← Behind the Numbers: an EMARKETER Podcast
Behind the Numbers: an EMARKETER Podcast
From Japan’s Konbini Culture to America’s Convenience Crisis: 7-Eleven’s Next Move | Reimagining Retail
00:18:32
Loading summary
Transcript55 lines
- [00:00]
A
Your audience is seeing ads everywhere, even on the screens you'd least expect. Nielsen Ad intel helps you see the whole picture, from creative trends to ad spend and media across all screens. Maximize every media dollar today with Nielsen Ad Intel. Hello, listeners. Today is Wednesday, November 12th. Welcome to eMarketers weekly retail show, Reimagining retail, an E marketer podcast made possible by Nielsen. This is the show where we talk about how retail collides with every part of our lives. I'm your host, Susie David Kenyon, and on today's episode, we're talking about 7 11. Yep, a brand making some bold moves that don't totally line up with the headlines. So we're going to try and figure out what they're thinking. In Japan, its Konbini stores are practically part of everyday life. You can grab dinner, pay a bill, even ship a package, and they become kind of a cultural icon. But as we know, here in the US It's a very different story. The brand is trying to reimagine what convenience looks like. They're testing Japanese style food. I think everybody's heard now that they're expanding their 7Now delivery network and they're opening hundreds of new stores even as same store sales and traffic diploma. The big question is whether all that effort will help spark a turnaround and maybe even a little bit more brand love in the US So in today's episode, we're breaking down their business into three quick rounds. Part strategy, part imagination. We'll start with why the company's doubling down on new locations even as the numbers get a little tricky. Then we'll dig into what really could move the needle. And finally, a bit of blue sky thinking. If you were in charge, what bold move would you make? But before we do, let's meet today's guests. Joining me in the studio for today's episode, we have two podcast regulars. Blake Drosch, senior analyst covering all things retail.
- [02:00]
B
Hey, Susie. Great to be back.
- [02:02]
A
Hey, Blake. Thanks for coming to the office and doing the pod in real life with us. And Sarah Marzano, principal analyst covering all things commerce media. Hey, Sarah.
- [02:11]
C
Hi, Susie. Thanks for having me.
- [02:13]
A
Thanks for coming. It's the first time you're on the show with me. I'm so excited. I know.
- [02:16]
C
I'm really excited, too.
- [02:17]
A
Okay, so let's get started with our first segment in round one, aptly called the paradox of growth. Blake and Sarah are going to weigh in on our key question. Why, even though sales are shrinking, is 711 still opening more stores? They're said to be opening over 200 stores a year in the U.S. blake, what do you think?
- [02:38]
B
I think I don't really see it as much of an expansion as it is sort of a transformation of their, their business model. Because while they are continuing to open new stores, they've also I think closed more stores than they've opened the past two years and plan to do the same this year. And I think it's really because they are completely shifting their business model from just convenience store to convenience store plus restaurant or food service outlet plus grocery. Right. And I guess we'll unpack sort of going from a one fold business into a threefold business. Like what does that require? But I think the main thing that it requires is a brand new retail footprint.
- [03:21]
A
So in your mind it's not that they're opening a ton of new stores, it's just they're rejigging their footprint.
- [03:27]
B
Right. And I think since they're going from convenience model to a multifaceted model that just requires a completely new type of store, often, you know, large format stores, which is the ones that they're opening. And I think that they can't do that with the current real estate that they have.
- [03:44]
A
It's interesting because I always think of when you grow stores, you also by default grow sales. But for you it's more strategic than that.
- [03:52]
C
I mean, I think it is about growing sales. Right. Like they have the advantage of 13,000 some odd stores in the US so they can analyze their fleet and then double down on what works. So to Blake's point, the new stores are going to prioritize quick service restaurants. And they've said that those stores see about 50% more foot traffic. And then as they roll out these new frequencies, formats, which again to Blake's point, are more than renovating the existing stores, it's about creating stores with larger footprints. They found that These stores drive 45% higher sales on average than compared to their traditional stores. So it's really about taking a look at like what's working and again doubling down on sort of expanding the penetration of what's working within their existing business.
