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in fact, it’s going to be the absolute norm,” DePinto says. “We need to be fully part of Joe DePinto has a chart. TORthat value chain.” On this chart, he and his team at the The c-store channel’s value has always 7-Eleven Inc. headquartersI in Irving, Texas, been helping people get places by fueling Dare plotting major disruptive moves across vice they provide. What they offer the con- their cars and bodies. But as that dynamic all sectors of . TheyS are ready, deter- sumer is so transformative that it displaces changes, can it adapt? And how is its No. 1 mined to be a part of what’s to come. (And RUPtraditional providers—companies that don’t chain—a disruptor itself that helped launch no, they won’t share the chart.) understand what business they are really the entire industry—poised to lead the “Our industry’s perspective early on was in and that define themselves according to charge? that we were somewhat insulated from what their product and channel, rather than the was going on,” DePinto, president and CEO value they should be creating. Rules of Engagement of 7-Eleven, told CSP in an interview held And then there are convenience stores. s Amazon, Wal-Mart and others shortly after the retailer signed a deal to ac- On the evolutionary tree, what began as wage a war to become the fastest, quire more than 1,100 stores from Sunoco LP. service stations branched into gas stations, easiest and cheapest retailer in “It had been my perspective that some which morphed into convenience stores, AAmerica, many battles are occurring di- of the disruptors would zero in on immedi- which are now changing into restaurants. rectly on c-store turf. The threats are broad ate consumption,” DePinto says. “It’s the And predictions loom large that more fu- and looming, but 7-Eleven has the potential last area that they haven’t been able to fully el-efficient vehicles, electric vehicles and to meet this disruption perhaps more than crack.” autonomous vehicles will greatly reduce or any other retailer. It has a technology-savvy Amazon, Apple, Netflix, Netscape, Uber even end the need for gas stations. The fu- C-suite, a Japanese parent company willing and even Wal-Mart have all been tagged els might be different; however, the laws of over time as disruptors, agents of change by demand, supply, biology and physics aren’t. virtue of the new and suddenly essential ser- “I don’t see [disruption] slowing down; BY GREG LINDENBERG, MITCH MORRISON AND ANGEL ABCEDE / ILLUSTRATION BY ADAM SIMPSON

june 2017 csp 23 “ THE ORIGINAL DISRUPTOR Immediate consumption to invest in American growth, deep satu- acquisitions, and [and] they tend to be moving toward more is the last area er retailers struggling to compete against ration across key markets throughout the in 1982, Southland urban areas. They’re not shopping brick- the speed and seamlessness of digital con- , and a brand that resonates acquired CITGO and-mortar as much, and when they do, [some disruptors] sumerism: time, immediate consumption, with its core customer. Petroleum, which they’re looking for more of a one-stop shop. haven’t been able human experience and foodservice. Steve DeSutter believes it. DeSutter, it sold to Petroleos And they’re very demanding and discerning “Many disruptors can only offer a trans- who was president and CEO of the Stripes de Venezuela in DePinto (right) advises his around quality and what they’re going to pay to fully crack.” action, but convenience-store retailers have retail network before becoming CEO of 1990. That same team to avoid chasing for that quality.” the ability to offer more,” says Tedeschi, quick-service restaurant (QSR) company year, the heavily in- the competition: “Have Understanding that customer means who sold his 182-store, Rockland, Mass.- Focus Brands Inc., Atlanta, sees 7-Eleven debted Southland your own perspective, figuring out what many call the “last mile,” based chain to 7-Eleven in 2015. “They have already exploring new ways to expand the filed bankruptcy understand the external which completes the circuit between retailer scape looks like, but where the consumer the opportunity to offer an experience. For definition of convenience for its customers. to transfer control environment.” and consumer. is going—and then have your own point of a lot of people, that personal interaction is “The consumer of today and tomor- of the company DePinto believes a mile is too far of a met- view and plans and strategies. In that sense, indispensable. That’s not something you’re row wants to have relationships with their to Japanese affiliate Ito-Yokado. In 1999, 7-Eleven’s strategy today, says DePin- ric. “It’s really the ‘last several blocks,’ ” he we have been a bit of a disruptor ourselves,” going to get ordering online.” brands. Consistency, reliability and authen- Southland changed its name to 7-Eleven to, is “first and foremost to understand the says. “It could be in the form of order and says DePinto. Tedeschi, who calls