As the leading convenience store in Taiwan, 7-11, or PCSC (President Chain Store Corporation), has been a popular research subject in both commercial and academic field. Its diversified product offerings have been well-acknowledged in the market; many of them were first-movers and have successfully boosted up sales in a short period of time. The following paragraphs review its early development and its recent expansion, and how it has built up the back-end resources sufficient to transit from conventional brick-and-mortar convenience store to a brick-and-click business model. The history of 7-11 is long and complicated since it involves more than 40 subsidiaries and affiliates. This chapter, however, will mainly focus on those milestones that are related to its early e-commerce development and 7Net.com, the own-branded shopping website that plays an important role in its click-and-brick business model.
3.1 7-11‘s Brick-and-Mortar Evolution in Taiwan
7-11 Taiwan was a subsidiary company of Uni-President Enterprises Corporation, established in 1978. Back to the 80s, when the economy was still in early developing stage, it was not easy to sustain a convenience store business in the local market. Starting from the first year, 7-11 was at loss in consecutive seven years and was once merged back to Uni-President Enterprise as a only a department of the mother company in 1982. After a series of policy adjustment and implementation of its channel management, 7-11 was back on the right track; it had expanded to 100 stores in 1986 and reached it break-even point for the first time. In 1990, with revenue of NTD 10.8 billion, 7-11 has officially become the leading company in retail business in Taiwan (巫俊彥, 2006). The number of its chain stores and
23
franchises has grown exponentially ever since; it reached its first 1000 stores in 1995, Since then, 7-11 has expanded at a pace of approximately 1000 stores every 3 year . In 2006, there are over 4380 stores in Taiwan; in 2011, the number has reached 4750 (See Figure 3-1).
Figure 3. 1 The Store Expansion of 7-11 in Taiwan Source: 7-11 Corporate Information (Public Disclosure)
The reorganization of Uni-President Enterprises in 2002 was the turning point for 7-11‘s expansion. By function, all the subsidiaries were formed into four sub-groups: Manufacturing, Logistics, Trading and Holdings. 7-11 becomes the leading company among the 42 companies in Logistics Sub-group, integrating retail and logistics-related subsidiaries to share all the resources and create synergy. The Logistics Sub-Group mainly comprises of four different types of companies: Supportive, Retailers, Non-Retailers, and Overseas Holdings (林盈芊, 2008). Retail Support International (RSI), Wisdom Distribution Service, UPCC and PLIC are the major couriers/logistics sub-companies to support 7-11 and ensure the deliveries are on time. Since then, 7-11 were able to provide innovative services to consumers by leveraging these sub-companies, mainly related to e-commerce. For instance, 7-11 started to cooperate with Books.com.tw, a leading online bookstore in 2000. The logistic flow is like
24
this: Books.com.tw places buffer stocks in RSI; after consumers confirm order on Books.com.tw and designate which chain store they would like to pick up the purchases, RSI completes sorting and packaging, and then Wisdom Distribution Service delivers the orders to the 7-11 stores designated by consumers. Consumers no longer need to pay by credit card or ATM in advance; the flow allows consumers to pay cash when picking up the purchase in the store. Since then, Books became the first online bookstore that offers ―cash upon pick-up at convenience store.‖ In the past, online payment mechanism were mainly through ATM and credit card, which might cause information leak and therefore consumers would have to bear the risk when transacting online. This innovative service has solved consumers‘ concern about privacy issue, and made consumers more willing to try online shopping. Consumers are not the only people benefit from this service; this new partnership between Books.com.tw and 7-11 also created a win-win situation: Books gained more sales through this new channel;
7-11 gained more walk-in potential consumers in its physical stores. The pick-up service was a success; later in 2007, 7-11 started to expand its partnership to non-affiliated e-retailers (林 寬宜, 2009). Until now, 7-11 has cooperated with over 250 e-retailers and provided them pick-up service, including many sellers at Yahoo or PChome ("7-11 Official Homepage,"
2011). This cross-platform system has made ―cash upon pick-up at convenience store‖ service more widely accepted by consumers. With such a new business model, 7-11 is no longer only a physical convenience store; it becomes a solution provider for other retail businesses. What it offers to consumers is no longer only physical products, but also intangible services.
Innovative marketing strategies of 7-11 are widely acclaimed by media and the government. In 2004, 7-11 has been awarded as ―the Leading Enterprise‖ by Common Wealth Magazine for consecutive 10 years. In 2004, 7-11 launched its I-Cash prepaid card product;
consumers can top-up and refill cash into a plastic IC card for future transaction in 7-11. This gives consumers a new paying method other than cash only. It was widely accepted by the
25
market; up till now, 7-11 has released 9.2 millions of ICash cards; total revenue transacted by ICash has reached 11 Billion (盧諭緯 & 羅之盈, 2010).
