Consumer attention is fragmented across multiple platforms and making informed advertising decisions is more critical—and complex—than ever. With Nielsen Ad Intel, you can streamline your strategy, minimize wasted spend, and identify opportunities to differentiate your brand, empowering you to stay ahead in an ever-changing market. Discover more today. www.nielsen.com

Suzy Davidkhanian (00:00):

Your audience is seeing ads everywhere, even on the screens you'd least expect. Nielsen Ad Intel helps you see the whole picture from creative trends to ad spend and media across all screens. Maximize every media dollar today with Nielsen Ad Intel.

(00:18):

Hello listeners. Today is Wednesday, November 12th. Welcome to eMarketer's weekly retail show, Reimagining Retail, an eMarketer podcast made possible by Nielsen. This is the show where we talk about how retail collides with every part of our lives. I'm your host, Suzy Davidkhanian. And on today's episode, we're talking about 7-Eleven. Yep. A brand making some bold moves that don't totally line up with the headlines. So we're going to try and figure out what they're thinking.

(00:48):

In Japan, its convenience stores are practically part of everyday life. You can grab dinner, pay a bill, even ship a package, and they become kind of a cultural icon. But as we know here in the US, it's a very different story. The brand is trying to reimagine what convenience looks like. They're testing Japanese style food. I think everybody's heard now that they're expanding their 7NOW delivery network and they're opening hundreds of new stores, even as same store sales and traffic dip. The big question is whether all that effort will help spark a turnaround and maybe even a little bit more brand love in the US.

(01:25):

So in today's episode, we're breaking down their business into three quick rounds. Part strategy, part imagination. We'll start with why the company's doubling down on new locations, even as the numbers get a little tricky. Then we'll dig into what really could move the needle. And finally, a bit of blue sky thinking. If you were in charge, what bold move would you make? But before we do, let's meet today's guests.

(01:52):

Joining me in the studio for today's episode, we have two podcast regulars, Blake Droesch, senior analyst covering all things retail.

Blake Droesch (02:00):

Hey, Suzy. Great to be back.

Suzy Davidkhanian (02:01):

Hey, Blake. Thanks for coming to the office and doing the pod in real life with us. And Sarah Marzano, principal analyst covering all things commerce media. Hey, Sarah.

Sarah Marzano (02:11):

Hi, Suzy. Thanks for having me.

Suzy Davidkhanian (02:12):

Thanks for coming. It's the first time you're on the show with me. I'm so excited.

Sarah Marzano (02:15):

I know. I'm really excited too.

Suzy Davidkhanian (02:17):

Okay. So let's get started with our first segment. In round one, aptly called the paradox of growth, Blake and Sarah are going to weigh in on our key question. Why, even though sales are shrinking, is 7-Eleven still opening more stores? They're said to be opening over 200 stores a year in the US. Blake, what do you think?

Blake Droesch (02:38):

Well, I think I don't really see it as much of an expansion as it is sort of a transformation of their business model because while they are continuing to open new stores, they've also, I think, closed more stores than they've opened the past two years and planned to do the same this year. And I think it's really because they are completely shifting their business model from just convenience store to convenience store, plus restaurant or food service outlet plus grocery. And I guess we'll unpack sort of going from a onefold business into a threefold business, what does that require? But I think the main thing that it requires is a brand new retail footprint.

Suzy Davidkhanian (03:20):

So in your mind, it's not that they're opening a ton of new stores, it's just they're rejigging their footprint.

Blake Droesch (03:26):

Right. And I think since they're going from convenience model to a multifaceted model that just requires a completely new type of store, often large format stores, which is the ones that they're opening. And I think that they can't do that with the current real estate that they have.

Suzy Davidkhanian (03:44):

It's interesting because I always think of when you grow stores, you also, by default, grow sales. But for you, it's more strategic than that.

Sarah Marzano (03:51):

I mean, I think it is about growing sales. They have the advantage of 13,000 some odd stores in the US so they can analyze their fleet and then double down on what works. So to Blake's point, the new stores are going to prioritize quick service restaurants, and they've said that those stores see about 50% more foot traffic. And then as they roll out these new formats, which again, to Blake's point, are more than renovating the existing stores, it's about creating stores with larger footprints. They found that these stores drive 45% higher sales on average than compared to their traditional stores. So it's really about taking a look at what's working and again, doubling down on sort of expanding the penetration of what's working within their existing business.

