Competitive Advantage Through Information Resourcing

7-Eleven Japan: Competitive advantage through information Resourcing

7-Eleven Japan has made information resourcing the key to its success. Because of the unique information resources it offers franchisees, it charges a premium priced franchise royalty rate , 43% of gross profits versus 35% of its closes rival, reflecting a highly successful competitive advantages based on differentiation. 7-Eleven’s use of information emphasizes finding new ways its franchisees or their suppliers can better serve Japanese consumers. As a consultant at the Boston Consulting Group’s Tokyo office puts it, ‘7-Eleven’s system is a learning device’.

At the heart of every one of the 5000 plus stores is a custom designed NEC computer that collects data from each point of sales cash register in the store. This includes not only what was purchased and when, but other data the clerks key in on customers’ sex and estimated age. The computer continually updates and analyzes this data and has it available for use by 7-Eleven’s corporate headquarters; the local store, or suppliers. Corporate headquarters continually taps into the data to see which of the 3000 items stocked by its stores are gaining or losing popularity. One store manager linked the data to weather conditions and discovered the reason why sales of cold noodle dishes were off 19%; now he orders less in cool weather. A Tokyo supplier receives data on what sandwiches are selling and which are still on shelves just 5 hours before its thrice daily deliveries and adjusts shipments accordingly for the 200 stores in its region.

All this is impressive enough, but the chain does not stop here. To maximize learning, the corporate offices at 7-Eleven use the computer network to flash messages to stores through the system about patterns they see marginalizing in trendsetting regions; they also use this analysis to help develop new products, such as a vitamin –enriched drink that proved popular. Another form of learning takes place within individual stores. The software is designed to allow it to provide more accurate estimates and forecasts as it goes along, so, as the ordering and sales process continues, projections grow more accurate. As one observer put it, ‘no other retailer in the world has defined its business so tightly around information’- and the results are impressive. Average daily sales per 7-Eleven stores in Japan are 30% higher than those of its nearest Japanese rival. Even though the average Japanese 7-Eleven is only half the size of its US counterpart, its average per store sales volume is four times as high.