A Bold Step

7-Eleven's DePinto stresses need for innovation, lays out company's new strategy

Abbey Lewis, Editor in Chief, CSProducts

PHOENIX -- There's no denying that 2009 will be a challenge for both consumers and retailers. Stock prices are sinking, housing prices are plummeting, interest rates are fallingbut innovation in the convenience store sector is intensifying. And it is happening because it is a matter of survival, said Joe DePinto, president and CEO of Dallas-based 7-Eleven Inc.

Specifically, DePinto told attendees at the 2009 Convenience Retailing Conference opening general session Sunday in Phoenix that convenience will always be of the utmost importance to the consumer, but it is up to [image-nocss] the retailer to adapt to changing preferences. "Maintaining a conventional approach will not sustain us in the long term," he said.

Last year, customization, premium products and organic produce were the newest trends. Today, "That's out the door," he said. Customers have less discretionary income and they're making purchases based on frugality, weighing value against quality, he said.

Adding insult to injury, convenience stores have more than the competitor down the street to worry about these days, DePinto said, as nontraditional retailers try to gain a foothold in the traditional c-store space.

According to DePinto, there's only one choice: Convenience retailers need new strategies to move the business forward. To that end, he said, 7-Eleven is concentrating on adapting product to customer demand, depending on different points of feedback to determine selection and preference. The chain is also consolidating logistics as well as growing store counts in markets with a high concentration of 7-Eleven stores, such as Chicago.

DePinto addressed the retailer's growing private-label offering, emphasizing the products' high quality and low overall pricing, both of which contribute to a gross profit that is 15% to 20% higher than branded product. "The consumer wins, and we win," he said. DePinto expects the program will grow from the current 31 items offered under 7-Eleven's private-label umbrella to 150 before the end of the year. New products will include paper products, water, batteries, wine and more.

DePinto spoke at length about the company's plan to consolidate logistics. In this "economic landscape, it is truly important that products are getting to our store efficiently," he said. Current DSD systems were designed for big-box stores, he explained, and not for small-format retailers. "The things that make it work for big box [are] why it's tough for us. We have totally different requirements," he said.

To address this issue, DePinto declared 7-Eleven's commitment to logistics efficiencies. The goal, he said, is to reduce the number of deliveries and place them on a more rational schedule, wherein like products are delivered on the same day. Consolidated daily delivery has been in place at 7-Eleven for a while, DePinto said, and it's working very well. In fact, 7-Eleven has implemented a 400-store pilot plan in Los Angeles that incorporates the company's strategy of logistics consolidation.

Wrapping up, DePinto encouraged attendees to put themselves in a position to meet the needs of customers looking for convenience by adapting to their changing needs and behaviors. He said, "What we've done in the past might not work in the future."

Abbey Lewis of CSP By Abbey Lewis, Editor in Chief, CSProducts
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