Suzy Davidkhanian (04:31):

It's true that they were saying that basket size is up even though footfall is down. But Sarah, from your perspective, do you think that it's also just about collecting more data, the more people are buying, the more stores there are, the more touchpoints there are?

Sarah Marzano (04:43):

Yeah. I mean, I think it makes sense. And 7-Eleven has had a retail media network since 2022. They were pretty early among C-stores to launch a retail media network. And so more data is always something that can bring increased value to advertisers. And so increasing basket size can help offset a decline in foot traffic, but also provide more utility to advertisers and also expand the base of applicable advertisers.

Suzy Davidkhanian (05:08):

So in one sentence, both of you think this makes sense and it's not weird.

Sarah Marzano (05:14):

Yeah, absolutely.

Blake Droesch (05:15):

I mean, I think it makes sense. But I mean, I think it's obviously a risk when you change your business model and they do have the dominant market share in the convenience source space in North America and I believe worldwide as well. It is always a risk to sort of pretty radically transform your business model, but I think it really is sort of about future-proofing the business and continuing finding new avenues to grow even when you have that high market saturation.

Suzy Davidkhanian (05:48):

It's almost like you knew what second segment was all about. Blake, thanks for the good tee up. So next up, we're going to talk about that growth piece that you're referring to. And in this segment, I want you guys to think about how can you formulate a pie that includes all the ideas around what will help 7-Eleven grow the most in the next three to five years.

(06:11):

So if you can think about the levers that they can pull and then add some percentages to each of the slices of the pie, that'll help us really spot where and how they're going to be positioned for growth. So ideas around more touchpoints, so like more stores, more private label. I could keep going, but I don't want to give you guys too many ideas because I want to see what's in your pie. So with that...

Sarah Marzano (06:35):

My pie is really boring because it's four equal segments, we can argue about the way I have it distributed. But first, delivery, which is an opportunity that 7-Eleven is already doubling down on. It makes a ton of sense. I mentioned that they have 13,000 stores in the US, which is a huge distribution advantage. They've already partnered with a lot of the major delivery platforms like DoorDash and Uber Eats, but it's very interesting to me that they've also built out a proprietary delivery mechanism and really focused on training employees for how to pick those orders and ensuring that they can fulfill delivery within 30 minutes or less. And again, I think that leans into this sort of foundational distribution network that they have thanks to their massive store footprint.

(07:17):

Delivery is also a huge opportunity for digital retail media. So I think what's really important is that they make sure they have a consolidated, cohesive digital experience for consumers and where possible they can pipe into the advertiser demand that platforms like Uber and DoorDash offer.

(07:35):

And then on the heels of that, I have in store retail media. I have formats like in store audio, which 7-Eleven has, according to the reports, I found they have them in about 4,000 stores currently, and they're planning to extend them to 12,000 over the next year or so, which will be nearly their entire footprint. I think in store audio is a format that is very logical for a small format store. It's easy to hear the messaging and because you're dealing in sort of impulse low consideration categories, it's more logical to think that you could influence what someone is purchasing via a message on an audio ad.

(08:09):

Quick service restaurants make a ton of sense. They've obviously seen that these stores drive higher foot traffic that's going to contribute to a higher basket size. And then private label, I think, in order to boost the margins on the purchases that they are seeing, which of course will have to be balanced with the retail media goals, which rely on advertising dollars from national brands. Those are my four slices of pie for old drive growth for 7-Eleven.

Suzy Davidkhanian (08:33):

It's interesting. 50 plus percent is around retail media and that extra revenue stream.

Sarah Marzano (08:39):

Yeah. True to my brand. I'm a believer.

Suzy Davidkhanian (08:42):

That's good. Blake?

Blake Droesch (08:45):

I think we probably share a lot of the same talking points, but I'm doing-

Sarah Marzano (08:48):

You put more thought into your distribution?

Blake Droesch (08:52):

My distribution is a little bit skewed towards in store over-

Sarah Marzano (09:01):

In-store retail media?

Blake Droesch (09:02):

... the digital aspects of it. There's no in store retail media in this pie.

Sarah Marzano (09:03):

Boo.

Blake Droesch (09:04):

It's just there are too many more important factors at play than audio ads.

Sarah Marzano (09:09):

Boo.