retailers such as ticity represent … a brand’s expression,” De- Inc. In 2005, Ito-Yokado formed Seven & i customer.” pickup; stopping in if you’re passing by or it’s One big differentiator 7-Eleven has Wal-Mart “price-competitive fulfillment Sutter says. “With [7-Eleven’s] scale, passion Holdings Co. Ltd. and 7-Eleven became its That’s nothing new. But what is new is on your route or part of your normal pattern; against other big industry players is its re- houses,” is confident that 7-Eleven will and global world view, they’ll figure out how subsidiary. the recognition that the rules of engage- or delivery, and then allowing you to pay how liance on the forecourt—or lack thereof. continue to adapt and evolve to meet to be a of choice.” Since then, 7-Eleven has expanded glob- ment have changed. Omnichannel is no you want. That just scratches the surface. DePinto estimates that only 40% of its the latest competitive threats. “Joe’s a 7-Eleven has a history of resilience and ally, reaching more than 62,000 stores in 17 longer bleeding-edge or forward-thinking. That will be table stakes to get in the game.” portfolio offers fuel, compared to its clos- very smart leader, and 7-Eleven has had adaptability. What started out as the South- countries, including approximately 10,900 It’s now, and it’s disruptive. C-stores “are perfectly positioned to de- est competitors at about 90%. If long-term many years to establish itself as a trusted land Ice Co. in the 1920s became Tote’m in North America. It has grown domestical- “We see ourselves as a neighborhood liver on those consumer demands because fuel consumption follows downward pro- brand,” he says. “These facts, combined Stores, selling bread and milk. It soon ly through a series of acquisitions, among store,” DePinto says. “And we’re trying to be our inventory is so close to the customer. jections, 7-Eleven’s focus on the box could with their depth of talent and impressive added gasoline, and in 1946, the company them 261 White Hen Pantry stores in 2006, closer and more convenient to the customer. That’s why you see all of the big boxes try- help propel its evolution. back-office analytical capabilities, will changed its name to 7-Eleven to reflect the 188 Wilson Farms stores in 2010, 163 TET- That’s our strength.” ing to move toward smaller boxes,” he says. “Our DNA started in retail. … We think allow them to assess the situation and stores’ hours of operation (which eventually CO stores in 2012, 143 Speedy Stop and Ti- More than 50% of those customers are DePinto advises his team to avoid there’s a difference there,” DePinto says. position themselves in a way that would grew to 24 hours, but by then, the name had germarket stores in 2013 and 180 Tedeschi millennials, he says: “They are really lead- chasing the competition. “Have your own Peter Tedeschi, former owner of Tedes- mitigate the threat posed by disruptors.” stuck). Food Shops in 2015 before acquiring Stripes ing change. They are more on the go, more perspective, understand the external en- chi Food Shops, cites four key ingredients The company grew through several large and other stores from Sunoco. time-starved, they’re eating differently vironment—not only what the entire land- that should differentiate 7-Eleven from oth- A History of Disruption 7-Eleven progenitor A 7-Eleven location Southland essentially near a university 7-Eleven begins created the convenience in Austin, Texas, offering Amazon store by disrupting stays open all night lockers, which allow the ice business, to accommodate consumers to buy demonstrating that the students. The 24/7 products from the The retailer launches value you offer is more idea is a hit and online retailer and the 7Rewards important than soon catches on have them delivered mobile app and the product you sell. in other locations. to the c-store. loyalty program. 1927 1937 1946 1963 1965 1976 2011 2013 2015 2016 To make life a Southland Ice Co. The name changes 7-Eleven debuts The chain introduces The chain partners The chain begins 7-Eleven achieves little easier on his president and founder from Tote’m Stores the Slurpee frozen the 32-ounce Big Gulp with key-duplication offering online the first fully customers, Jefferson Joe C. Thompson Jr. to 7-Eleven to reflect drink and the world’s fountain drink. kiosk service KeyMe. ordering and delivery autonomous drone “Uncle Johnny” Green takes Green’s idea to the stores’ new extended first coffee to go. in select markets delivery from a has the idea to start other local ice docks. hours: 7 a.m. to 11 p.m., through partnerships retailer to a customer’s selling everyday Within a decade, seven days a week. with Postmates, home. The Reno, staples from the dock locations selling DoorDash and Tapingo. Nev.-area 7-Eleven of a local icehouse the new product line delivered Slurpees, a in Dallas. The world’s triple in numbers. chicken sandwich, first “convenience The new convenience doughnuts, hot coffee store” is born. stores are called and 7-Select candy. Tote’m Stores.

