7-Eleven in Taiwan
History and Background
7-Eleven is one of the most successful convenience stores having transformed from a small Dallas storefront selling groceries and basic items to become a multinational corporation. Headquartered in Irving, Texas, 7-Eleven began its operations in 1927 (7-Eleven, 2009). The company, previously the Southland Corporation, later changed its name to 7-Eleven in 1946 as a reflection of the store’s extended hours of business between 7:00 am and 11:00 pm. The extension of the operating hours helped the company grow as a convenience chain (7-Eleven, 2009). Due to bankruptcy and debt, 7-Eleven’s parent company, Southland Corporation, filed for Chapter 11 bankruptcy in 1990, which aimed at transferring 70 percent of the company to Ito-Yokado Co. for $430 million (Los Angeles Times, 1990). Through the bailout, 7-Eleven became a wholly owned subsidiary of Seven & i Holding, a Japanese conglomerate. Over the years, the convenience store has grown to operate, franchise, and license stores across the world. By 2017, the store stands first in the Entrepreneur’s Magazine Franchise 500 with over 40,000 stores across the world (Entrepreneur, 2017). Today, aside from its outstanding operations and customer service, 7-Eleven is one of the largest convenience stores in the world.
7-Eleven has been in operation in the U.S. for more than 90 years. The company had unprecedented success in the U.S. since its establishment apart from the 1930s when the Great Depression affected its profitability, almost sending it to bankruptcy (Los Angeles Times, 1990). The store was able to weather the storm, converting into a private model at rumors of a hostile corporate takeover before a 70% buyout of the company in 1990 by Seven & i Holding (Los Angeles Times, 1990). 7-Eleven’s expansion to the outside world has been successful. Its operations have especially been successful in Taiwan, a country with a high-frequency patronage of convenience stores, and one with one of the highest density of convenience stores per individual in the world (Dou & Hsu, 2014).
The success of 7-Eleven, and other convenience stores, in Taiwan, attributes to the fact that the stores offer more than just the basic items. Dou and Hsu inform that the stores “provide a ballooning array of services including dry cleaning, train and concert ticket reservations, traffic fine and utility payment, hot sit-down meals, and mail drop-off and book pickup” in addition to the snacks and basic items. Part of the reason for the success of the convenience store is its ability to adapt to the market. While convenience is important in the U.S. market, 7-Eleven has adopted the store to the convenience of the different markets including fresh pasta snacking and paying of phone bills in Hong Kong paying traffic tickets and utility bills, as well as sending and receiving packages in Taiwan (Hines, 2012). In Japan, online shoppers receive purchases at the 7-Eleven stores. The store has, therefore, hinged its success in the U.S. and across the world on flexibility.
7-Eleven’s success in Taiwan largely hinges on the company’s flexibility and its ability to provide the products that resonate with its customers’ needs. The firm’s stores in Taiwan offer customers both products and services that are not only convenient but also satisfy their needs. In the article “7-Eleven Opens Thousands of New Stores, Aims for World Domination,” Hines states that through 7-Eleven stores in Taiwan, “locals use the store to pay for traffic tickets and utility bills, pump up bicycle tires, and send and receive packages.” Offering such products strikingly digresses from the norm of convenience stores in the U.S. By offering customers what they want in products and services such as the egg tea and cab payment, 7-Eleven has been successful. Hines states that the localization strategy has been a success for the store, informing that it is not only quirky but also a good business model. Thus, by having partners with in-depth knowledge of the environment within their market, 7-Eleven has delivered products and services needed by the customers, in addition to allowing the store to grow rapidly and with only minimal investment (Hines, 2012).
The Taiwanese economy is doing well with an increase in double-income families. Even with such increases in income, 7-Eleven has maintained convenience in not only the products on the offing from its stores but also in the prices. For instance, while there were 530, 000 cups of fresh coffee sold in Taipei in 2004, 7-Eleven sold 400,000 of the cups (Chan & Chen, 2012). The store’s prices have remained within the grasp of both the rural and urban population of the country, which are served by the store. Moreover, the store sells i-Cash cards, which are prepaid cards in a wide range of denominations of the New Taiwan dollar. The cards have a wide array of applications, and can be used to pay for purchases (Chan & Chen, 2012). Moreover, the store offers discounts, especially for handicapped persons, for different products and services. The discounts are in addition to other conveniences for people with disabilities, whereby “people with hearing problems could use the store’s i-Bon for free to call a cab” (Chan & Chen, 2012).
