7-Eleven is very meticulous about researching new products and is extremely strict in deciding whether a product can be sold in its stores. At meetings to approve new products, everyone from low-level managers to board members must taste the product themselves. Once, Suzuki tasted a type of sushi and found the rice was too sticky, not up to standard. He had it removed from stores immediately. It took the supplier a year and eight months to reformulate and reproduce it before it was allowed back on the shelves. To maintain such impeccable quality, 7-Eleven is constantly researching and developing new products.
The first step was producing ready-to-eat meals with an original, authentic taste, nicknamed "My Home's Taste." Even though 7-Eleven sells pre-packaged food, its taste is no different from home-cooked meals. For example, the red bean paste rice cake, a favorite in Japan, traditionally has to be steamed for hours in a bamboo basket. Because factories produce in large quantities, they used large-scale steamers instead of bamboo. Suzuki tasted it and knew immediately it wasn't steamed in a bamboo basket. He demanded the factory reproduce it using bamboo baskets to achieve the original taste. He had them meticulously select and wash the rice to maintain the product's quality and authentic flavor. In the end, this ready-to-eat red bean paste rice cake became a best-seller at 7-Eleven.
In addition to this, you can find many other carefully selected meals and soups at 7-Eleven, all given the utmost attention by management. This is a special aspect of 7-Eleven that other marts find hard to replicate.
In summary, Suzuki spent a lot of time choosing locations, reducing the supply of low-quality products, reorganizing the delivery system, and managing product quality exceptionally well. He did all this to maintain convenience. What does "convenience" mean to him? He believes that convenience is not defined by him, but by the customers. When we understand the customers' needs, they will find it convenient. So, how can we get close to the customers and make them feel this convenience? This brings us to the second point.
The founder understood that in retail, the main competitor is not other retailers but the failure to meet customer needs. When the economy is struggling, many people think it's because consumer purchasing power has decreased or there's too much competition. But Mr. Suzuki sees that as just an excuse. The only reason a business fails is that it did not meet the needs of its customers.
So, how can one keep up with the rapidly changing needs of customers in this modern era? He added that when facing uncertainty, one shouldn't panic, but one shouldn't wait either. You must be proactive and strike first. Gather extensive data and information, maintain a broad network, and seize opportunities. Listen to the radio while driving, watch TV at home to stay informed about what's happening. The more information you have, the better your decisions will be. Be curious and research to gain deep understanding. Information may go in one ear and out the other, but what is useful will be retained.
Furthermore, during meetings, he always asks participants questions like: "What product should we sell this season? Why should we produce this type of product? What is special about this product?" He collects all this information to stay ahead of market changes. For instance, a survey revealed that small families are not pleased with promotions that increase product quantity for the same price. For them, it's a burden because they don't want leftover food. Therefore, a larger quantity is not an attractive offer. The new generation values product quality highly. So, a strategy of maintaining the same quantity but improving the quality is exceptionally effective for 7-Eleven.
As an example, during an economic downturn in Japan, many 7-Eleven managers thought they should lower prices to attract customers. They reduced the price of the red bean paste rice cake to 100 yen, but surprisingly, no one bought it. Suzuki saw this and correctly identified the customers' real needs. He had them produce a more expensive version, selling for 200 yen, but with improved quality and a special taste. He believed that even in a bad economy, people still want to eat well. The result? It sold out completely.
To capture customer needs, 7-Eleven implemented a system of managing products by specific types, also known as managing stock by item (SKU). For example, milk is categorized in great detail: Good Day brand, strawberry flavor, 150ml size, is kept separately from other brands and sizes. This precise division prevents overstocking and simplifies inventory counting. To avoid issues like stockouts, they follow a three-step principle: Hypothesis, Execution, and Verification.
First, Hypothesis: They conduct surveys on everything from weather and temperature to the local atmosphere to forecast customer demand. They study purchasing behavior to predict needs. For example, in Japan, people prefer sandwiches and rice balls for breakfast, and noodles or salads for lunch. Therefore, they prepare these items in just the right quantity. If the weather forecast predicts a cold day, they know soup will sell well. If it's about to rain, umbrellas will be displayed at the checkout.
Second, Execution: After making their hypothesis, they prepare the products they believe will be in demand for different times of the day.
Third, Verification: They check if the actual sales match their forecast. Based on sales data for items like sandwiches and noodles throughout the day, they adjust their data accordingly. For instance, if salads aren't selling as well as predicted, they reduce the order. They also investigate the reason—is it due to cold weather or a local event? The store manager must be able to read this data and make independent decisions.