3.2 7-11‘s Early Development of Corporate Shopping Website
Within 20 years, 7-11 has gained full experiences in physical chain store management in Taiwan. From 2008, 7-11‘s market share in Taiwan has reached 51%, followed by Family mart, Hi-life, and OK Convenience Stores (2010 台灣連鎖店年鑑, 2010). With such a large scale, 7-11 has to continuously diversify its revenue model to maintain its growth in a saturated market. Since it has dominated the conventional physical retail market, there is little room left for 7-11 to grow significantly (蔡薇欣, 2009). It seems to make sense that 7-11 starts to move on to the e-commerce and find new revenue streams online. In fact, 7-11 did attempt to start its click-and-mortar business model early; back to 1992, 7-11 developed a mail order catalog named Uni-mall and set up a simple website in 2000 named 7eShop.com as its online channel, mainly sold women apparels. Ten years ago, while online shopping market was still underdeveloped, Uni-mall may be considered one of the first movers and could have seized its market share. Besides, it had 7-11 as its channel to promote the shopping website and expand its customer base. However, due to the lack of brand recognition and clear positioning, the sales has been gloomy for years and could not compete with the rapidly-growing shopping websites such as Yahoo and PChome. The poorly-managed website was criticized by the users; reviews about its bad quality of customer services can be easily found on the online forums (台灣研究院-搜尋引擎優化與行銷, 2009). Without efficient business model or clear product offering, Uni-mall could not survive in the ever-changing e-commerce market in Taiwan, even if it had strong back up of its mother company. In December 2009, Uni-mall shopping website was shut down and became history; the management team was merged back to Internet Shopping Business Division of
26
7-11.
3.3 7-11‘s New Attempt for Own-Branded Shopping Website: 7net.com.tw
Uni-mall‘s failure did not stop 7-11 from approaching the B2C e-commerce market in Taiwan. After a series of internal review, 7-11 decided to make a new plan to go back to the Internet. In July 11th 2010, the new 7-11‘s shopping website 7Net.com.tw is launched. 7net becomes the new brand name that is easier for consumers to associate with 7-11 (盧諭緯 &
羅之盈, 2010). The Chief Operating Officer of 7-11, Chien-Nan Hsieh, commented on this new website, ―We have a very clear positioning for our new website, which is the extension, or complementary platform of our physical 7-11 stores. 7-11 will move on to a ―Net Store‖
model; the store is the foundation, while the net is on top of it. 7-11 is no longer only a shop, but a click-and-mortar platform. In the past, a physical convenience store can display about 3000 items; now, with a virtual extension platform, 7-11 can expand its capacity unlimitedly;
there will be no boundaries between physical and virtual stores for consumers anymore. 7net will be the gateway to a new brick-and-mortar business model (方巧文, 2010).‖
Currently, 7net has a membership size of around 200 thousands; average spending per customer transaction is about NT700 (方巧文, 2010). Unlike the previous platform Uni-mall, which focused on women apparel, 7net.com mainly focuses household goods and wholesale food and beverage, along with 3C products, women‘s apparel and accessories, and exclusive mail order brands from Japan such as Nissen and Cecil (王貞曄, 2010). There are over 100 thousands of items available online, The main slogan under 7net‘s logo is ―Order Today; Pick Up Tomorrow‖, conveying an appeal of fast delivery. Utilizing the advantages of the dense 7-11 store networks in Taiwan, each store becomes the hub for 7net‘s consumers to pick up their order from, without minimal purchase amount. Besides convenient delivery method, 7net offers consumers a new paying method; consumers can now pay by their I-Cash prepaid
27
card when shopping on 7net, as long as consumers have a card reader linked to the internet.
This becomes another unique feature of 7net that no other B2C websites can offer.
Tu-Chang Tsai, the General Manager of Marketing of 7-11, commented on its membership base, ―the size of the membership base is the key to revenue growth. In the past, Unimall could not successfully gain membership base growth; therefore, it was difficult to hit the expected revenue. Now, 7net, with clear positioning and innovative marketing strategies, the membership base is growing ever since (方巧文, 2010).‖
The management team holds great expectation for 7net. According to the press release, 7net‘s estimated revenue in 2011 is NT2 Billion, 4 times of that in 2010. As for product offering, the management team expects to increase its product lines from 100 thousands to 1 millions. In the midterm, 7net aims to reach its accumulated revenue of NT5 Billion in the upcoming three years.
Figure 3. 2 Homepage of 7net.com.tw
Source: 7net.com.tw
28
Figure 3. 3 7net.com.tw‘s Division of Labor
Source: Interview with Internal Staff of 7net.com
Figure 3. 4 Flexible Methods Provided by 7net
Source: 7net.com.tw
29
Table 3. 1 Chronicle of events of 7-11‘s Development
Year Events
1978 President Chain Store Corporation (統一超商股份有限公司) was established 1983 Started its 24-hour business model
1985 Launched microwave foods and finger food products 1986 Reached the first 100 stores and its break-even point
1990 Became leading retailer in Taiwan (revenue reached NTD10.8 Billion)
1990 Cooperated with Japan and established RSI, the exclusive distribution center for 7-11 1996 Unimall shopping website was launched
1998 Cooperated with China Telecom (中華電信) to launch the first in-store bill collectionTaiwan.
1999 Wisdom Distribution Service (大智通文化行銷股份有限公司) was established
2000 Launched pick-up services with Books.com.tw, later became the main shareholder of Books.com.tw
2002 Re-organization of mother company Uni-President Enterprises; four groups are developed.
2003 Co-funded with Japan and Established Muji Rouhin Taiwan (台灣無印良品股份有限公司) 2004 Launched Icash Prepaid IC card
2006 Launched ibon kiosk, providing in-store service such as printing, scanning, paying bills, ticketing, etc.
2007 Partnered with e-retailers
2008 Rakuten.com.tw (樂天市場) was established 2009 Unimall is closed
2010 Launched 7Net.com.tw as 7-11's own-branded shopping website Chronicle of Events of 7-11's development
Source: Compiled Data
30