Blake Droesch (09:09):

I'm going 40% store investments. That's huge. 40% food service and then 10% for delivery and 10% for retail media. So you have roughly an 80/20 split, which is what e-commerce penetration roughly looks like in the US right now. So I think that's sort of a fair framework.

(09:29):

The store investments piece, I think you walk into a 7-Eleven location anywhere in the US, oftentimes there's going to be a lot to be desired in terms of the quality of the store, the presentation. I think in order to build consumer trust, particularly around food service and grocery, the cleanliness of the stores, the quality of the store, just the overall vibe is going to need to improve. So I think the investments that they can make in these new larger format stores with more bells and whistles, just a little bit of a smoother shopping experience, that's crucial. And that's going to give way to that additional 40% of investing in food services.

(10:14):

If the quality of the food is heightened and they're making a lot of investments and sort of expanding the selection, that's great. But if people walk into these stores and they don't necessarily feel like it's an appealing environment to order fresh food, then it's going to fail.

(10:32):

The other remaining 20%, I think completely agree with Sarah on the delivery aspect, the huge retail footprint really works in their advantage, particularly when you look at digital grocery, e-commerce penetration as opposed to restaurant delivery. If they can invest in that food service piece, then it's just going to make their delivery services all for the better. And then of course, on top of that, retail media is the icing on the cake, the additional 10%.

Sarah Marzano (11:01):

I think you make a really good and interesting point around the fact that they need to be wary about ... It makes sense to double down on investing in key store formats and especially in really important areas that are going to drive the most impact to their bottom line, but there's a risk in not ensuring that there is some consistency across the stores to build that consumer trust. Because you don't necessarily want to be faced with the situation where customers are like, "Oh, that's one of the good 7-Elevens." But most of them are kind of not as good. So there needs to be some investment across the entire store fleet so you can have that trust and consistency and say, "This is a store I would buy a fresh meal from."

Blake Droesch (11:42):

Right. And I think that's a good point. That makes me want to put the store investments even higher than 40%.

Sarah Marzano (11:48):

Yeah. Me too. I want to change mine too now.

Blake Droesch (11:50):

Yeah.

Suzy Davidkhanian (11:50):

Well, I'm going to ask you guys about that in terms of store investments like bells and whistles, remove friction points, help with delivery, but it's also about the food innovation. So they need more fridges. And you both talked about food, but kind of in different ways.

(12:08):

Sarah, when you think about QSR driving foot traffic, are you talking about they partner with the Taco Bell or that they ... Because Blake, I got the impression that you're talking more about have your own foods sort of available that are fresh and delicious and look super inviting.

Sarah Marzano (12:25):

Someone correct me if I'm wrong, they have their own proprietary QSR restaurant chains-

Blake Droesch (12:33):

They do.

Sarah Marzano (12:33):

... that change depending on the geography. So it's like their own brand of QSRs.

Suzy Davidkhanian (12:34):

[inaudible 00:12:35] branded.

Sarah Marzano (12:36):

Yep.

Suzy Davidkhanian (12:36):

Oh, I didn't know.

Blake Droesch (12:37):

Yeah.

Suzy Davidkhanian (12:37):

The one by me does not.

Sarah Marzano (12:39):

Well, there you go.

Blake Droesch (12:41):

I think it all comes down to increasing that product selection, right? I mean, if you look at Wawa and other convenience stores that have successfully leaned into this model in the US, there's a core group of food categories where a convenience store format can excel, right? Pizza, sandwiches, things of that nature, that 7-Eleven actually already does. I just don't think that they do it well enough to really build an audience around it in the same way that these other convenience stores have been able to.

Suzy Davidkhanian (13:14):

So the other thing I was thinking about you guys is if we're trying to create this cultural moment for 7-Eleven, in addition to amazing food and bells and whistles, is there anything around leaning into pop culture moments? And maybe they're already doing it's just not high on my radar. You know Taco Bell has the Doritos? Is there anything around collabs that would help them with growth?

Sarah Marzano (13:37):

I think collabs makes sense. I think building more exclusivity, and they can do that with private label products, but they could also potentially do it with national brands. I think just building more urgency and FOMO and exclusivity around the products that are carried at 7-Eleven, so you have a reason for choosing 7-Eleven versus any other number of convenience stores or just going on DoorDash or Instacart or Uber Eats and picking sort of anonymously based on what can get to you the quickest, right? Creating more reason for consumers to say 7-Eleven is where I have to go to get the thing that I want is a good strategy.