24 csp June 2017 june 2017 csp 25 THE ORIGINAL DISRUPTOR Drone On echnology is the electricity of disrup- Stripes’ success was now CEO of Focus Brands, Atlanta. “I think they’re tion. It powers the changes that com- due in no small part to its looking at this acquisition panies such as Amazon are bringing to Mexican food brand, as a way to further their Tretail, and it is what c-stores must harness to Laredo Taco Company. understanding of food and stave off the brick-and-mortar apocalypse. how to better integrate it 7-Eleven’s own consumer-facing tech- concept a lot.” into their business model.” nology initiatives range from strategic But like any other But foodservice hasn’t T imes file h: Caller- shifts to smaller, see-what-sticks ideas. It foodservice concept, always been a cultural John has followed the big surge of restaurants DePinto says, “it has got to strength of 7-Eleven. be right for the consumer. Matthews, now president offering mobile ordering, pickup and deliv- … Whether we can expand and CEO of Gray Cat p Photogra ery in select markets (with partners such as it outside of Texas, time Enterprises Inc., Wake Postmates, DoorDash and Tapingo in about will tell, but I do think Forest, N.C., was vice 30 markets), while continuing to bolster its Tex-Mex will resonate with president of marketing and 7Rewards app program, which has more The Fate of Laredo the consumer outside of merchandising for Clark than 700,000 members, and offers a free aredo Taco Company Texas. It’s just a question Retail Enterprises/White has become proof of where.” Hen Pantry from 1996 to drink for every six purchased. of the potential of a In 2016, Sunoco began 2003. 7-Eleven acquired the It has also explored another disrup- c-store foodservice to test Laredo Taco outside Lombard, Ill.-based White tion darling—vending—through KeyMe brand. With the of Texas, opening locations Hen Pantry chain in 2006, key-making and Key Cafe key-exchange Lshift in ownership of the near Pittsburgh and and with it, its reputation kiosks, premium-salad vending machines Stripes stores, Laredo’s Nashville. Steve DeSutter, for solid in-store delis. from Farmer’s Fridge, and even pickup lock- future now lies in former president of the “With an iconic brand ers from partners Amazon and UPS. 7-Eleven’s hands. Stripes retail network, like White Hen, it was “I’ve always admired speculates that 7-Eleven, all but forgotten in lieu Most notably, 7-Eleven is also experi- Sam Susser and what rather than roll up Stripes of commonality to the menting with drones, making a mark and he and his team built at in a traditional manner, 7-Eleven brand as well as even beating Amazon in July 2016 with the Stripes,” says 7-Eleven could elevate it from its its systems and processes. first fully autonomous drone delivery from a President and CEO Joe current market positioning. Managing multiple retailer to a customer’s home. To date, it has DePinto. Susser’s Susser “I think there’s a good platforms is probably not made 77 deliveries with the help of Reno, Holdings established the chance they’ll use the in the cards for 7- Eleven,” Matthews says. Nev.-based Flirtey. Stripes chain and was Stripes/Laredo Taco as “I would acquired by Sunoco parent a platform for the next expect that the Stripes “Drone delivery is the ultimate conve- ETP in 2014. “Laredo Taco generation of 7-Eleven,” chain will eventually be nience for our customers, and these efforts is part of that. We like the says DeSutter, who is ‘7-Eleven-ized.’ ” create enormous opportunities to redefine convenience,” said Jesus Delgado-Jenkins, executive vice president and chief mer- be a convenience service. And it will allow A Big Bite chandising officer for 7-Eleven, at the time. for very quick delivery of product. For us, it’s hange used to be somewhat incre- “We plan to make the entire assortment in R&D, and understanding it, being prepared. “ mental. Now it’s happening in big our stores available for delivery to custom- But I can tell you that it does resonate with bites,” DePinto says, unconscious- ers in minutes.” the consumer.” ly Creferencing 7-Eleven’s trademarked Big While drones seem like a novelty now, He predicts that drones could be main- Bite, the foodservice sibling of the Big Gulp 7-Eleven is betting they will become a reg- stream in as little as 10 years. fountain beverages. ular, necessary element of retailers’ offers. “Whoever can deliver product fastest to He is referring to technological change, “Drone delivery is going to happen; it’s the consumer is going to win, and drones are but 7-Eleven Inc.’s more than $3.3 billion just a matter of time,” DePinto says. “It will going to be part of it,” says DePinto. purchase in April 2016 of approximate- DePinto also believes that—like drones— ly 1,100 company-operated convenience autonomous vehicles will play a part in the stores in 18 states from Sunoco LP was also delivery equation. a big bite, its largest acquisition ever. It also “It’s about building a whole ecosystem delivered 7-Eleven the trademarks and in- “Change used around who we partner with and what digi- tellectual property of the Stripes c-store tal resources they bring, and how we can play brand and the Laredo Taco Company food- to be somewhat a role in that,” he says. “Partnering with the service brand, which Sunoco gained when it incremental. major automakers and Lyft and Uber is going purchased Susser Holdings Corp. for about to be important. Are we on their touchscreen $1.9 billion in 2015. (See sidebar, above.) Now it’s happening in their car? Is the app there? Can they quick- 7-Eleven is taking advantage of Sunoco’s in big bites .” ly know where there’s a local 7-Eleven?” shift in focus away from retail and toward

