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Running head: 7-ELEVEN IN TAIWAN

7-Eleven in Taiwan Yuko Matsumuro National Chengchi University

7-ELEVEN IN TAIWAN

Abstract Nowadays, convenience stores have become more and more common in Taiwan. If you just look around everywhere, you will soon find there are a lot of convenience stores surrounding your town. Among several convenience store chains, 7-Eleven, or the President Chain Store Corporation, is the most popular one now. The paper focuses on why 7-Eleven is so successful in Taiwan and pursuits what is behind it. At the beginning, to understand the position of 7-Elevens parent company Uni-President Enterprise Corporation (UPEC) in Taiwan, and investigate how it influence the success of 7-Eleven. Also, based on the data which showed the consumers satisfaction towards 7-Elevens service, to consider how 7-Elevens service performances are evaluated by consumers and what kinds of management manuals they have. In last, the paper will discuss the influences of 7-Elevens special marketing geographical strategy and their advertisement effects on consumers. These information will help us know why 7-Eleven can continue to improve.

7-ELEVEN IN TAIWAN

Why 7-Eleven succeed in Taiwan? Introduction According to the article Taiwan Convenience Stores 2010, In 2009, Taiwans four major convenience store chains such as 7-Eleven, Family Mart, Hi-life, and OK operated a total of 9,184 stores around the country, a density of one store per 2,500 people, making Taiwan the densest market in the world in terms of convenience stores. Among several convenience store chains, 7-Eleven is the most popular one in Taiwan now. To think about the history of Taiwanese convenience stores, according to the article The Development and Trend for Convenience Stores from Managing Convenience Stores Theories, the Uni-President Enterprise Corporation (UPEC) had contributed the great role to the development of convenience store in Taiwan (Department of Economy, 2000). In May 27, 1979, UPEC stated with fourteen chain stores and in this year, UPEC cooperated with the Southland Corporation, having the longest history and the biggest chain convenience store Company in South America, imported 7-Eleven to Taiwan (Department of Economy, 2000). The first 7-Eleven in Taiwan opened in 1980 with 27 stores and the sale of this year was just only NTD 1.2 billion. Although 7-Eleven grew 62 stores in 1984, the sale still did not improve a lot, and 33 stores had been closed in this year (Lu and Luo, 2010). Nevertheless, the 7-Eleven company did not stop to increase the number of stores; in 1987 they started to work 24 hours with all 168 stores. Since this turning point, 7-Eleven started to expand their business and in April 2010, 7-Eleven expanded with 4733 chain stores with a sale of NTD1017.6 billion in a year (Lu and Luo, 2010). This paper will explore these following questions: 1. Why 7-Eleven is so successful in Taiwan?

7-ELEVEN IN TAIWAN

2. Does 7-Elevens parents company the Uni-President Enterprise Corporation (UPEC) role relates to the success of 7-Eleven? 3. What kinds of strategies 7-Eleven has? It is valuable to study why 7-Eleven can continue to improve and understand their strategies and backgrounds. What is the Uni-President Enterprise Corporation (UPEC)? First of all, to understand the position of 7-Elevens parent company Uni-President Enterprise Corporation (UPEC) in Taiwan, and investigate how it influence the success of 7-Eleven. According to the article The Revenue for UPEC in April is 41.92 billion and increasing annually by 7.41%, The whole profit-making of UPEC in April recorded NT41.92 billion, its increased 7.41% from last year at the same time (Yang, 2011). Uni-President Enterprise Corporation (UPEC) is the only company in Taiwan, which has many kinds of food manufacture branches, and dozens of products can be made through only one branch (Chang, 2006). Major domestic subsidiaries of UPEC are such as 7-Eleven, Starbucks Coffee Company, Mister Donuts, Muji (Taiwan) Co., President Drugstore Business Corp. (COSMED), President Transnet Corp., Semeur De Pain and so on. We can see there are so many subsidiaries under the UPEC and each of them quite popular companies in Taiwan now. While adequately integrating the subsidiaries of retail, logistics and recreational service companies within the group, rapidly expanding its business territory (Uni-President, 2007). The subsidiaries of UPECs business tie-up increased their business territory, and made UPEC more powerful company. In 2005, the profit-making of the food industry UPEC exceeded over NTD 1,000 billion (Chang, 2006). The food industry of UPEC is one of famous company in

