Why did 7-Eleven become a Japanese company in the US?
On a hot day, I went for a run in Koriyama City, Fukushima Prefecture. My aim was to complete a 30-kilometer run, so I didn’t bring any water along. As I ran, I grew increasingly exhausted and thirsty. When I reached the mountain’s peak, I noticed a familiar logo adorning the side — it was a 7-Eleven.
Well, well, well… I had a change of heart regarding just drinking water. Let’s take a look. Alright. I’ve already run 20 kilometers and still have 10 kilometers to go, so it’s time to replenish my body with nutrients. There are protein jellies, iron and glucose jellies, and vitamin C drinks. I made the payment using my Japanese transportation card, SUICA, which I had stored on my iPhone. Kyaa… My body is brimming with energy once again.
7-Eleven, a konbini (コンビニ, Japanese for convenience store), truly lives up to its name — convenient in every sense of the word. When you think of a convenience store, it’s hard not to appreciate how remarkably customer-centric it is. It goes beyond being just a typical store where you can find anything. That’s why I’ll refer to it as a convenience store.
One Japanese YouTuber recently shared a video warning people to exercise caution when consuming convenience store bento boxes, as he experienced a decline in his health after eating convenience store food for a month. Nonetheless, convenience stores remain a convenient option for a quick meal when hunger strikes. It’s astonishing how they manage to have everything you might need.
In times of urgency, such as when I need to print, scan, and send an important document in the middle of the night, I can simply rely on a convenience store. I truly appreciate the ability to print, sign, scan, and email vital contracts, vows, and more when I’m pressed for time.
In 2020, 7-Eleven introduced a new platform called Seven Central, allowing them to view and respond to real-time customer purchase data, needs data, and other information. This platform acts as a streamlined data mart, enabling 7-Eleven to promptly address individual requests. The entire company has access to the data in real time, thanks to its centralization on the Google Cloud platform. It’s impressive how this convenience store has developed such sophisticated capabilities!
7-Eleven indeed originated as an American ice company
As of 2022, there are approximately 78,000 7-Eleven stores across 19 countries. However, a significant portion of them, around 21,000, are located in Japan. This is why we often associate 7-Eleven with being a Japanese brand, even though it originated as an American company.
In 1927, in Dallas, Texas, the Southland Ice Company served as the prototype store for what we now recognize as 7-Eleven. Initially, they primarily sold ice, along with basic items like milk, eggs, and bread. The decision to sell ice stemmed from the belief that it was a highly sought-after commodity. However, their distinctive feature went beyond the product range. Unlike other stores that closed early in the evening, they extended their operating hours, opening early and closing relatively late. This unique approach quickly made the Southland Ice Company a favorite among customers.
Bosses who are receptive to employee ideas are essential for fostering a collaborative and innovative work environment.
The Southland Ice Company initially focused solely on selling ice and had not ventured into offering milk, eggs, and bread. However, it was an observant employee, John Jefferson Green, who recognized the potential to expand the product range by including everyday staples. Green shared his idea with his boss, Joe C. Thompson, suggesting the addition of groceries that people commonly needed. Thompson embraced the concept, leading to the successful introduction of milk, eggs, and bread in their offerings.
This incident highlights the significance of frontline employees who closely observe customer needs, propose solutions based on their experiences, and take action. It’s surprising how often organizations fail to listen to the voices of their frontline staff and instead stifle their input with authority. However, the opinions of these employees, regardless of their position, should be valued and not dismissed as mere complaints. Thompson, as a leader, exemplified this understanding.
This customer-centric and needs-oriented approach has formed the foundation of 7-Eleven’s management philosophy. The company’s innovations and transformations have consistently been driven by keen observation and understanding of customers’ needs and purchasing behaviors. Today, 7-Eleven even utilizes aggregated data to anticipate customer preferences and proactively prepare for them in advance.
A Totem Pole was erected next to the store to capture attention, and eventually, the name was changed to Tote’m Store (derived from “tote’s store,” indicating a place where items are carried over the shoulder). Passersby would stop by out of curiosity and gradually developed an affinity for the convenience store inspired by the Southland Ice Company.
