7-Eleven’s Major Paradigm Shift
The truth about the technology all around us today is that it is here to stay whether we like it or not. The younger generations—Generation X, Millennials—and even baby boomers do everything on their smart phones, tablets and computers, from communications to television, to reading books, to shopping online, to boarding an airplane. Anyone with a smart phone can stand in a retail store, scan a bar code and find out where else that product is selling and for what price. For those of us in retail, the landscape is changing. The question now is, “How fast?”
I’m not a big fan of texting, but I know if I want to stay connected with people I really have no choice. My daughter is a perfect example of the new communicator who will text as often as talk, and the new hybrid shopper. She’ll spend a half an hour picking out a bottle of wine, but she does not want to spend anywhere near that picking out cereal, so she orders groceries online at PeaPod.com to be delivered. Clearly, if we don’t get our stores involved digitally, the world will pass us by.
For a long time now I have been telling 7-Eleven that they owe franchisees a peek under the tent that tells us what they think the business will look like over the next several years. The smart phone, iPad and laptop computer overnight have become the convergence devices around which our lives operate, and the consumer has become a highly educated shopper with access to multiple shopping outlets. Where are we going to be in three years?
At the recent 7-Eleven USE in Dallas in January, and again at the National Coalition Board of Directors meeting in Tucson in February, SEI VP of Merchandising, Marketing, and Logistics, Jesus Delgado Jenkins, and VP Retail/Business Innovation Rob Chumley made presentations that give us a peak under that tent and show significant changes to the way 7-Eleven is looking at retail in 2012 and beyond.
Jesus spoke about changing consumer behavior, and one of the points that struck me most was that in the current market, consumers are cutting out larger purchases and going for premium smaller purchases. We’ve gone from, “I’m going out on the town tonight,” to “I’ll treat myself to a premium chocolate bar.” This is in sharp contrast to the large dose of private label products franchisees have had lately, but we’re glad that the company is able to understand and move in both directions. Jesus also cited the move to emotional premium purchases, the “feel good or indulgent” movement, and he cited as evidence for this the fact that yogurt is down 5 percent, but more expensive Greek yogurt is up 117 percent.
Another point that Jesus made was that while customers are economizing and retail channels are blurring, technology like apps on the smart phone and Facebook are driving the sale. He said technology is giving customers more choices today than ever before, and I can agree with this. It used to be, “I know I can get it at 7-Eleven,” and consumers would pass three competitors on their way to your store to get a particular product because they knew you carried the item. Now they look it up on their smart phone and find they pass three stores with that item on their way home. Customer loyalty in the future will come in a different way. Today we have to do more than just know our customers by name. Now we have to learn different technologies to attract new customers and build our customer base digitally, or online.
Jesus also told us that at $588 billion, foodservices sales are fifteen times cigarette sales ($40 billion), and that hot and fresh foods will play a big part of 7-Eleven’s future. The overall strategy is to use merchandising, Consolidated Market Rollout (CMR) and fresh food transformation, supported by Business Transformation (BT) to make this transition. He still mentioned that “store product assortment will be driven by the store owner,” and that the main ideas behind BT are to “simplify store operation, to serve guests and to forecast.” He also mentioned a co-prosperity model with franchisees, which I believe is critical. The person that makes the buying decisions in my store is still the person with the MOT in his or her hands, and without co-prosperity, the system is not going to grow.
On day two of the Tucson Board meeting, Rob Chumley described 7-Eleven’s plans for digital innovation and the store of the future. He described five strategic teams—Fresh Food Innovation, Fresh Food Transformation, Next Generation Store Design, Digital Guest Experience, and New Business Development—that could “transform the entire store, and 7-Eleven’s future.”
Rob told us that the store of the future will have many formats, and that there will be nine clusters of stores with a different DNA string for each store. The new store formats will emphasize the guest of the future and the brand experience. This means that the store format may change. Stores in different locations could emphasize different product selections that support local clientele. Not every store will be the same.
Rob started off by telling us that 500,000 apps have been developed for the smart phone in only three years, and that technology is taking over the retail experience. The path to purchase is lined with digital experiences, and if 7-Eleven wants to stay the leader in this business, we will we have to put the customer in charge and surpass what other chains are doing with technology.
There’s no doubt in my mind this is a major step and 7-Eleven is undergoing some kind of paradigm shift in the use of technology. Rob described no fewer than 16 areas of technology under investigation, including: Guest Identification, Guest Database, Digital Coupons, POS Data Collection, Social Media, Analytics, Targeted Promotions, Loyalty Programs, Payments and Reloads, Cross Marketing, Vendor Portal, Surveys, Gas Integration, GeoSensing, Gaming, and Pre-ordering. Is your head spinning?
There is no doubt that franchisees have to become better communicators online with our customers, but this amount of technology boggles the mind. Some franchisees in my generation may have problems adapting to the digital age. We like our face-to-face conversations, and our personal relationships with our customers, and many of us believe the most important thing you can do is greet your customer by name. Today, with more and more being done electronically, it’s still about the social relationship, but the social relationship is migrating to the digital.
SEI is telling us there are untapped markets out there that we are missing, whether it’s a certain age group or demographic. There is a group of social media people with whom we must stay in touch. We saw last Slurpee Day how fast word travels when some stores were inundated with customers as a result of massive messaging and tweets. What if we could raise a customer base online through social media?
I believe that over the years we’ve lost touch with some of our customer base because we’ve lost some of our competitive advantage. We can’t rely just on scale and say we’re the industry leader because we have the most outlets. If we really want to do a better job of selling merchandise to our customers, we have to identify who our customers are and relate to them on their own terms. We also have to change the way we communicate, because technology has changed the way they relate to us.