Positioning 7-Eleven for the Future

President and CEO Joe DePinto shares with Convenience Store Decisions how a customer-obsessed culture is propelling the world’s largest convenience retailer forward.

By David Bennett, Senior Editor

For 91 years, 7-Eleven Inc. has often been on the cutting edge of major trends across the convenience store industry.

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Whether it was the company’s launch of the first self-serve soda fountain, 24/7 store hours, coffee sold in to-go cups, or the first self-serve gas pumps and ATMs installed at a c-store, 7-Eleven can count many “firsts.” The biggest, of course, occurred in 1927. Convenience retailing got its start when employee “Uncle Johnny” Jefferson Green approached a young Joe C. Thompson of the Southland Ice Co. about selling bread, milk and eggs from the front dock of an ice house.

With success comes growth. Today, a new 7-Eleven store opens somewhere in the world every 3.5 hours. Convenience, 7-Eleven style, remains in high demand.

The Irving, Texas-based c-store chain, a subsidiary of Seven & I Holdings Co., operates, franchises and/or licenses more than 67,000 stores in 17 countries, including more than 11,800 locations in North America, making it the largest convenience retailer in the world.

President and CEO Joe DePinto recently shared with Convenience Store Decisions his take on the headwinds and disruption in the c-store and retail environment and how 7-Eleven is not only addressing the complex business challenges now, but also how the company plans to maintain its leadership position in the industry, going forward.

Since he was appointed president and CEO of 7‑Eleven in 2005, DePinto has led the charge of building long-term sustainable growth in part by implementing programs designed to satisfy its franchisees and its customers. During the last 13 years, however, U.S. retail has been reformed drastically by demographic, technological, behavioral and entrepreneurial changes.

Just in the last few years, the explosion of e-commerce has forced c-stores to rethink how they do business and evaluate what kind of job they’re doing to meet consumer demand.

How well 7-Eleven is doing on a daily basis is what DePinto and his executive team concern themselves with every day at its headquarters, known as the 7-Eleven Store Support Center. For a company that was preoccupied with customer satisfaction when DePinto took the helm in 2005, 7-Eleven now identifies itself as a customer-obsessed and digitally-enabled company.

“The consumer is changing as fast as I’ve ever seen,” DePinto said. “Product life cycles are a lot shorter. (Consumers) are much more demanding and discerning. They have instant information about products and locations from their smart devices. They can look at Yelp reviews. That is creating this wave of change.

“The best retailers are going to recognize this change, listen to the customer and make the changes customers want,” DePinto added. “That is exactly what we are doing. That’s how 7-Eleven is going to win.”

For a large corporation like 7-Eleven, nimbleness and flexibility are key and can be challenging in a marketplace punctuated by declining disposable income of low- and lower-income Americans, the encroachment of dollar stores and aggressive quick-service restaurants (QSRs), and the growth of e-commerce, DePinto said.

“There has been a buzz about retail channels blurring,” DePinto said. “In my opinion, there are no more channels. I think the customer is deciding and they are looking for—particularly the low-income consumer—quality at a strong value. The message I have is: We need to recognize that, and certainly our supplier partners need to recognize that we need products at a fair cost, so we can compete in a changing world.”

NEW-AGE INNOVATION
Once again, 7-Eleven finds itself leading the charge in retail trends, but this time, for a new generation. In the last few years, the company has rolled out several platforms including 7NOW (mobile app order delivery), heat-and-eat meals, a proprietary cold-pressed juice program, and has made an aggressive push with healthy food offerings and gourmet quality items sold under its 7-Select brand.

One notable development is the company’s Expanded Beverage Platform concept, which will become part of future store design. The platform is an expansive space dedicated to an array of dispensed beverages including iced coffee, nitro coffee, bean-to-cup coffee, cappuccinos, frozen dispensed beverages, soft-serve ice cream, fountain drinks and assorted teas. The beverage destination feature will be in 150 stores shortly, with a wider roll-out planned in the next few months, DePinto said.

STARS AND STRIPES
As 7-Eleven expands product lines and services inside its stores, it is expanding its reach through strategic acquisitions. At the beginning of 2018, the chain closed on the purchase of approximately 1,030 Sunoco convenience stores located in 17 states. The $3.3 billion deal included the APlus, Laredo Taco, Ladson Grill and Stripes Stores brands, and provides 7-Eleven entry into Houston, the fourth-largest U.S. city, and a strong presence in Corpus Christi and across south Texas.