One of 7-Eleven’s major promotions has been on public relations. The store has cordial relations with its customers, business partners, and government agencies. As a result, the Taiwanese Department of Health hosts its medical checkup camps at the stores. Moreover, the organization has started a program whereby drug addicts exchange used needles for clean ones at 7-Eleven (Eng, 2007). Another proof of the store’s good public relations is the fact that it is the preferred pick-up point for online purchases by customers purchasing goods such as books from Amazon (Chan & Chen, 2012). The store’s seating areas double up as points of rest for the elderly, as well as a “children’s afterschool waiting room” (Chan & Chen, 2012 10).
7-Eleven has more than 4,400 stores in Taiwan, serving the 23 million people of the island country. The number of convenience stores in Taiwan ideally makes Taiwan the country with the highest per capita convenience stores in the world (Eng, 2007). The number of stores in the country makes for the convenience of place and time for customers who are quick to point out that “There’s always a 7-Eleven around the next corner” (Eng, 2007). The ubiquity of 7-Eleven stores across Taiwan has made the store the to-go place of convenience for different products and services including package deliveries, payment of utility bills, taking coffee, electronics’ purchases, food, and drinks. The penetration of the stores best explains the availability of the stores, where the Taiwanese franchisee of the store states, “Our product logistics system penetrates deep into mountain areas, rural villages, and even secluded offshore islands” (Hines, 2012).
At its entry into the Taiwanese market, 7-Eleven opened its stores largely in residential areas in city centers, which targeted housewives (Chang & Chen, 2012). The women were, however, concerned with the price given the positioning of the store as a high-end convenience store. However, the store looked at correcting the mistake after a decade of operation in the country. With new operations and franchises, 7-Eleven opened more stores in city centers and high-density locations such as railway stations (Chang & Chen, 2012). Additionally, the store opened new stores in corner sites. The new operations ideally moved from the first target of price-sensitive housewives to young urban professionals. The move “appealed to the younger generation by promoting American products such as the Slurpy” (Chang & Chen, 2012). Targeting the young professionals and including local delicacies proved successful to 7-Eleven’s operation in Taiwan. Chang and Chen (2012) assert that “the success of marketing local food led to the decision to extend the concept of customer convenience in two ways: moving beyond selling packaged foods to selling fresh food and products that could be consumed immediately rather than held for stock” (p. 7).
The four major segmentation bases are geographic, demographic, psychographic, and behavioral. 7-Eleven conveniently combined the four bases for its success. While its first stores were on the southern and northern parts of the island, within city centers, the company has since corrected the mistake and has introduced the stores at virtually every intersection of the country (Chang & Chen, 2012; Hines, 2012). Additionally, the store has since expanded its demographic reach, serving not only the price-sensitive housewives and young professionals, but all sections of the demography including the young and elderly. Knowing the young professional’s needs in technology, 7-Eleven has been at the forefront of supplying products and services to the convenience of the entire demographic makeup of the country. It supplies technology products such as phones, TVs, and Wi-Fi subscriptions to its younger customers, while providing seating areas for the old and waiting areas for schools children. This is in addition to fresh foods and groceries for women.
7-Eleven’s first value proposition was its price and location. It had presented itself as a high-end convenience store within the city center. The stores’ outlook was one that was clean, giving it a sharp contrast with the local stores such that some customers had to take off their shoes before getting into the store (Chang & Chen, 2012). However, this value proposition did not work for the company as expected, thus the need to localize the product and services. The store looked at convenience in finding a store while providing a wider range of products and services at competitive prices. These helped the company not only in its expansion but also in increasing the stores’ customer traffic.
7-Eleven’s differentiation starts with its operations. Thus, while not all of the company’s stores operate 24/7, some of the stores in high-density areas are operational day and night thus differentiating the store from other convenient stores. Further, by targeting young professionals and locating its stores close to office buildings, as well as serving food to the professionals who are unlikely to go home for breakfast and lunch, 7-Eleven easily distinguishes itself (Chang & Chen, 2012). Another differentiation is in the products and services that the stores offer, ranging from food to payment of utility bills, as well as package sending and receiving. Such products and services are not available in other stores. Moreover, adopting technology in payment, monitoring customer traffic, and providing taxi and telecom services enables the store to stand apart from its competitors (Chang & Chen, 2012).
7-Eleven is the biggest convenience store in Taiwan. By 2009, the company had 4,750 stores in comparison with Family Mart’s 2, 394 stores, Hi-Life’s 1,236 stores and OK’s 824 stores (Hsueh & Hsu, 2010 3). 7-Eleven’s cost leadership, location, product and service range, and competitive prices continue to endear it to its customers. While its competitors are equally strong in operation and business models, 7-Eleven’s product range, widespread location, economies of scale, and market leadership give it an upper hand against these smaller competitors.