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Taiwan, if you look around 7-Elevens food categories, you will soon found a lot of them are from its company. Now, we know such big food industry behind 7-Eleven, is it related to the success of 7-Eleven? Food is important role in convenience store In the article The Almighty Convenience Store, 7-11 and Family Mart Competes, E-IPC, the research of Taiwanese people whose frequency to visit convenience stores which stated from 1988, suggested those who answered once a week was 53.1% in 1995; in 2009, those who answered to go there every week was 84.7%, among them, the sum of those who answered three times a week and once a week was 50%, answered going everyday was 34%, surprisingly, those who answered visited over twice a day was 7.3% (Marketing.chinatimes.com, 2010). The age of main consumers who spend money in convenience store is 13 to 64, the E-IPC in 2006 to 2009, shown that those who answered visiting there every day was increased 30.8 to 34% (Marketing.chinatimes.com, 2010). From the data, we can see nowadays people visit the convenience stores more often than before. Then, what kind of people have become regulars nowadays? The article shows that the Taiwanese population is mostly working class; they at least buy two takeout meals per day, and these two meals are mostly breakfast and lunch (Marketing.chinatimes.com, 2010). Now, we know the main consumer of convenience store is the working class people and their needs are food. According to the article Local Convenience Stores' development and future in 2008, the data of The Private Brand of four big convenience stores in Taiwan(Table 1) shows that 7-Elevens main products such as Drinks, fresh food, snacks, coffees, daily commodities, all of them comes from UPEC company or their own 7-Eleven brands (Wang. 2008). As to Family Mart, their main products are the Fresh food and drinks, Hi-Lifes are the Fresh food and dairy products, and OK is the Fresh food 5

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(Wang. 2008). Only Fresh food come from their own brands in Family mart, Hi-Life, and OK, and we can see 7-Eleven has more many kinds of main products than others because of the support of UPEC.

Table 1 The Private Brand of four big convenience stores in Taiwan (2008) Company Brands 7-11 CITY CAF Family Mart Hi-life Main products Notes

7-Eleven

Drinks Fresh food All products come from UPEC Snacks company or their own 7-Eleven Coffees brands Daily commodities Drinks Fresh food Drinks Daily commodities Fresh food Fresh food comes from their own Fami brand Fresh food comes from their own Hi-life brand Fresh food comes from their own OK brand

Fami

Hi-life

OK

OK

Extended menu offerings have successfully increased the importance of convenience stores foodservice offering. The company derives its share from its convenience stores, under the brand 7-Eleven. At the end of 2009, there were 4,750 outlets, 7-Eleven may be considered to be the pioneer in introducing convenience stores fast food in Taiwan, and has since constantly innovated with the launch of new products (Euromonitor international. 2010). Besides, Family Mart said the sale of fresh food items currently accounts for only 12 percent of its revenue. In Taiwan, the industry average is 20 percent (Business weekly. 2010), compared with other convenience

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stores, Family Mart provides less food and it may give distance with 7-Eleven high sale because peoples needs are food. Then, how does the CVS chain store attracts the customers and creates non stopping motives for them to buy? There are two prospective on this; one is the products that they are currently selling. With the penetration of the stores, expanding their takeout meals market is also an important marketing strategy (Marketing.chinatimes.com, 2010). Therefore, the convenience stores targets the timing to do marketing strategies or other promotional plans. For example, in 7-Eleven, drinks and breakfasts are only 39 NTD to promote their products (Marketing.chinatimes.com, 2010). Internal business management of 7-Eleven According to the date of The Benchmarking Companies of Digital Service in 2011, 7-Eleven, or the President Chain Store Corporation, ranked the top in retailer category, it can say consumers are satisfied to the services of 7-Eleven (He and Yang, 2011). From this date, we can consider why 7-Elevens service performances are evaluated by consumers and what kinds of management manuals they have. According to the book of Successful CVS Strategies by Chen Kuang in 2006, stated the detailed and specific personal management is 7-Elevens basic concept. There are three main management concepts of 7-Eleven such as work refinement, formal management, and the core value to the consumers. First of all, the feature of 7-Elevens staff management is refinement work. For example, as to cleaning, there are many stores are required to do cleaning but less stores have cleaning process and every department has its own regulations, 7-Eleven is such convenience store(Chen, 2006). Even though cleaning which parts in what time, the way or the order to clean, using which tools to clean, all of which are written in their management regulation, and workers should be follow it every day. Their regulation is including such as cleaning of 7