- [04:31]
A
It's true that they were saying that basket size is up even though footfall is down. But Sarah, from your perspective, do you think that it's also just about collecting more data? The more people are buying, the more stores there are, the more touch points there are.
- [04:44]
C
Yeah, I mean, I think it makes sense. And Seven Eleven has had a retail media network since 2022. They were pretty early among C stores to launch a retail media network. And so more data is always something that can bring increased value to advertisers. And so increasing basket size can help offset a decline in foot traffic, but also provide more utility to advertisers and also expand the base of applicable advertisers.
- [05:09]
A
So in one sentence, both of you think this makes sense and it's not weird?
- [05:14]
C
Yeah, absolutely.
- [05:15]
B
I mean, I think it's. I think it makes sense, but I, I mean, I think it's obviously a risk when you change your business model and they do have the dominant market share in the convenience or space in the, in North America, and I, I believe worldwide as well, it is always a risk to sort of pretty radically transform your business model. But I think it really is sor. You know, about future proofing the business and, and, you know, continuing finding new avenues to grow even when you have that high market saturation.
- [05:48]
A
It's almost like you knew what second segment was all about. Blake, thanks for the good tea. Up. So next up, we're going to talk about that growth piece that you're. You're referring to. And in this segment, I want you guys to think about how can you formulate a pie that includes all the ideas around what will help seven Eleven grow the most in the three to five years? So if you can think about the levers that they can pull and then add some percentages to each of the slices of the pie, that'll help us really spot where and how they're going to be positioned for growth. So ideas around more touch points. So, like, more stores, more private label. I could keep going, but I don't want to give you guys too many ideas because I want to see what's in your pie.
- [06:34]
C
So with that, my pie is really boring because it's four equal segments. We can argue about the way I have it distributed. But first, delivery, which is an opportunity that 711 is already doubling down on, it makes a ton of sense. I mentioned that they have 13,000 stores in the US which is a huge distribution advantage. They've already partnered with a lot of the major delivery platforms like Doordash and Uber Eats. But it's very interesting to me that they've also built out a proprietary delivery mechanism and really focused on training employees for how to pick those orders and ensuring that they can fulfill delivery within 30 minutes or less. And again, I think that leans into this sort of foundational distribution network that they have. Thanks to their massive store footprint, delivery is also a huge opportunity for digital retail media. So I think what's really important is that they make sure they have a consolidated, cohesive digital experience for consumers. And where possible, they can pipe in to the advertiser demands that platforms like Uber and DoorDash offer. And then on the heels of that, I have in store retail media formats like In Store audio, which seven eleven has. According to the reports I found they have them in about 4,000 stores currently and they're planning to extend them to 12,000 over the next year or so, which will be nearly their entire footprint. I think In Store audio is a format that is very logical for a small format store. It's easy to hear the messaging and because you're dealing in sort of impulse, low consideration categories, it's more logical to think that you could influence what someone is purchasing via a message on an audio ad. Quick service restaurants make a ton of sense. They've obviously seen that these stores drive higher foot traffic. That's going to contribute to a higher basket size and then private label, I think in order to boost the margins on the purchases that they are seeing, which of course will have to be balanced with the retail media goals which rely on advertising dollars from national brands. But Those are my four slices of pie for old drive growth for 7 11.
- [08:34]
A
It's interesting. 50 plus percent is around retail media and that extra revenue stream.
- [08:39]
C
Yeah, true to my brand, I'm a believer.
- [08:43]
A
It's good. Blake.
- [08:46]
B
I think we probably share a lot of the same talking points, but you.
- [08:50]
C
Put more into your distribution.