This particular acquisition has a different feel, perhaps, compared to other 7-Eleven purchases. 7-Eleven is meticulously studying the best of what Susser Holding Corp., a subsidiary of Sunoco and creator of Stripes, has to offer and what made the brands so successful. When feasible, the company plans to integrate some of these best practices into its broader operation. For example, 7-Eleven recently launched a new Customer Experience Visit program that has been successful for Stripes stores in recent years.

“We really like their assets, in particular the Stripes business created by the Susser family, which is an outstanding operation,” said DePinto. “We also like the Laredo Taco restaurant concept a lot. We are on the ninth month of a major integration. It’s been going really well. We’ve learned some things from them, and they’re taking part in some of the benefits of the 7-Eleven system, so it has been a great marriage. I’ve been very pleased with it.”

At the time of the acquisition, Stripes Stores comprised at least 550 locations. DePinto said the company has no current plan to convert the Stripes locations, which is noteworthy, considering some of 7-Eleven’s previous c-store acquisitions.

“The plan right now is not to rebrand,” said DePinto. “We are rebranding the APlus stores. The Stripes brand in south Texas is a very strong brand, and clearly, we like that operation. Sam Susser and his team did an outstanding job.”

REDEFINING CONVENIENCE
Last year, 7-Eleven expanded its already popular 7Rewards loyalty program so customers could earn points on a wider range of eligible purchases—from a Big Gulp drink to chips to fresh food. 7Rewards members can earn and redeem on all products in stores excluding fuel, age-verified products and services.

Gurmeet Singh, senior vice president, chief digital officer and chief information officer for 7-Eleven, played an important role in the expansion of the mobile loyalty platform, as well as a host of other digital initiatives. Singh said the convenience chain is always looking for new ways to deliver products and services to its customers, whenever and wherever they need them.

As proof, the company processes 20 billion transactions across its global network each year.

Recently, 7-Eleven introduced support for tap-and-pay services, such as Apple Pay and Google Pay.

Company executives also are looking at “frictionless” checkout, as well as how to make it even easier for customers to find what they want, as quickly as possible. Eventually, this could include scan-and-pay technology to eliminate lines, enabling customers to depart the store without having to wait for a cashier. The company is already testing such a system at its Store Support Center.

In addition, 7-Eleven continues to roll out new digital services, including several major ones recently:
• 7NOW. The proprietary smartphone app, currently being launched in select U.S. markets, enables on-demand ordering of products from local 7-Eleven stores, and offers Apple Pay as a payment option.
• 7Rewards. The popular customer loyalty program through the 7-Eleven app allows customers to earn and redeem points upon checkout.
• 7-Eleven Bot on Messenger. 7-Eleven customers, who are at home or another location can engage with the brand from within Facebook by chatting with the 7-Eleven Bot on Facebook Messenger.
• Amazon Services. The in-store package pickup service, Amazon Locker, is in approximately 1,100 7-Eleven stores, and Amazon Cash may be used at more than 8,000 7-Eleven locations.
• BillPay. The app powered by PayNearMe enables cash-users to pay a variety of bills at participating 7- Eleven stores.

“Nearly 50% of the U.S. population lives within one mile of a 7-Eleven,” Singh said. “Even closer, if you consider that with a smartphone or device, a consumer has a 7-Eleven store in the palm of their hand. Now, we are adding digital to the equation. We can become the fastest fulfillment for customers who need us, anytime, anywhere. Our physical assets already give us a huge advantage. Now, with digital we are right there to disrupt and redefine convenience.”

STORE EVOLUTION
7-Eleven Executive Vice President and Chief Operating Officer Chris Tanco is busy. He leads all aspects of operations for 7‑Eleven’s stores, including field operations, operations support, fuels, acquisition integration, store evolution, franchising as well as 7-Eleven’s Canadian business unit.

While these present duties keep him occupied, Tanco is heavily involved in the future direction of 7-Eleven. Tanco explained that consumers expect more from the brands they shop and need a compelling reason to visit the inside of a c-store.