7-Eleven began operating 24 hours a day
In 1946, the convenience store underwent a renaming and became known as 7-Eleven. This change was prompted by the store’s operating hours, which spanned seven days a week, from 7am to 11pm. This adjustment was a result of careful observation of customer needs. During that time, many stores and general merchandise shops closed relatively early, leaving people unable to purchase their daily necessities or food when returning home from work in the evening or during the late hours. By extending their hours from 7am to 11pm, 7-Eleven significantly improved its success and customer satisfaction. The business adage “the customer is king” doesn’t imply that every customer action is correct, but rather emphasizes the importance of understanding and anticipating their needs, and offering items that fulfill them. 7-Eleven’s unwavering focus on customer needs has greatly contributed to its ongoing development.
By the late 1950s, 7-Eleven had expanded from its Texas origins to the East Coast. In 1963, after a football game, when faced with a surge of customers, 7-Eleven realized the potential of staying open beyond the usual 11 p.m. closing time. This realization led to the birth of the 24-hour convenience store concept.
7-Eleven Finally Arrives in Japan — The Significance of Local Partners
In 1974, 7-Eleven launched its first Japanese store in Toyosu, Japan. The remarkable success of 7-Eleven in Japan can be attributed to the effective localization and differentiation strategies implemented by their local partner, Mr. Yukado Ito. With prior experience in managing supermarkets in Japan, Mr. Ito played a vital role in establishing 7-Eleven’s presence in the Japanese market.
Ito Yukado was a Japanese company that specialized in retail stores, encompassing supermarkets and department stores, beginning in 1920.
Toshifumi Suzuki, pictured second from the left, introduced the American 7-Eleven brand to the Japanese market.
Toshifumi Suzuki played a crucial role not only in introducing 7-Eleven from the U.S. to Japan but also in spearheading the localization and expansion of the 7-Eleven business model in the Japanese market.
Numerous newspaper articles and YouTube videos compare American 7-Eleven to its Japanese counterpart. When Americans visit a 7-Eleven store in Japan, they often jokingly, yet somewhat seriously, express their admiration for the superior quality of Japanese 7-Eleven. However, the journey for 7-Eleven in Japan was not without its challenges. Initially, there was a 0.6% royalty fee imposed on 7-Eleven stores in Japan, along with immense pressure to open 1,200 stores within eight years.
In response, Yukado Ito took a bold and decisive approach. He opted to fully localize the stores, offering a wide array of uniquely Japanese foods, bento boxes, snacks, and virtually all essential daily life items. While maintaining the cleanliness and organizational standards characteristic of Japan, 7-Eleven swiftly became a household name, particularly beloved by hardworking Japanese individuals.
Here’s how 7-Eleven in Japan has achieved greater success compared to its U.S. counterpart.
1. Thorough Localization: Emphasizing adaptation to the local market and environment.
2. Local Partners with Retail Experience: Collaborating with experienced local partners.
3. Commitment to Customer Needs: A strong dedication to meeting customer demands.
4. Loyalty through Cleanliness and Convenience: Building customer loyalty through cleanliness and convenience.
5. Extensive Product Lineup: Offering a wide range of products, making it a one-stop shop.
6. Agile Decision-Making: Leaders making faster and efficient decisions.
7. Comprehensive Clerk Training and Friendliness: Prioritizing thorough training and fostering friendly interactions with customers.
8. Strategic Store Placement: Conducting thorough research to identify locations where convenience stores are needed.
When Toshifumi Suzuki brought 7-Eleven from the U.S. to Japan, he introduced innovative technology that ushered in a new era for the retail franchise in Japan. Localization was a key focus, involving analyzing the local market and tailoring responses accordingly. Recognizing the absence of a precedent for such a convenience store in the Japanese market, Yukado Ito established a separate company called 7-Eleven Japan, with Toshifumi Suzuki as its president. Two important policies from 7-Eleven (Southland) in the U.S. were introduced.
