Combini : The success of 7-Eleven in Japan

(via Time) The article captured my attention because I firmly believe, innovative service business models are built harnessing information technology. Combini is the term for convenience stores and Japan has 40,000 of them of which 9,800 are 7-Elevens. Founded in 1927 in Dallas, Texas, 7-Eleven stores started out as a true-blue American invention and has only 5,700 of them in continental U.S. These stores have become the neigbourhood nexus in many towns and urban communities in Japan.

The post-war industrial success of Japan is attributed to comapnies like Toyota, Honda, Sony and 7-Eleven is rarely mentioned. With total sales in Japan of $18.5 billion and profits of $1.3 billion, 7-Eleven today is Japan’s No. 1 food retailer and the country’s most profitable retailer overall. The foundation of this service and innovation engine is highly dependent on Information Technology.

The company today uses a satellite-based ordering system that includes detailed weather information—so managers know to order more cold noodles on warm days or more fresh produce on rainy days to accommodate customers postponing a trip to the grocery store. “The sophistication of their IT system is unparalleled,” says JP Morgan’s Tsukazawa, noting that inventory response times can often be measured in minutes. “7-Eleven is always stocked with the freshest food, both on- and off-peak hours. Other stores’ shelves are often empty after lunchtime.” Multimedia training modules are used to bring new employees upto speed on using systems and achieveing service levels.

Japanese consumers are notoriously fickle. 7-Eleven doesn’t ponder why, it just responds. Technology just makes it easier to respond and that’s the reason Japanese customers have two categories of Combini—7-Eleven, and all the rest.”