Blake Droesch (14:09):

Yeah. I think collabs could be something that would be really interesting, particularly the food service aspect of it, because if you bring a brand into your store and you can do it justice by making sure that the food preparation is up to par, then you already have a little bit of built up trust. And it doesn't need to be a Chipotle. It could be like a Crumbl Cookie or something that is a little bit easier, it's a smaller format, it's easier to manage, but has a brand that already does well with consumers that could really bring in foot traffic, could get people used to sort of this habit of purchasing some sort of fresh food in a 7-Eleven. And then when you expand with your own product lines, I think that could potentially transfer.

Suzy Davidkhanian (15:00):

Cool. Well, that was my future proofing idea. So now I want to hear yours. In round three, I'm going to ask you, if you are CEO at 7-Eleven for the day and you could do any big picture move that didn't have operational friction, it was in a vacuum, what would that be?

Blake Droesch (15:18):

I will show you my notebook that also I literally have restaurant collaboration. So I think we all had the same CEO.

Sarah Marzano (15:26):

You just wrote that down.

Blake Droesch (15:26):

Did not write it down just now. The ink is dry.

Suzy Davidkhanian (15:30):

[inaudible 00:15:31] working [inaudible 00:15:31] together.

Blake Droesch (15:30):

Since I'm on my feet... I know. It's probably true. Since I'm thinking of my feet, I would say a big marketing campaign, very similar to what I believe it was Domino's did a few years ago or Pizza Hut. Basically when they were like, "We understand the quality of our pizza has really gone downhill. We've taken the advice to heart and we're improving it." I would do the same type of campaign. We know that the stereotype of 7-Eleven is the perpetually spinning hot dog that's been there for three months.

Sarah Marzano (16:05):

Too long, I can see it.

Suzy Davidkhanian (16:05):

That's the one that [inaudible 00:16:07]-

Blake Droesch (16:06):

We acknowledge that and then we move on. We talk about what we're doing now in terms of bringing in better ingredients, fresh food, more care around the food preparation and ensuring that it's fresh. I think that would be a really bold campaign to get people thinking about the option of going into 7-Eleven for a meal and expecting something different from what they're used to seeing.

Suzy Davidkhanian (16:34):

I love it. Sarah, what about you?

Sarah Marzano (16:36):

I love that idea too. I think that's really smart. I think in general, leaning more into 7-Eleven as a lifestyle brand versus a commoditized place to get convenience items. And I think doing that by launching a full-scale social media strategy and partnering with lifestyle influencers and creators, again, to build that sort of more elevated, while still saying accessible reason for shopping at 7-Eleven as more of a lifestyle brand. And I think they could use the launch of their private label product sort of hand in hand to do this.

Blake Droesch (17:08):

Who would be the core audience that we'd be going after? What's the lifestyle?

Sarah Marzano (17:13):

Yeah, that's a great ... I mean, they're open, so many of them are open to 24/7 so I like the idea of appealing to younger generations as this is the place that you could stop on your way home from going out kind of thing. Or maybe if you're living alone and you need an easy but high quality dinner. I like the idea of tapping into younger generations and making it both this pit stop that's available all the time for any of your needs. A lot of their new locations have these beer caves, so maybe that's part of it. But also a great sort of companion for when you're getting your life started. I just came up with that. I feel like it's good.

Blake Droesch (17:46):

I like that. That's good.

Suzy Davidkhanian (17:47):

It does also go into that efficiency of experience and making it really connect emotionally too with this particularly targeted customer who wants everything very quickly.

Sarah Marzano (17:58):

Yep.

Suzy Davidkhanian (17:59):

Fits the bill. That's all we have time for today. Thank you, Blake.

Blake Droesch (18:03):

Always a pleasure.

Suzy Davidkhanian (18:04):

And thank you, Sarah.

Sarah Marzano (18:05):

Thanks, Suzy.

Suzy Davidkhanian (18:06):

I hope you'll come again. And thank you listeners and to our team that edits the podcast. Please leave a rating or review and remember to subscribe. I'll see you for more Reimagining Retail next Wednesday. And on Friday, join Marcus for another episode of Behind the Numbers, an eMarketer podcast made possible by Nielsen.