From 1978 until this book was written, 7-Eleven updated its information storage system over six times. This continuous updating and data collection allows 7-Eleven to make accurate forecasts, combined with its famous "Tanpin Kanri" (item-by-item management) system. This method is similar to the SKU system used in e-commerce and large modern markets.
At this point, we've covered the strategies for product and inventory management. Suzuki knew that for 7-Eleven to succeed, it wasn't enough for him to be the only one who understood these principles. Each store had to be able to implement them. Therefore, he focused on direct communication, sending information straight to his subordinates without going through multiple layers of management. He believed that front-line staff play the most crucial role because they are the first to interact with customers.
7-Eleven doesn't have a top-down information culture like other companies. Suzuki collected data and sent it directly to the staff. When communicating, he would get immediate feedback on their understanding and any difficulties they faced, allowing for continuous improvement. This effective communication ensures everyone understands the importance of anticipating customer needs. Day by day, they follow the cycle of Hypothesis, Execution, and Verification, providing customers with true convenience. This is the secret behind the world's best-selling mart.
But ensuring high-quality products and providing convenience is only part of the story. What makes 7-Eleven truly successful and special is that it offers something other marts don't. It's not just a place to buy goods; it also provides essential social services. If you travel to Japan, you can withdraw money at a 7-Eleven. It's incredibly convenient. Wherever there's a 7-Eleven, there's an ATM. While ATMs are common now, in the 1990s, they were hard to find. No other mart had ever done this.
Suzuki's research showed that customers needed to withdraw money and hoped for an ATM where they shopped. He believed that wherever there is customer demand, it's worth a try. In 2001, 7-Eleven obtained a banking license and installed ATMs in its stores. What's more, even if the ATM fees aren't high, while customers are in line, they often grab items from the shelves. In retail, the more time a customer spends in the store, the more opportunities for sales.
7-Eleven also offers home delivery. The delivery people are not from a separate company; they are the 7-Eleven store staff themselves. This is because 7-Eleven understood that customers value convenience, safety, and a sense of warmth. Having a familiar face from the local store deliver goods to their home creates a close, friendly bond. This goes beyond mere convenience; it strengthens the relationship between the buyer and the seller. When delivering, the staff often ask about other needs, like, "Are you out of gas or rice?" and inquire about the family to anticipate future needs.
Moreover, 7-Eleven was the first mart to offer bill payment services for water, electricity, and gas, and it even sells some medicines. No other mart in the world provides such comprehensive and convenient social services. It's a place where you can not only buy goods but also withdraw money, pay bills, buy medicine, and get home delivery. This has made 7-Eleven an indispensable part of people's daily lives.
In summary, Suzuki, the founder of 7-Eleven, stated that the most formidable competitor in retail is not other sellers but the changing needs of customers. Through effective communication, he directly conveyed his vision to front-line staff for implementation, thereby providing customers with true convenience. 7-Eleven uses an item-by-item management system to stay on top of customer needs in real-time, offering tailored products and services.
We have now covered the key points from the book "The Retail Strategy of 7-Eleven." I will briefly summarize how 7-Eleven's operations, strategies, and customer focus led to its immense success, even allowing it to buy its own parent company.
Part 1: Increasing production efficiency and providing high-quality products. This was the key difference between the struggling street-side stalls in Japan and the modern 7-Eleven. They chose potential locations and opened stores in dense clusters, used combined delivery, managed products by temperature, and reformed their supply model to align with customer demand. They also created a dedicated research team to study needs and develop new products continuously.
Part 2: Understanding the real needs of customers and providing them with convenience. They created additional services that catered to daily needs. These two points make 7-Eleven a daily necessity. The founder, Suzuki, used an item-by-item management strategy and the principles of Hypothesis, Execution, and Verification. Each store implemented this cycle daily, leading to constant improvement.
7-Eleven transformed a simple store into a hub deeply connected to daily life. In Japan, data shows that only 20% of people who enter a 7-Eleven initially intend to buy something. Most come for the additional services. But once they are inside, it becomes a sales opportunity.
Looking back, 7-Eleven's decisions were always ahead of their time. When they went against prevailing social trends, they always succeeded. As society evolves, customer needs change. A mart like 7-Eleven must have unique characteristics to meet those needs at all times to win customer loyalty and thrive for decades to come. We are confident this company will continue to excel.
Regarding the news that this world-class mart will enter Thailand, it is both good news and bad news. It's good news for consumers, but bad news for us because we don't yet have a local mart brand that is strong and prominent. If a foreign company of this caliber enters, the opportunities for local management and competition will diminish. I hope we have all learned a lot from this company's business model and can apply these lessons to our own businesses.