- [08:52]
B
My distribution is a little bit skewed towards in store over in store retailer digital aspects of it. There's no, there's no in store retail media in this pie. It's just there are too many more important factors at play than audio ads. I'm going 40% store investments. That's huge. 40% food service and then 10% for delivery and 10% for retail media. So you have roughly an 8020 split, which is what, you know, e commerce penetration roughly looks like in the US right now. So I think that's sort of a fair framework. The store investments piece. I think, you know, you walk into a 711 location anywhere in the U.S. oftentimes there's going to be a lot to be desired in terms of the quality of the store, the presentation. I think in order to build consumer trust, particularly around food service and grocery, the cleanliness of the stores, the quality of the stores, just the overall vibe is going to need to improve. So I think the investments that they can make in sort of these new larger format stores with more bells and whistles, just you Know, a little bit of a smoother shopping experience. That's crucial, and that's going to give way to that additional 40% of investing in food services. If the quality of the food is. Is heightened and they're making a lot of investments and sort of expanding the selection, that's great. But if people walk into these stores and they don't necessarily feel like it's an appealing environment to order fresh food, then it's going to fail. The other remaining 20%, I think, completely agree with Sarah on the delivery aspect. The huge retail footprint really works in their advantage, particularly when you look at, you know, digital grocery e commerce penetration as opposed to restaurant delivery. If they can invest in that food service piece, then it's just going to make their delivery services all for the better. And then, of course, on top of that, retail media is the icing on the cake, the additional 10%.
- [11:02]
C
I think you make a really good and interesting point around the fact that they need to be wary about. You know, it makes sense to double down on investing in, like, key store formats and especially in really important areas that are gonna drive the most impact to their bottom line. But there's a risk in not ensuring that there is some consistency across the stores. Right. To build that consumer trust. Because you don't necessarily wanna be faced with this situation where customers are like, oh, that's one of the good 7:11s. Right. But most of them are kind of not as good. So there needs to be some investment across the entire store fleet so you can have that trust and consistency and say, like, this is a store I would buy a fresh meal from.
- [11:43]
B
Right. And that's. I think that's a good point. That makes me want to put the store investments even higher than 40%.
- [11:49]
C
I want to change mine too now.
- [11:50]
B
Yeah.
- [11:51]
A
Well, I'm going to ask you guys about that in terms of store investments, like bells and whistles, remove friction points, help with delivery, but it's also about the food innovation. Right. So they need more fridges. And you both talked about food, but kind of in different ways. Sarah, when you think about QSR driving foot traffic, are you talking about, like, they partner with the Taco Bell or that they. Because, Blake, I got the impression that you're talking more about, like, have your own foods sort of available that are fresh and delicious and look super inviting?
- [12:25]
C
Someone correct me if I'm wrong, they have their own proprietary QSR restaurant chains that change depending on the geography.
- [12:33]
B
Yeah.
- [12:34]
C
So it's like their own brand of QSRs. Yep.
- [12:36]
A
Oh, I didn't know. Yeah, the one by me does not.
- [12:40]
C
Well, there you go.
- [12:42]
B
I think it all comes down to increasing that product selection. Right. I mean, if you look at Wawa and other convenience stores that have successfully leaned into this model in the US There's a core group of food categories where a convenience store format can excel. Right. Pizza, sandwiches, things of that nature that 711 actually already does. I just don't think that they do it well enough to really build an audience around it in the same way that these other convenience stores have been able to.
- [13:15]
A
So the other thing I was thinking about, you guys, is if we're trying to create this cultural moment for 7 11, in addition to amazing food and bells and whistles, is there anything around leaning into pop culture moments? And maybe they're already doing it. It's just not high on my radar. Like, you know, Taco Bell has like the Doritos. And is there anything around collabs that would help them with growth?
- [13:38]
C
I think collabs make sense. I think building more exclusivity and they can do that with private label products, but they could also potentially do it with national brands. I think just building more sort of urgency and FOMO and exclusivity around the products that are carried at 7 11. So you have a reason for choosing 711 versus any other number of convenience stores or just going on doordash or Instacart or Uber Eats and picking sort of anonymously based on what can get to you the quickest. Right. Creating more reason for consumers to say, like 711 is where I have to go to get the thing that I want is a good strategy.
