Rewriting the Rules
In an environment in which c-store chains tend to lag far behind supermarket, drugstore and other chains when it comes to private label product and program development, 7-Eleven Inc. stands out as a noteworthy exception. The Dallas-based company has long been associated with such iconic brands as Slurpee, Big Gulp and Big Bite. But a spate of activity on the product development side in recent years has taken 7-Eleven’s store brand program to new heights.
Within just the past year or so, for example, the retailer added such items as 7-Select Go! Smart fruit and nut bars, 7-Select Go! Yum sweet treats, and even a line of 7-Select over-the-counter (OTC) medications.
7-Eleven, part of Tokyo-headquartered Seven-Eleven Japan Co., operates, franchises and licenses almost 8,700 stores in the United States and Canada. The sheer size of its operations allows 7-Eleven to “go a little farther and deeper” within the private brand arena, says Jim Wisner, president and founder of Wisner Marketing Group, Libertyville, Ill.
Carol Spieckerman, president of the newmarketbuilders retail consultancy agrees.
“The depth and breadth of category offerings go far beyond traditional c-store fare,” she says. “7-Eleven has also taken a thoughtful approach to packaging and pricing. Its private brand products present a compelling value proposition which runs counter to the price-gouging standard that c-stores have set in the past.”
The retailer’s recent entry into healthful private brand items also is a plus, contends Kai Clarke, CEO of the global American Retail Consultants.
“I like the perspective that 7-Eleven is giving to their healthy snacks,” he says, “since this plays away from the traditional perspective of a convenience store.”
Spieckerman likes that direction, too, suggesting it could help attract more women to 7-Eleven stores.
Another positive that bodes well for 7-Eleven’s store brand program is the retailer’s commitment to making store brands a significant part of its business, Wisner adds. He points out, for example, that the c-store operator was “first to the table” with store brand wine and beer — commonly purchased c-store items.
“Private brands are a major part of 7-Eleven’s strategy,” explains Sean Thompson, the retailer’s senior director of merchandising and a key member of its private brands team. “Our organization is fully aligned that expanding our private brand offering is a key component of our future growth.”
Speaking of expansion, 7-Eleven has a goal to increase private brand SKU count by 60 percent in 2015, he notes.
Focus on innovation, differentiation
Innovation and differentiation have been key buzzwords in the private brand arena for a few years now. But for 7-Eleven, they are much more than just buzzwords — they are among the guiding principles for product development.
“To drive total-category performance, private brand items need to offer customers something they aren’t currently getting,” Thompson explains. “We listen to our internal team, conduct research with our consumers and validate the opportunity with our franchisees. We have several groundbreaking platforms launching this summer, and they all started by listening to the needs of the business.”
Quality is a key differentiator for the retailer. Products offered under 7-Eleven’s own brands give shoppers items that are of “exceptional quality,” he says, driving profits for the retailer’s all-important franchisees. (More than 6,400 of its U.S. and Canadian stores are franchised.)
On the quality front, 7-Eleven begins with a specific benchmark for a product, and works to create a store brand item that is “noticeably higher” in quality than that benchmark, Thompson says. Although this approach makes it much more difficult to bring products to market, the retailer will not compromise here.
7-Eleven’s category managers also play a critical role in store brand innovation and differentiation via a strong category strategy that allows them to identify gaps in the assortment.
“They know the needs of their customers and work with our team to deliver on opportunities that add incremental sales to their assortments,” Thompson says.
One recent success story came out of a collaborative effort between a 7-Eleven category manager and a product development manager. The goal was to offer customers a line of sweet treats they might expect to see at a local confectionery outlet, but at a compelling price, he notes. The first products introduced under the resulting product line — 7-Select Go! Yum — also were created based on 7-Eleven’s consumer insight research that showed consumers want to reward themselves with premium high-quality treats.
“Each product is made with premium ingredients curated to provide high-quality products with on-trend flavors that have features designed specifically for the 7-Eleven customer,” Thompson says. “They did a great job, and this platform is helping to drive incremental sales for the entire category.”
Enhancing the packaging experience
7-Eleven also understands that packaging plays a significant role in own-brand innovation, differentiation and, ultimately, product success.
“We believe packaging is a significant part of the customer experience,” says Denise Jenkins, director of marketing for 7-Eleven private brands. “Great packaging can take an otherwise strong product and enhance the customer experience.”
Consumers also have a number of frustrations regarding existing packaging in general, so 7-Eleven understands that it needs to discuss those frustrations and how they might be overcome early in the product development process, she says. In addition, the final packaging must be able to “accurately showcase” the product’s quality.
“Our packaging works hard to demonstrate the quality of the product inside,” she says. “We are using shopper data, customer feedback and a well-honed brand position to better understand what attributes we should communicate, and then we use imagery and storytelling to tie it all together.”
Committed to franchisees
Most U.S. 7-Eleven stores are franchisee-run, so 7-Eleven does everything it can to help its franchisees succeed. And own-brand products are critical in the franchisee-support process.
“With unique and different items, we can give customers products they can only get at our store,” says Joseph Peng, a 7-Eleven franchisee who operates a store in Lincoln Park, Texas. “This helps us build our brand, and nobody else can offer these products in our area.”