1. Differentiating from Local Supermarkets: Avoiding price-matching with local supermarkets.
2. Transparent Accounting System: Maintaining franchisees’ trust through a transparent accounting system.
7-Eleven brought about a turning point in the Japanese market, revolutionizing business models and practices. Suzuki introduced computerized point-of-sale (POS) registers, originally used for inventory management in 7-Eleven stores in the U.S. The collaboration with industry leader NEC led to the development of simple POS terminals and subsequent hardware upgrades. The software, including Microsoft-developed solutions, was primarily outsourced rather than relying on an extensive in-house IT department. These technological advancements significantly contributed to the success of 7-Eleven in Japan.
7-Eleven had developed an incredibly advanced integrated system. Thousands of cash registers, handheld computers, and other equipment were interconnected throughout the supply chain. Every employee was trained to utilize the system’s analytical tools, leveraging extensive customer data, sales information, weather data, and other relevant insights to guide daily orders. The integration of suppliers and distributors facilitated a rapid response system, ensuring that freshly made products ordered in the morning would be delivered before the evening rush hour. With precise sales trend data, they were able to eliminate the common Japanese practice of returning unsold merchandise. This gave them complete control over shelf space, lower wholesale prices, and the capability to facilitate real-time two-way communication. They were evolving into a data-driven company, going beyond simply collecting and selling products.
Whether customers needed scissors, scotch tape in the middle of the night, or suddenly desired an apple, they could find them at a 7-Eleven store. This extensive availability was all made possible through data analysis. As an example, when I needed a t-shirt for an early morning meeting in Japan, I found one at a convenience store. This experience made me realize that 7-Eleven had already identified this customer need and accumulated the necessary data to meet it.
One of the great advantages of 7-Eleven and other convenience stores in Japan is the presence of ATMs inside, eliminating the need to search for a bank ATM when you require cash urgently. These convenience stores are a part of our daily lives, often used without much thought. However, when you examine the products they offer, it becomes evident that they are entirely focused on fulfilling customer needs.
Japan’s 7-Eleven comes to the rescue of US 7-Eleven during a crisis
Each market has its unique characteristics, influenced by cultural and regional differences. It becomes problematic when a foreign headquarters attempts to exert full control without considering local conditions. This scenario is often observed when companies headquartered in one country enter overseas markets and disregard the advice and insights of their local partners. They rigidly impose their own methods, leading to significant losses and eventual withdrawal from the foreign market within a few years. It is crucial to strike a balance by carefully selecting local partners, taking their circumstances into account, incorporating their input into management decisions, and promoting localization. Even small differences matter.
In a related development, Canadian investor Samuel Belsberg, known for his aggressive approach to mergers and acquisitions, attempts to acquire shares of 7-Eleven in the United States. This causes alarm among the Thompson family, the founding family of 7-Eleven, who make every effort to keep the company afloat. However, despite their efforts, the financial strain proves too great, leading to the company’s bankruptcy.
Strategize with Local Partners
It was Japan’s 7-Eleven that played a crucial role in rescuing the U.S. headquarters from financial turmoil. In 1990, through the utilization of the pre-packaged bankruptcy system, a process that allows stakeholders to negotiate a reorganization plan prior to filing for bankruptcy, the debt-ridden U.S. 7-Eleven (Southland Corp.) was saved by Japan’s 7-Eleven (Yukado Ito) acquiring a 70% stake for $430 million in cash.
Despite months of efforts to acquire 7-Eleven in the U.S., Japan’s 7-Eleven encountered challenges in securing the support of 95% of bondholders, despite making various concessions to creditors. Nevertheless, the company persisted and successfully utilized the pre-packaged bankruptcy system to rescue U.S. 7-Eleven.
When 7-Eleven first arrived in Japan in 1974, no one could have anticipated the remarkable turn of events that would lead to the rescue of 7-Eleven U.S.A. from bankruptcy and the subsequent transformation of the company nearly 30 years later. This significant development gave rise to the establishment of Seven & i Holdings Co. in 2007 and paved the way for the renaissance of 7-Eleven as we recognize it today. It stands as a rare and powerful testament to the influence of having the right local partner.