- [14:09]
B
Yeah, I think, I think collabs could be something that would be really interesting, particularly the food service aspect of it. Right. Because if you bring a brand into your store and you can do it justice by making sure that the food preparation is up to par, then you already have a little bit of built up trust. Right. And it doesn't need to be a Chipotle. It could be like a, like a crumble cookie or something that is a little bit easier and smaller. It's a smaller format, it's easier to manage, but has a brand that already does well with consumers that could really bring in foot traffic and get people used to sort of this habit of purchasing some sort of fresh food in a 7 11. And then when you expand with your own product lines, I think that could potentially transfer.
- [15:01]
A
Cool. Well, that was my future proofing idea. So now I want to hear yours in round three. I'm going to ask you if you are CEO at 711 for the day and you could do any big picture move that didn't have operational friction, it was in a vacuum. What would that be?
- [15:18]
B
I will show you my notebook that also I literally have restaurant collaboration. So I think we all had the same cd.
- [15:25]
C
Just wrote that down.
- [15:27]
B
Did not write it down just now. It's been the ink is dry. But since, since I'm on my feet, it's probably true. Since I'm thinking on my feet, I would say a big marketing campaign very similar to what I believe it was Domino's did a few years ago or Pizza Hut basically, when they were like, we understand the quality of our pizza has really gone downhill. We've like taken the advice to heart and we're improving it. I would do the same type of campaign. We know that, you know, the stereotype of 711 is the, you know, perpetually spinning hot dog that's been there for three months. Right.
- [16:05]
C
I can see it.
- [16:07]
B
We acknowledge that and then we, you know, we move on. We talk about what we're doing now in terms of, you know, bringing in better ingredients, fresh food, like more care around the fruit, food preparation and ensuring that it's fresh. I think that would be a really bold campaign to get people thinking about, you know, the option of going into 711 for a meal and expecting something different from what they're used to seeing.
- [16:34]
A
I love it. Sarah, what about you?
- [16:37]
C
I love that idea too. I think that's really smart. I think in general, leaning more into seven Eleven as a lifestyle brand versus a commoditized place to get convenience items. And I think doing that by launching a full scale social media strategy and partnering with lifestyle influencers and creators again to build that sort of more elevated while still saying accessible sort of reason for shopping at 7:11 as more of a lifestyle brand. And I think they could use the launch of their private label products sort of hand in hand to do this.
- [17:09]
B
Who would be the core audience that we'd be going after? What's the lifestyle?
- [17:14]
C
Yeah, that's a great. I mean, they're open. So many of them are open to 24 7. So I like the idea of like appealing to younger generations as like, this is the place that you could stop on your way home from going out kind of thing, or maybe if you're living alone and you need like an easy but high quality dinner. Like, I like the idea of tapping into younger generations and making it both like this, this pit stop that's like available all the time. For any of your needs. Like a lot of their new locations have these beer caves, right? So maybe that's part of it but also like a great sort of like companion for when you're kind of getting your life started. I just came up with that.
- [17:46]
B
I like that. That's good.
- [17:48]
A
It does also go into that efficiency of experience and making it really connect emotionally too with this particularly targeted customer who wants everything very quickly. Yep, fits the bill. That's all we have time for today. Thank you, Blake.
- [18:03]
B
Always a pleasure.
- [18:04]
A
And thank you Sarah.
- [18:05]
C
Thanks Susie.
- [18:06]
A
I hope you'll come again and thank you listeners and to our team that edits the podcast, please leave a rating or review and remember to subscribe. I'll see you for more reimagining retail next Wednesday. And on Friday join Marcus for another episode of A High behind the Numbers, an E marketer podcast made possible by Nielsen.