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doors, floors, around of sales counter, electric lights, parking areas, public telephone outside the store, and so on (Chen, 2006). As to formal management, Working Progress reports are written by every staff everyday, which can make the staff clearly understand when to do what at where and how (Chen, 2006). Also, 7-Eleven execute working progress report for every worker once a time, which includes evaluation of oneself or other workers (Chen, 2006). Also, the customers' core value is to provide and support how 7-11 should run the business. They consider to receive the consumers heart is important for their value and the growth for the company. For example, 7-Elevens staff cannot answer I dont know for their consumers question. They should say Could you wait me for a while, Ill check it, or Can I ask your phone number? Ill contact you if I know the result (Chen, 2006). They also have seven technical words which should say if they meet the consumers such as regular greetings, please watch your step, and take care. We can see the 7-Elevens personal management is really detailed which increase their work efficiency; also their regulation requires staff to be precise in work and have the right behavior toward the consumers. Such 7-Elevens management may lead to the consumers satisfaction. Staff training and evaluation are also the important part of 7-Elevens internal management. 7-Eleven has three training center in Taiwan such as Taipei, Taizhong, and Kaoshiung, where trains the new staffs knowledge, attitude, skills, and abilities. The new staffs take training classes for the first four and a half day and one left to do retail sales practice(Chen, 2006). In addition, 7-Eleven training materials are renewed in every six months which we can see 7-Eleven changes their management manual depends on the society condition or peoples need. As to managers' training and evaluation of promotions, the 80% to 90% of 7-Elevens senior management employees were raised from the basic unit staff to be promoted (Chen, 2006). For 8

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example, if a graduate college has performed well in the basic unit staff, he will be the vice manager in three years (Chen, 2006). Employing people in the promoting way, which can maintain stable management, decrease employees fluidity. The workers done need to worry about their future at the same time training rich experience staff workers. Marketing Geographical of 7-Eleven Taiwan is a high dense populated region, it has limited for the growth of big stores, and they cannot establish their companies easily. However small stores, especially convenience store, has more possible to be future development mainstream (Department of Economy, 2000). As we know convenience stores in Taiwan has been increasing their marketing territory nowadays. According to the article The Comparison of 7-11 President Convenient Chain Stores, Family Mart Convenient Chain Stores and Hi-life Convenient Chain Stores, the research of the main convenient chain stores in Taiwan in 2007 showed that 7-11 President Convenient Chain Stores was on the top of the rank, which owned 51.87% of the market; Family Mart Convenient Chain Stores owned 24.56% of the market ,and Hi-life Convenient Chain Stores owned 14.33% of the market (Workshop of Starting your own business with joining Chain Stores, 2008). 7-Eleven shares more than half of the convenience store market in Taiwan, and has raised its publicity. However, they are not only increasing the number of stores, but also having the strategies to set up it. According to the Statistic suggested that the condition of location influences the stores success of 60% (Chen, 2006). To see 7-elevens geographical condition and learn their three important strategies such as confirmation of business place, Choosing the right place, and address and evaluations. Confirmation of business place refers the basic investigation of business place and know their competitive market (Chen, 2006) For example, the residential area is more stable for stores profit. The next, choosing the right place means that 7-Eleven always 9

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set in the consumers daily routes such as on the way of going to the work or school, parks, and so on. Also, address and evaluations is that the condition of population density or using the rate of success to calculate if the store should be establish or not (Chen, 2006). 7-Eleven always investigate the place deeply, to understand either the place can lead 7-elevens success or not. Moreover, the central construction is also one of 7-Elevens geographical strategies. It will consider four major effects from central construction that is decreasing the budget of advertising, increasing the image of the business, being controlled better and the quality would be better, and increasing the efficiency of delivery and decrease the amount of money and time spend on it (Chen, 2006). For example, our school National Chengchi University, we can find three 7-eleven inside the school campus and two outside of school. There are five 7-Eleven around our school; some of stores are running together because we sometimes see the employees go 7-Eleven in this store or move to that one. It can help each stores business and can cause great advertising effect for 7-Eleven. Advertisement If you watch any commercials on TV for a while, you will soon be aware that it is easy to find 7-Eleven advertisements. Recently, 7-Elevens commercials have increased, do these advertisements really influence the increasing of their profits? The article indicated that After several failed attempts, 7-Eleven came out with the low price City Caf in 2004. However, with the success of commercial advertisements in 2007, 7-Eleven has been selling 30 million cups of coffee a year (Taiwan insights, 2010). Whatever strategy does 7-Eleven used and rises up its profits? Since November of 2009, the usage of hiring celebrities with different impressions to be with representatives, to have a strong stands in the coffee market. 10

7-ELEVEN IN TAIWAN

According to the article The Report of Reaching The effect of advertisement(Table 2), in the data of December, 2009, the rank of Effective dose of advertisement in coffee from chain stores and fast food restaurants, 7-11 CITY CAF is on the top. With the airing 157,846 times on screens 7-11 CITY CAF commercial have the highest budgets of 9,710,000 NTD. In return, CITY CAF has helped 7-11 to earn back a revenue of 17 times bigger than the actual costs being used for the campaigns. However, Family Mart has only an airing of 65,670 on screens, their advertisement effect is ranked the fourth (Liao, 2010). From the data, we can see 7-Elevens commercial on the screen increases their profits.