june 2017 csp 27 THE ORIGINAL DISRUPTOR Scale Matters 7-Eleven is open for business in 34 states. wholesale fuels distribution to add a sizable WA NH chunk of stores to its network of more than VT ME 8,300 stores. The Sunoco sites are primarily OR in Texas and along the East Coast: about 550 ID WI NY in Texas, 450 in New York and 110 in Florida. MI MA CT “It’s a win for both parties,” says Den- IA PA RI nis Ruben, executive managing director of NV OH NJ IN NRC Realty and Capital Advisors, Chica- UT IL CA CO WV VA DE KS go. “It’s clear that 7-Eleven wanted to grow MO KY MD dramatically in North America. It seems NC like an opportunity to add a lot of stores in AZ Headquarters in Irving, Texas SC one transaction, expand in markets they’re already in and ones they’re not in.” It’s also a win for Seven & i. In Japan, Sev- TX en-Eleven Japan has approximately 19,000 FL convenience stores, but sales growth is MAJOR 7-ELEVEN slowing in the face of a declining popula- ACQUISITIONS tion and fiercer competition. The company 1964 Speedee Mart (126 stores in California) 2013 Speedy Stop/Tigermarket (143; Texas) forecasts that profits in its domestic c-store 2006 White Hen Pantry 2015 operations will remain flat. (261; , ) (180; Massachusetts) In its presentation of its financial re- 2010 Wilson Farms (188; New York) 2017 Pending: Sunoco company-operated c-stores sults for fiscal 2017, Seven & i said its 2012 TETCO (163; Texas) (1,100; Texas, New York, Florida) medium-term goal is to “concentrate man- agement resources with a core focus on growth in convenience-store operations in store—on average about 2,000 square feet— crucial tool to help the chain evolve its food- both Japan and North America. Its first year over four times a day by daypart,” he says. service stateside. of initiatives will be to establish an unri- “You’re a Tim Hortons in the morning, a Mc- DePinto calls Seven-Eleven Japan’s valed lead in domestic and overseas conve- Donald’s in the afternoon and a Whole Foods foodservice program “world-class.” But he nience-store operations.” at night. And then a 7-Eleven at midnight.” points out that Japanese consumers are far “We came to the decision that we like Japanese retailers are also making moves more accustomed to grabbing on-the-go the U.S. market,” says DePinto, who sits on technologically, with companies such as meals from the nearest c-store. “We’ll take the Seven & i board. “We think that there’s 7-Eleven investing in radio-frequency iden- advantage of being part of the same orga- room for expansion here.” tification (RFID) to track and potentially nization, taking some of the best practices The short-term goal is to get to 10,000 sell goods. Such technology could allow for that they do and applying them to the U.S. U.S. stores by 2019; by 2027, he says, the people to grab an item and leave the store market,” he says. company hopes to hit 20,000. without stopping to check out, much like the technology buzzing around . Well Prepared Not Made in Japan Such a service runs parallel to the quick- rom its industry-spawning, icehouse recent series of leadership meet- and-easy shopping experience that defines origin to a tech-savvy present promis- ings led by NACS in Japan provide Japanese c-stores. Food is not the only draw, ing to usher in its leader’s drone-filled some insight into how that country’s with banking, ATMs, copiers, ticket reser- Fvision for the future, 7-Eleven continues to Ac-store culture might help 7-Eleven ride the vations, digital-camera prints, bill payment create its own waves of change to dominate disruption wave. and Wi-Fi all popular options, Taylor says: the c-store industry. The company’s for- Gray Taylor, executive director of Con- “They’re selling convenience, not stuff.” ward-looking strategy has it well-positioned exxus, Alexandria, Va., was on that visit. Seven-Eleven Japan could also provide a to face the disruption that retail juggernauts With Conexxus as NACS’ main technology such as Amazon and Wal-Mart have brought advisory group, Taylor was curious about to the doorstep of the convenience channel. supply chain and just-in-time delivery. The Whether they go beyond the lab or remain infrastructure around the nation’s 55,000 curiosities, will those perceived threats be- c-stores is about “fast and fresh,” he says. come opportunities? Is the c-store channel “It’s a dense population of stores that, for “We came to as prepared as 7-Eleven for what’s to come? the most part, don’t have fuel,” Taylor says. the decision “It’s not our goal to disrupt,” says DePin- “Supporting that density is a pervasive net- to. “It’s our goal to deliver on what the con- work of central kitchens, distribution cen- that we like the sumer wants, but some have been slower to ters and food trucks, essentially turning the U.S. market .” do that than others.”

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