Convenience chain 7-Eleven has revealed it is investing in innovation to ensure the network of franchised and corporate stores stays ahead of the game.
CEO Angus McKay told Inside Franchise Business “We’re investing in becoming better retailers. We want people to have a business that’s healthy and makes money.”
Innovations are part of the DNA now at 7-Eleven, with a try and fail attitude central to the brand’s development, he says.
Actions include turbo charging the food on the go offer, doubling its coffee output to an average 500 cups a day per store under the Coffee 500 project banner, adding daily fresh bakery items, introducing a parcels locker service, trialling digital payment options and providing a fuel value proposition.
This equates to giving customers choice with a range of fuels, quick access to pumps with a well-maintained forecourt, the fuel app to lock in low prices when they are available, being able to redeem the savings offer, and the ability to grab a coffee or meal on the go.
“We have a huge opportunity to lift our fuel game,” McKay says.
The goal is to become the premier retailer in Australia and as part of the process a brand new look for smaller, urban stores has also been unveiled.
“Our vision comes back to what makes life easier for customers and easier for store operators,” reiterates McKay.
7-Eleven is offering a different retail experience
And today the customer wants a different retail experience from the traditional convenience purchase.
With 32.1% market share on the eastern seaboard, up 2.1% from 2017, 7-Eleven claims to be the fastest growing convenience store chain in Australia.
- Fuel retail has accounted for more market share, up 8.5%, with like for like year to date up 2.3%.
- Merchandise has risen 10 % with like for like sales up 5%.
- Strong customer growth has seen transactions rise by 5%.
The own-brand Slurpee soft drink is a major traffic generator for 7-Eleven outlets, as well as coffee and tobacco.
But there are challenges ahead. McKay pointed out the categories likely to cause the chain some future challenges: tobacco, sugar and fuel.
“We need to be faster and thinking further ahead.
“As much as I value confectionery in stores it’s not now all the customer wants. Whether it’s healthy or a treat you have to offer a range.
“It isn’t about price,” he insists. “We need to offer good value and good service.”
The transformation isn’t just about shifting the product focus in-store either, the outlets themselves look markedly different.
New compact store model
In stark contrast to the white, bright dcor of a traditional 7-Eleven store, the new-look fit-out is a much darker hue, with black painted walls creating a warmer, more upmarket feel and, says general manager retail operations, Braedon Lord, ensuring the products stand out visually. The chain is testing whether the signature red, green and orange stripes work as well on black-based signage.
“It’s about the customer sensory experience,” says Lord.
Lord says today’s convenience shopping is not about buying a can of spaghetti or a band aid though people do still purchase emergency items. Most people do their regular shop through a supermarket or grocer, he says.
“Our customers are looking for alternatives, for food on the go. The differential is a quick service food store.”
The refurbished city outlets will stock essentials but devote most floor space to fresh fruit, bakery, coffee; the sandwich offer will increase from 40 to 100 units. Krispy Kreme is given a bigger dedicated area.
Typical sites to be refurbished will include those non-fuel outlets in high transit areas such as universities and transport hubs.
The convenience chain aims to provide the value for money options that today’s customers are seeking and to infill these smaller footprint stores in areas not serviced by 7-Eleven.
There are now eight of these refurbished stores and the plan is to transform all similar outlets by the end of the fiscal year 2019.
The traditional offer in larger stores will remain, perhaps with the space-greedy parcel locker service adding income opportunities. A nearby small 7-Eleven outlet will take on the new mantle and offer a pared-down merchandise selection.
Retail is highly challenging, says Lord. “Our stores can be open 24 hours, there are high rents, labour costs, utilities and maintenance costs just to operate the business.
“We needed to make changes.”
Store success and expansion
Lord says the transformation has been successful, with stores picking up an extra 300 shoppers from their base of 700 customers.
The transformed stores have reinvigorated franchisees he adds and the cost of refurbishment has been covered by the franchisor.
Across the network there are about 90 corporate stores. “We want every one of our stores to be profitable. There’s nothing that we do not share from corporate stores to franchisees , to make lives easier and more profitable.”
There are 42 new stores opening bringing the total Australian 7-Eleven network to 685 outlets by June 2018.
The business is moving further into regions and into Western Australia, which McKay admits will be a test of the company’s supply chain.
Speed and flexibility are crucial in today’s retail environment and 7-Eleven has adjusted its delivery process to meet these demands, and improve cost efficiencies.
“The next gen supply chain is a life blood for our organisation but we recognised it was not capable of doing what we wanted to do. So we have been devoting time and resources to get it right.”
7-Eleven is trialling innovative services
Refining the offer is crucial to the retailer. So what’s being tried and tested now?
- Fresh baked goods are being trialled in a dozen stores.
- Embracing digital payment is one way the chain will progress but what shape this will take is yet to be determined. One consideration is an app that allows for product to be scanned and payment to be made on the phone with no other checkout interaction.
- Digital screens are being trialled – these can tailor each store’s promotional items according to the most popular purchases at any point during the day, reinforcing the buy-me message to customers.
- 7-Eleven is tapping into the online shopping trend with the trialled introduction of parcel lockers allowing customers to access parcel deliveries from a secure site at their convenience.
- Another idea in the pipeline provides a solution for time-constrained customers and is geared to boosting sales across the quieter times in-store, such as the evening; a ready-meal for instance.
- To asisst stores reach the target of a network store average of 500 coffee cups a day each outlet will have a minimum of two coffee machines operating by June 2019.
Management is “more and more prepared to pull the pin” on innovations if trials prove unsuccessful, says McKay. “The art of retail is finding what’s a good idea.”