7-ELEVEN EVOLVING

Convenience chain continues to invest in innovation, and is about to roll out a new look in Australia.

This convenience chain is rolling out a new look in Australia.

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 in Australia.

CEO Angus McKay tells Inside Franchise Business, “We’re investing in becoming better retailers. We want people to have a business that’s healthy and makes money.”

He says the brand this year gained a 66 per cent net promoter score, and says there is a need to be pragmatic about the math in stores. “The challenge is to get customers to spend more, buy more and come back more often.”

Innovations are part of the DNA now at 7-Eleven, he says, with a try-and-fail attitude central to the brand’s development. Actions include turbocharging 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 of 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.

NEW LOOK

As part of the process of working toward the goal of becoming the premier retailer in Australia, a new look has been unveiled for smaller, urban stores. “Our vision comes back to what makes life easier for customers and easier for store operators,” says McKay, noting that customers today want a different retail experience from the traditional convenience purchase.

With 32.1 per cent market share on the eastern seaboard, up 2.1 per cent from last year, 7-Eleven claims to be the fastest-growing convenience-store chain in Australia. • Fuel retail has accounted for more market

share, up 8.5 per cent.

• Merchandise has risen 10 per cent with

like-for-like sales up 5 per cent. • Strong customer growth has seen transaction numbers rise by 5 per cent.

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 says, citing 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. We need to offer good value and good service.”

SENSORY EXPERIENCE

And the transformation is not just about shifting the product focus in-store. The outlets themselves look markedly different.

In stark contrast to the white, bright décor of a traditional 7-Eleven store, the new-look fit-out is a much darker hue, with black walls creating a warmer, more upmarket feel and, says GM for 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 signs.

“It’s about the customer sensory experience,” says Lord, noting that convenience shopping today is not about buying a can of spaghetti or a band aid, though people do still buy 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. A larger area has been dedicated to Krispy Kreme.

Typical sites to be refurbished will include non-fuel outlets in high-transit areas such as universities and transport hubs. The convenience chain aims to provide the value-for-money options today’s customers want 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 next fiscal year. The convenience chain expects to have about 110 CBD-style outlets.

HIGHLY CHALLENGING

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 pareddown merchandise selection of 900 SKUs rather than the traditional 1600 SKUs.

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 run the business. We needed to make changes.”

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 says, 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 we do not share from corporate stores to franchisees , to make lives easier and more profitable.”

With 42 stores opening, the total Australian 7-Eleven network was approximately 680 stores in June. The business is moving further into regional areas and into Western Australia, which McKay admits will be a test of the company’s supply chain.

COST EFFICIENCIES

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."

As refining the offer is crucial to the retailer, what is being tried and tested now? • Fresh-baked goods are being trialled in a

dozen stores.

• Embracing digital payments 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 receive parcel deliveries from a secure site.

• Another idea in the pipeline is geared toward boosting sales across the more quiet times in-store, such as the evening.

• To help stores reach the target of a network average of 500 coffee cups a day, each outlet will have a minimum of two coffee machines in use by June next year.

Management is “more and more prepared to pull the pin” on innovations if trials prove unsuccessful, says McKay. “The art of retail is finding a good idea.”

Agility is an essential element of today’s retail scene, which McKay describes as ‘brutal”. “You have to be patient and really be on your game and know what the customer wants, and be prepared for them to change their minds.”

FIRST CHOICE

Looking beyond retail, the vision for the business is to be the first choice in terms of customer preference and market share. To bring this to fruition, the business needs to grow sustainable profit and business value, double the gross profit delivery in its emerging categories, exceed community expectations and work to a high standard as well as maintain a highly engaged workforce.

Six customer strategies devised last year are still the top priorities for consumer development: good value, energised stores, to be known for new and exclusive items, customer experience, famous for Food on the Go, credible for healthy options.

The chain’s financial goals are to protect and grow shareholder returns, to achieve sustainable growth in profits for the stores, realise the value from acquisitions and optimise the cost of doing business.

“We need to find ways to put time back to people in-store, provide greater efficiencies and processes,” says McKay.

The innovation is not all product focused. The launch of the 7-Eleven Good Cause giving program aligns the convenience store’s partnerships with charitable organisations. “Good Cause will give a home to all our charitable activities and add new and exciting projects that will see us, as an organisation and as individuals, inject greater capacity into incredible charities already doing great work for Australia.”

Partners include Second Bite, which rescues and redistributes surplus fresh food to more than 1200 community food programs around the country. 7-Eleven will help develop a new model of distribution that will focus on capacity building and establishing new collection points.

AMES Australia is the convenience chain’s migrant partner. The collaboration will focus on providing opportunity for economic independence.