“Customers today are much more demanding than they have been in the past, not just in how they want to shop, but what they want to shop for, how they want to pay for it, and how they want to receive products,” Tanco said. “The store of the future has to anticipate the customer’s needs, sometimes even before they know what they want, and give them what they want quickly, conveniently and at a great value.”

DOWN THE ROAD
Keeping up with merchandising trends, especially with the channel consolidation previously mentioned by DePinto, is more challenging than ever—even at 7-Eleven. Jack Stout, senior vice president of merchandising, marketing and demand chain, said once you cut through the chaff, two merchandising trends stand out… ones the company is watching closely.

“You see more channels chasing more immediate consumption and more differentiation,” Stout said.

While private brands can help drive differentiation, more retailers across the board are trying to provide customers what they demand, which 7-Eleven has a reasonable handle on, for now.

“Customers are looking for unique products, and they are eating differently, so we see health consciousness as a real trend within food and beverage,” Stout said. “We also see people wanting authentic, local representation of the products—wrapped in a great experience, both online and off-line.”

That’s a tall order, but 7-Eleven leaders are up to the task. 7-Eleven works with both small and large vendors to bring exclusive, first-to-market products to customers. The company created the Next Up event to give up-and-coming brands an opportunity to share their products with 7-Eleven’s merchandising team. At least 50 companies are expected to attend the full-day event Oct. 11 at 7-Eleven’s Store Support Center.

Next Up will also provide small businesses and emerging brands an opportunity to participate in merchandising, logistics and operations workshops with company leaders.

FUTURE PURSUITS
7-Eleven was named the top franchise of Entrepreneur’s “Franchise 500 List in 2017,” with the ranking based on franchise costs and fees, size and growth, support, brand strength and financial strength. The convenience retailer landed ahead of major corporations such as McDonald’s, Dunkin’ Donuts and Dairy Queen.

As he looks to the future, DePinto sees bright horizons. “With entrepreneurial spirit and innovations coming from our Store Support Center, a strong franchisee community and dedicated supplier partners, I have no doubt 7-Eleven will reach its corporate goal of having 20,000 stores in North America by 2027. What a great way to mark the company’s centennial and honor its history of leadership in convenience retailing.”

Serving a Growing Demographic
With 57 million Hispanics in the U.S. alone, this group now represents almost 18% of the country’s population and has significant spending power. Hispanics are a growing portion 7-Eleven’s customer base, and a majority fall in its demographic sweet spot—Millennial-aged and younger.

Chris Tanco, executive vice president and chief operating officer, explained what the c-store chain is doing to better engage this consumer group.

Convenience Store Decisions (CSD): You have mentioned that the U.S. Hispanic market represents a growing consumer segment for 7-Eleven. How is this trend influencing the product mix in certain geographic regions?
Chris Tanco (CT): Hispanic spending continues to rise across the total fast-moving consumer goods, and 7-Eleven wants to ensure we offer products this demographic wants to see on our shelves, conveniently and priced competitively. Recognizing this, 7-Eleven recently introduced a private brand version of four traditional Mexican sweet bread options: Mantecada, Panquecitos, Roles de Canela and Panque con Nuez.

CSD: What are you doing to ensure Hispanic and Latino consumer are ready to see, hear and purchase what 7-Eleven has to offer?
CT: We have a strong partnership with 7-Eleven Mexico and get great ideas from them. We know what sells well in Mexico often sells well in the U.S., so 7-Eleven Mexico is often a good source for us on product quality and ideas. Hispanic Packaged Bakery items were extensively tested in Mexico for flavor, texture, aroma and appearance and have been found to be at parity or better than the competition. Beyond the quality, we are excited to offer these items to our customers at a value price point compared to the competition.

Other examples of Hispanic products available at participating 7-Eleven stores both nationally and regionally, year-round or for a limited time include private brand 7-Select chili mango dried fruit, horchata Big Gulp drinks, hot empanadas, fresh-baked pan de bono, mango and jicama with lime and tajin, Cuban sandwiches and more.

CSD: How is 7-Eleven engaging its Hispanic and Latino customers?
CT: To promote Hispanic products, we actively market directly to Hispanic segments. We leverage targeted channels to reach the demographic more effectively as well as run messages in English
and Spanish.