As previously mentioned, it is not uncommon for Korean companies to engage a local partner, even if they choose to operate their business directly. Carelessly selecting a local partner or partnering with the wrong entity can lead to significant setbacks in overseas ventures. Even with the right local partner, there have been instances where failure occurred due to the imposition of their own ideas.
There are numerous convenience stores in Japan, with strong contenders like FamilyMart and Lawson. However, 7-Eleven still maintains a significant market share, accounting for nearly half of the market. The company’s strengths lie in its continuous innovation, utilization of technology, and data-driven decision-making.
While local partners possess extensive knowledge about their specific markets, it’s essential to remember that they may not have all the answers or be aware of all the possibilities. They may hold valuable insights without even realizing it. Therefore, it’s crucial to ask the right questions in order to unlock the solutions you seek. By asking the right questions, you increase the likelihood of obtaining the necessary solutions.
Asking the right questions can lead to the discovery of hidden information and uncover solutions that were previously unknown.
Failure in Indonesia
However, 7-Eleven’s otherwise successful track record experienced a setback in Indonesia. Ironically, the company deviated from its own proven formula for success when entering the Indonesian market. In 2009, 7-Eleven had confidence in achieving success in Indonesia based on its achievements in other countries. It partnered with a local company, PT Modern Petra Indonesia, and made a vigorous effort. Surprisingly, their approach in Indonesia was the complete opposite of what made 7-Eleven successful in Japan.
First, there was a lack of understanding of the local market. Indonesian companies primarily consisted of diaspora returnees who had received elite education abroad. While their learning capabilities and understanding of foreign business models were strong, they may have overlooked local competitors.
Second, the local partners didn’t provide much assistance.
Third, although the concept was popular, it failed to convert into actual purchases once customers entered the 7-Eleven stores.
Fourth, there was a failure to recognize the problem early on and take prompt action. Quick decision-making based on data was lacking.
Fifth, the company’s geographical presence was limited and focused primarily in Jakarta, whereas local competitors operated nationwide, leading to increased customer loyalty.
Sixth, there was a lack of comprehensive understanding regarding customer preferences and desires.
For a period of nearly 11 years, from 2006 to its exit in 2017, 7-Eleven faced challenges in understanding the market it entered, the preferences of its customers, and the local culture and habits. Unfortunately, there was a lack of swift response to the emerging issues. When the sale of alcohol was banned in convenience stores in April 2015, it had a significant impact on 7-Eleven, whereas competitors Alpha and Indomaret did not experience as much damage. Unlike its Japanese counterpart, which boasts a diverse and robust product lineup as one of its strengths, 7-Eleven in Indonesia lacked a similarly diverse offering compared to its competitors. The loss of alcohol sales further emphasized the need for a broader range of products to compensate for the shortfall.
To enhance the success rate of international expansion…
After the remarkable success of popular Korean content such as Squid Game, Love Crash Landing, and BTS, there has been a tendency to assume that the most Korean elements are more likely to succeed globally. This sentiment is often reinforced by the success of Samyang’s buldak fried noodles. While it is true that sometimes embracing the distinctiveness of a culture, whether it’s Korean, Japanese, Chinese, or any other, can lead to popularity and differentiation, it is essential to avoid hasty generalizations.
Jumping to quick conclusions and assuming that the Korean way will always guarantee success can be rigid and overlook subtle yet crucial factors of localization. Even if one acknowledges and learns from past mistakes and makes efforts to find the right local partner, failure to understand the nuances of a different culture, language, and habits can hinder market entry. In Korea, misinterpreting the intricacies of the local market without striving to comprehend them can lead to failure without even realizing it. Just as Japan’s 7-Eleven owes its triumph to its meticulous localization and adaptation to fit the local market, failure to understand one’s own market and remaining inflexible and rigid can have adverse consequences.
7-Eleven’s failure in the Indonesian market serves as a valuable cautionary tale.