7-Eleven’s use of technology is a competitive advantage that its competitors lack. By adopting the technology, the company has become efficient in stocking its inventory, as well as in monitoring customer traffic flow and purchases. Through such data, the company has been able to stock its stores with mostly purchased products, while ridding the stores of dead stock. 7-Eleven’s collaboration with iBon has also proven profitable for the store since it has become the ‘go-to’ spot for payment of bills and purchasing of airline and train tickets. In so doing, it became the largest ticket sales platform in Taiwan.
Localization has become one of the greatest competitive advantages for 7-Eleven in Taiwan. During inception, the company imitated the parent store’s design in the U.S.; however, upon realization of the futility of the strategy, the store’s franchisee in Taiwan considered localization in product and service offerings, as well as location (Chang & Chen, 2012). The decision proved wise, as it has given the store a competitive advantage over its competitors. That that one can get a 7-Eleven store at “every intersection” is proof of the company’s competitive advantage in location and expansion over its competitors.
Service differentiation remains 7-Eleven’s strategy of operation in Taiwan. The company used product and service development to differentiate itself from competitors and attract customers to its stores. By localizing its products and services, making the stores convenient for making purchases, meals, as well as electronics, the company cleverly differentiated itself. The strategy not only increased its store traffic but also improved its sales (Chang & Chen, 2012). Additionally, in differentiating itself, 7-Eleven embraced the use of technology combining information systems within its operations, training its workers on the use of IT in operations, thereby delivering fast and efficient customer service and experience as demanded by the Taiwanese customer (Chang & Chen, 2012; OUHK, 2013).
In the early years of its operation in Taiwan, 7-Eleven encountered several problems such as conformity to the tried and tested U.S. business model. The non-localization of the business model put most customers off, given the prices charged on the products and services in the store (Chang & Chen, 2012). Additionally, during the establishment period, there were few freestanding sites for the stores, which limited the store’s ability to build the locations from the ground, which then meant that the stores could not conform to the standard U.S. models. However, the company was able to surmount the problems through localization of its operations and store formats.
7-Eleven is perhaps the biggest convenient store in the world, with operations across the world. In the U.S. alone, the store had 4,600 stores in the U.S. So successful is 7-Eleven that big retailers such as Walmart and Target are looking to use the store’s model in their expansions and operations (Hines, 2012). The store’s parent company, Seven & i Holding, had $90.52 billion in sales revenue, of which the stores accounted for 86 percent (Gallagher & Uranaka, 2017).
Localization has proven successful in Taiwan, in its future expansions; therefore, it will be considerate to look at localization as the default strategy, especially in countries whose culture and business approach digresses from the traditional U.S. business model. Future expansion to other countries should take localization as the first strategy, given that although it is expensive, it has been a worthwhile investment for the company as proven by its Taiwanese operations. Additionally, the store can offer even a wider variety of services and products to increase its clientele and sales since the strategy has proven effective in Taiwan. Replicating such a strategy will enable the company attract more people to the stores, ensuring that the client traffic not only increases, but also guarantees a purchase from the customers.
Article Summary and Relation to Book Chapter
In the article “Five Customer-Centric Marketing Lessons from Apple to Zappos,” Stan Phelps (2014) discusses the idea of marketing, especially to current customers rather than new customers. Phelps argues that traditional marketing is dying, giving way to an age of marketing whereby consumers have more information regarding products and services, which is a far cry from the past decades whereby marketing and advertising were the sole source of information for consumers on various products and services. For this reason, Phelps suggests that companies must look for innovative ways of marketing, especially to their current customers who have the potential to offer more value to businesses, unlike new customers. He further suggests ways of creating value to businesses in addition to giving examples of companies doing so including Apple Inc., Amazon, Disney, Southwest Airlines, Wells Fargo, and Zappos. Among the suggestions he makes include selling more to current customers, exceeding customer expectations, creating convenience for the customer, thinking value rather than price, and treating customer experience as an investment.
The article and the chapter have similarities in that they look at the changing nature of marketing. Both articles mention companies that have made changes to marketing and how much they are reaping from the marketing changes. The chapter mentions eBay as one of the pioneers of peer-to-peer marketing, in addition to door-to-door marketing among Japanese car manufacturers, who build trust with the customers before selling. Similarly, the article focuses on the customer’s convenience, experience, as well as value as methods of building trust between the business and the customer. The article’s take on value and experience largely focuses on the customer; however, there is a relation providing value, especially when dealing with business-to-business relations. The chapter emphasizes the need to build long-term partnerships and maintain the partnerships long after a business has gained entry and established itself in a given market. Such partnerships, according to the chapter, bring value to the business.
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