Table 2 The ranking of effect of advertisement in December, 2009 Ranking 1 2 3 4 Products 7-11 CITY CAF Mc CAF Hi-life Brown CAF Family Brown CAF Airing times 2,974 2,268 2,532 3,159 Seconds 89,205 68,040 53,175 32,880 Times on the screen 157,846 145,500 130,442 65,670 Effect of ad 9,707 8,378 7,717 4,124

Moreover, according to the date from CVC industries from May to October in 2009 The rank of Advertisement effect in 2009(Table 3), top ten among seven are UPEC, the top is 7-Elevens advertisement whose airing is 1,057,969 times, compared with the second rank 524,102 times of Family Mart, it is greatly high (Liao, 2010). As we know commercials costs money, but if you do not put action to increase your publicity, you will decrease the opportunity to introduce your products to people, and also cannot earn a lot of revenue. The data shows large number of 7-Elevens advertisements on TV, and 11

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they make use of commercials sufficiently to lead their successful of business. Table 3 The rank of Advertisement effect in May to October, 2009 Raking 1 2 3 4 5 6 7 8 9 10 Products 7-11President Convenient Store Family Convenient Store 7-11Slurpy 7-11 CITY CAFE Welcome Supermarket 7-11OPENchan recharge card 7-11general lunch box 7-11Onigiri Family fabulous bread 7-11SMOOTHIE photosynthesis Airing times 29,460 16,804 15,109 11,162 7,098 5,398 9,002 6,734 8,900 3,218 Seconds 626,140 262,650 247,160 242,160 141,960 134,950 139,100 148,795 119,840 96,510 Times on the Effect of ad screen 1,057,969 524,102 485,738 414,309 290,317 240,821 256,977 261,237 229,083 184,137 70,208 32,250 30,341 28,442 19,631 16,729 16,417 16,117 13,659 13,005

Conclusion After the research of 7-Eleven, we can understand the 7-Elevens background and there are many kinds of strategies behind them. The 7-Elevens parent company Uni-President Enterprise Corporation (UPEC) has a lot of subsidiaries whose business tip-up make each companys development. For example, the food industry of UPEC supports 7-Elevens variety of food products, and increases their outlets than other convenience stores. Especially, for the working class people whose purpose to visit convenience store is for the food, it can say the food industry of UPECs support relate to the success of 7-Eleven. Also, the detailed internal business management of 7-Eleven makes worker can understand clearly how they work and behave, and following its 12

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regulations which increase the efficiency of each stores. Employing people in the promoting way also give them more faith for their work. If the management does not give the stable work condition for employee, they also cannot give a good response to the upper levels. Moreover, 7-Elevens geographical marketing or large number of advertisements which also raising up their publicity and become the one of strategy for the success. If we do not know what is hiding behind 7-11, we will never understand why they are so popular in Taiwan and how they succeed. To the success of one company, the managements should consider a lot of possibilities to make their business more efficient and always observe peoples mind. For instance, 7-Elevens training materials are renewed in every six months (Chen, 2006), from there we can see they always change their materials depending on the passage of the time, it also makes 7-Elevens continual improvement. In 1984, 7-Eleven closed up 33 stores because of the crisis of management, and their brand of City Caf in 2004 recorded low prize; nevertheless, the history of 7-Eleven is not always successful but they come up with new ideas to solve the issues. What can we learn from 7-Eleven is that even though the result is a failure, you forge ahead and try next without giving up.

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Taiwan insights. (2010, September 24). Taiwan: the convenience store capital of the world. Retrieved from http://www.taiwaninsights.com/2010/09/24/taiwan-the-convenience-store-capitalof-the-world/ Uni-President. (2007). Construction of Sub-conglomerates. Retrieved from http://www.uni-president.com/04business/departments02-2.asp Wang, Z. (2008). 2008 Local Convenience Stores' development and future in 2008 . . Retrieved from http://campaign.hncb.com.tw/intranet/monthly/mon062/06204.pdf Yang, L. (2011, May 9). 4 4 41.92 7.41% The Revenue for UPEC in April is 41.92 billion and increasing annually by 7.41%. . Retrieved from http://www.nownews.com/2011/05/09/91-2711176.htm

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