The retailer’s private brands team spends a lot of time traveling to talk with its franchisees throughout the year, Thompson notes, to find out what’s working and what’s not, as well as to help identify gaps that private brand products could fill to better serve the needs of shoppers.
“This feedback is incorporated into our plans either for new items or continuous improvement opportunities,” Thompson says. “What we want them to know is they have a private brands team that is passionate about developing products that will differentiate them from their competitors, create loyalty with their customers and drive sales and profit for their business.”
Franchisees also learn of news related to 7-Eleven’s strategy business results and planned new product launches during face-to-face meetings, he says. In addition, they get to try new own-brand products so they are confident in offering them to their customers.
“I am really impressed with the quality of our 7-Select products,” Peng says. “My associates talk with our customers about these products because we know they will love them and come back to our store for more. They also generate great gross profit for my store, and that is great for my business.”
7-Eleven’s annual meeting — the 7-Eleven Experience — also has a significant focus on private brands and gives 7-Eleven a prime opportunity to interact with franchisees.
“Each franchisee is invited to interact with senior leadership, talk about business performance, provide feedback and see what is new from merchandising,” Thompson says. “We want our franchisees to get excited about what is coming, and we work hard to sample products, demonstrate merchandising best practices and gather recommendations from them regarding what we can do better to serve.”
Franchisees ultimately make the decision as to how many private brand SKUs they will carry in their stores. For his part, Peng opts to merchandise more than 95 percent of the products — his customers love the products and come back to his store to make repeat purchases.
“This is really good for my business,” he stresses. “The gross profit is much higher than national brands’, and this helps me run a profitable store.”
Of course, part of the commitment to franchisees is a commitment to the franchisees’ customers. “I want our customers to know we have countless options for them to enjoy in our stores,” Thompson says. “7-Eleven offers an awesome fresh food program, exclusive items co-developed with branded manufacturers and a great private brand program.
We try to create an experience where our customers can always find something new and exciting while being able to get in and out quickly.”
A selective partner
Because 7-Eleven has a mission to bring high-quality, differentiated private brand products to market, its supplier partners must be up to that task.
“We have heard from several suppliers that we ask more questions regarding product details and specifications than any other retailer,” Thompson notes, “and this makes me happy to hear.”
When the private brands team is working on a major platform, it needs to get the full commitment of the manufacturer’s executive team and meet with that team to discuss the project’s goals, needs and criteria for success, he says.
The team also explains 7-Eleven’s product development process to prospective suppliers, Thompson notes. That process starts with a demonstrated clear consumer need and ends with a product that significantly outperforms the benchmark set for quality in the quest to improve franchisees’ business.
“We get into a high degree of depth during these meetings, and my team typically walks a manufacturer through a past presentation so we can calibrate on the level of detail, energy and resources needed to develop products for 7-Eleven,” he states.
7-Eleven is particularly drawn to manufacturers that possess an in-depth knowledge of the consumer and are able, therefore, to talk about consumers’ needs and unmet needs, Thompson says, as well as how they are innovating to meet those needs.
“These manufacturers have specific quality-related reasons for procuring their raw ingredients, seek out innovative suppliers [and] have distinct differences in the process they use that differentiates them from their peer group,” Thompson maintains. “Additionally, they are able to help us think through how to leverage packaging and supply chain to ensure the quality of the product is the same at the store as it is coming off the line.”
The high expectations mesh with the new investments 7-Eleven has made to its private brands team. The company “dramatically increased” the size of the product development team, he says, and added dedicated marketing resources and a strategy and analytics function.
“This investment has allowed us to really develop and market products differently and engage with our operations team and franchisees to drive the business,” Thompson explains.
Forward-thinking
7-Eleven has done much to “rewrite the rules” when it comes to store brand product development for a c-store setting. But Thompson admits that the retailer is not without its challenges here.
“When you have as much happening as we do, customer trial becomes critical,” he says. “We spend a lot of time thinking about how to engage with our customers, show them what is new and give them an opportunity to try our products.”
In addition, many of 7-Eleven’s customers are “routine-based” — stopping in for coffee and a doughnut each weekday, for example.
“Our customer research tells us that we need to work harder at breaking through and making our products more visible,” Thompson says, “and we applied these insights when designing our packaging and in-store merchandising.”
When it comes down to it, 7-Eleven is “doing so many things right,” Spieckerman stresses. But the competition is heating up in the form of small-format stores from players such as ALDI, Walmart, Target and even Lidl.
“All of these competitors are focusing on fresh and healthy selections, and Walmart and Target are working hard at integrating their e-commerce businesses with their physical locations,” she says. “7-Eleven has found itself operating in a once-sleepy retail tier that has suddenly become a hot spot.”
Still, 7-Eleven has demonstrated a fairly sophisticated approach to obtaining and leveraging consumer insights to create unique products that resonate with its customers, Wisner says, which bodes well for the future.
“7-Eleven hasn’t fully developed all of [its] opportunities yet, but it is going after them aggressively,” he stresses.
7-Eleven has a goal to increase private brand SKU count by 60 percent in 2015.
Franchisees ultimately make the decision as to how many private brand SKUs they will carry in their stores.