Taking a store-centric approach

5/31/2011 - Not every CEO would be willing to work a convenience-store night shift to learn more about day-to-day operations, let alone do so on national television.

But Joe DePinto ’99, president and CEO of 7-Eleven, did just that and showed a clip of himself on the CBS show “Undercover Boss” as part of his “Championing Change at 7-Eleven” talk at the Kellogg School.

“We try to be a neighborhood store,” DePinto said to a packed audience May 25.

This neighborhood philosophy includes tailoring the offerings at each individual store by using a sophisticated data system that analyzes which items are selling and allowing owners to stock a more targeted product mix. DePinto said that 7-Eleven changes the product assortment every week based on new data.

“In a thin-margin business, we have to turn the products,” DePinto said. “We have to be efficient at knowing exactly what their needs are and stock our stores with it.”

Stores utilizing this data system are posting sales 43 percent higher than before.

The chain, which has more than 41,000 locations in 16 countries, is opening a new store every three and a half hours, and growing mostly through franchising and partnering with existing stores, whose owners already have relationships with shoppers.

“We gain a competitive advantage from the intimacy the owner/operator has with the customer,” DePinto said.

On the supply side, 7-Eleven wants to reduce costs and improve efficiency by completely transforming the delivery system. “There are lots of dollars tied up in the current distribution system,” DePinto said.

Currently, 60 trucks per week deliver to stores from individual vendors, an inefficient, supplier-driven model. DePinto wants the company to move to a retailer-driven model, where vendors deliver to a centralized distribution center and 7-Eleven then delivers items to stores in its own trucks. Although suppliers have been reluctant, 7-Eleven has successfully piloted this model in Los Angeles.

The chain has introduced other changes, including a line of branded value products, new beverage bars and hot foods, all to combat competition from grocery stores and fast-food restaurants as well as respond to customers who want more bang for their buck.

Kellogg student Tom Blank ’12 said the speech shone a light on the unexpected complexities of the convenience-store business. “It’s a different perspective, a granular perspective, that gives a sense of how difficult it can be to run what we think of as a simple system, and [that] a thoughtful approach to that makes a huge difference,” Blank said.