Case Study $-$ Seven$-$Eleven Japan Co$.$

Established by Ito Yokado in $1973,$ Seven$-$Eleven Japan set up its first store in Koto$-$ku$,$ Tokyo, in May $1974.$ The company was first listed on the Tokyo Stock Exchange in October $1979.$ On September $1,2005,$ Seven & i Holdings Co$.$ Ltd$.,$ was established as the holding company for Seven$-$Eleven Japan, Ito$-$Yokado, and Denny$$s Japan. As a result, detailed financial results for Seven$-$Eleven Japan have not been available since then and are reported only as the convenience store portion of Seven & i Holdings. Seven$-$Eleven Japan realized a phenomenal growth between $1985$ and $2016.$ During that period, the number of stores in Japan increased from $2,299$ to more than $19,000.$ Globally, the firm had more than $60,000$ convenience stores by September $2016$ and was the world$$s largest chain in terms of retail outlets. Global revenues for Seven & i from convenience store operations were $2,675$ billion yen in $2016$ with an operating income of $352$ billion yen. The firm opened over $1,600$ new stores in Japan in $2016.$ Customer visits to Seven$-$Eleven outlets averaged more than $1,000$ per store per day in $2013.$

Company History and Profile $-$

Both Ito$-$Yokado and Seven$-$Eleven Japan were founded by Masatoshi Ito. He started his retail empire after World War II$,$ when he joined his mother and elder brother and began to work in a small clothing store in Tokyo. By $1960,$ he was in sole control, and the single store had grown into a $$3$ million company. After a trip to the United States in $1961,$ Ito became convinced that superstores were the wave of the future. At that time, Japan was still dominated by mom$-$and$-$pop stores. Ito$$s chain of superstores in the Tokyo area was instantly popular and soon constituted the core of Ito$-$Yokado$$s retail operations. In $1972,$ Ito first approached the Southland Corporation about the possibility of opening SevenEleven convenience stores in Japan. After rejecting his initial request, Southland agreed in $1973$ to a licensing agreement. In exchange for $0\mathrm{.}6$ percent of total sales, Southland gave Ito exclusive rights throughout Japan. In May $1974,$ the first Seven$-$Eleven convenience store opened in Tokyo. This new concept was an immediate hit in Japan, and Seven$-$Eleven Japan experienced tremendous growth. By $1979,$ there were already $591$ Seven$-$Eleven stores in Japan; by $1984,$ there were $2,001.$ Rapid growth continued $,$ resulting in $19,166$ stores by $2016.$

On October $24,1990,$ the Southland Corporation entered into bankruptcy protection. Southland asked for Ito$-$Yokado$$s help, and on March $5,1991,$ IYG Holding was formed by Seven$-$Eleven Japan $(48$ percent$)$ and ItoYokado $(52$ percent$).$ IYG acquired $70$ percent of Southland$$s common stock for a total price of $$430$ million. In $2005,$ Seven & i Holdings was established through a stock transfer combining Seven$-$Eleven Japan, ItoYokado, and Denny$$s Japan. In $2015,$ convenience store operations from Seven$-$Eleven Japan and other subsidiaries in North America and China contributed $44\mathrm{.}3$ percent of total revenues from operations and $88\mathrm{.}6$ percent of operating income for the Seven & i Holdings Company $($see Table $3-5$ for details$).$ The relative performance of convenience stores within Japanese operations was even more dominant. The discrepancy between Tables $3-4$ and $3-5$ results because Table $3-4$ reports sales at both company$-$owned and franchised stores, whereas Table $3-5$ reports revenues for only Seven & i$.$

Study Questions

$1.$ A convenience store chain attempts to be responsive and provide customers with what they need, when they need it$,$ where they need it$.$ What are some different ways that a convenience store supply chain can be responsive? What are some risks in each case?

$2.$ Seven$-$Eleven$$s supply chain strategy in Japan can be described as attempting to micro$-$match supply and demand using rapid replenishment. What are some risks associated with this choice?

$3.$ What has Seven$-$Eleven done in its choice of facility location, inventory management, transportation, and information infrastructure to develop capabilities that support its supply chain strategy in Japan?

$4.$ Seven$-$Eleven does not allow direct store delivery in Japan but has all products flow through its distribution center. What benefit does Seven$-$Eleven derive from this policy? When is direct store delivery more appropriate?

$5.$ What do you think about the $7$ dream concept for Seven$-$Eleven Japan? From a supply chain perspective, is it likely to be more successful in Japan or the United States? Why?

$6.$ Seven$-$Eleven is attempting to duplicate the supply chain structure that has succeeded in Japan into the United States with the introduction of CDCs$.$ What are the pros and cons of this approach? Keep in mind that stores are also replenished by wholesalers and DSD by manufacturers.