- [Narrator] Rice balls. - [Vlogger] Look at that. Michelin-type of ramen. - [Narrator] Collaborations
with famous restaurants like Santouka, milk tea. This is 7/11 in Japan. But in the US, the company is more known for Slurpees and hot dogs. It's just not as appealing. My perception is people go
in there when they need to. - [Narrator] The world's
largest convenience store chain has over 13,000 locations
in North America alone and made over $72 billion
in sales last year. But now, it's working to bring
more Japanese inspiration to its American stores. Convenience stores have
historically made their money selling tobacco and gas. But now, as cigarette
sales continue to decline and many expect gas sales to slow, many are racing to find
other sources of revenue and doubling down on food. But shifting a business this
massive is a major undertaking.

This is the economics of 7/11. (light music) 7/11 started as an American company, but it went bankrupt, twice. Once in 1932 during the Great Depression, and again in 1990 as it struggled with debts. 7/11 is now owned by a Japanese company, Seven & I Holdings. A majority stake was bought by Ito Yokado, a Japanese supermarket chain that had been operating 7/11 stores in Japan for more than a decade. From the beginning, the Japanese owners said American 7/11, both its central operations and its franchises, had a lot of catching up to do. The Japanese model was a lot more data driven. They would pour over what sold well at what time of day, break it down by gender and age, and use that to inform their next order decisions. The American system just wasn't as sophisticated as that. There were some major differences

between US and Japanese 7/11s. The US stores were typically larger and attached to gas stations. The Japanese stores didn't sell gas, but had a much wider array of fresh food. Japanese stores only stocked
items that would sell quickly. They had a proprietary distribution system that made multiple shipments
to stores every day. Orders were customized by store based on sales data, demographic trends, and local weather forecasts. American 7/11 stores were
getting two deliveries per week, and some items were never being purchased. When American operators began counting items in their stores, some found that 40% of their products were selling less than one unit per month. Now, American 7/11 has its
own distribution system where franchises place orders every day based on company recommendations of what's selling nationally and regionally and their own store data. They're making
decisions every single day on what they're going to order based on what they understand the customer wants to purchase.

what new items are going to be made available. One of the most interesting lessons that we've learned from 7/11 Japan is their approach to operations and to retailing, which they call tanpin kanri. And tanpin kanri is basically this idea that we localize our assortment to the needs of customers. We actually help our stores localize their assortment so that they have the right balance of a consistent assortment of products that consumers and customers would expect to see nationally, as well as items in the assortment that are perfectly appropriate for a given store's location. This is especially important when it comes to food. Seven Eleven Japan is known for its wide array of meal options. You're not gonna believe the choice of food in a convenience store. American 7/11 also has a big food and beverage business. In total, it sold over $17 billion of food last year.

about 24% of its overall sales. That included 315 million cups of coffee, 153 million Slurpees, and 99 million slices of pizza. But next year, it hopes to make one third of its sales from store brand goods, including food, up from less than one quarter in 2022. That's particularly important given shifts in the convenience store industry. So if you think about what convenience stores sell, there's fuel, there's tobacco products, and there's food and snacks. Gas is already a low margin business, and it's at risk long-term if electric vehicle adoption increases over time. Tobacco very profitable, but people are smoking less. Food, though, is a category where demand just isn't going away. So for convenience stores, it makes sense that they would wanna double down on that. 7/11 currently has 17 so-called Commissaries around the country that make food for all of its US locations.

Now it's working on upgrading them. It's partnering with Warabeya, a supplier for Seven Eleven Japan, to spearhead the effort. Warabeya's new factories in Hawaii, Texas, and Virginia can make a wider and more localized range of food than 7/11 has been able to stock in the past. Things like being able to cook rice en masse, new protein capabilities, all which helps 7/11 introduce new types of products in the food area to our customers. We recently launched a product that's a spicy miso ramen soup, not something you would typically think about being sold at a 7/11. [Narrator] It's adding a lot of items to its menu. The main question is how many customers will buy them? And this is where data comes into the question. When customers come into our stores, they're in an immediate consumption mindset. [Narrator] Capitalizing on this

is a key priority for the company, and it plans to use its massive
data operation to do it. American seven elevens monitor daily sales, and for loyalty members, they collect demographic
information on who's buying what. The company's loyalty program has 95 million members. Building on that, the company's investing in targeted advertising on screens and TVs throughout stores. That's to spur impulse buys. It helps not only 7/11 but also our advertisers, our vendors, to target our customers
at the point of purchase. So, for example, in the morning,
we may target our customers with a message around a hot
cup of coffee and a donut, whereas later in the day,
we may target our customers with an advertisement
that's around a snack and a beverage from our cold vault. And for potential customers who aren't at the store, there's delivery, the fastest-growing part
of the company's business. It's highly profitable for the company.

since delivery orders tend to be for about double the amount
of in-store purchases. How the brand's grown
for nearly a hundred years starts with what's the customer want, where do we think they're going, and how do we meet them
where they're going. A big question
is whether American customers will match the enthusiasm 7/11 sees in some of its other markets in Asia. I think there is so much excitement around convenience stores and the types of food
and snacks they offer. So if they can bring even a little bit of that excitement to the us,
We're gonna get some musubis. That would be a great success.

7-Eleven Is Reinventing Its $17B Food Business to Be More Japanese | WSJ The Economics Of

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