What's In Store for 7-Eleven?

You wouldn't know it to look at 7-Eleven's famous Slurpee, a cup of frozen mush consumed with a combination spoon-straw, or a Super Big Gulp soda, a 44-oz. liquid homage to American excess. But 7-Eleven is mostly Japanese.

The convenience store chain suffered through a bad leveraged buyout in 1987 and bankruptcy three years later. In 1991, Japan's biggest retailer, Ito-Yokado Co., bought 73% of what is now known as 7-Eleven Inc. Since then, 7-Eleven has grown to $10 billion in U.S. sales and $33 billion worldwide with Ito-Yokado's help.

The Japanese influence is palpable in 7-Eleven's information technology. The Dallas-based company is widely viewed as a technology leader, not only among convenience stores but all retailers. That's because 7-Eleven managers in the U.S. can track sales at their 5,300 stores item-by-item, hour-by-hour with one-of-a-kind software hand-coded by programmers in the mid-1990s.

7-Eleven's retail-information system, or RIS, as the company calls it, was built to fulfill Ito-Yokado's philosophy that successful retailers "hypothesize, take action, then verify."

In other words, store managers must think through what customers are doing, devise a plan to spur more sales around those trends, then quantify the results. That goes for selling not only cold drinks and cigarettes, but sports gear, clothing or any of the other retail goods in Ito-Yokado's $25 billion empire.

But you can't do that without having the right data at the right time. The company's store system provides that. The system's strength is clear in what happens to inventory. 7-Eleven unloads its inventory in an average of seven days, far faster than convenience-store competitors like Uni-Marts Inc. (Download PDF file to see financial chart.)

But now 7-Eleven faces forces unseen when it painstakingly built its store-information system. Narrower profit margins are forcing retailers to cooperate more with suppliers, to figure out how to spend less money getting products on shelves. The partnerships call for extensive data-sharing, and 7-Eleven's proprietary approach threatens to block the way.

Collaboration with manufacturers certainly isn't unheard of at 7-Eleven. One example is the Candy Gulp, which 7-Eleven developed with Nabisco in 2000. It is a resealable plastic container that fits in a car's cup holder and is filled with chewy "gummy" candies to scarf down while driving. Though 7-Eleven mined its trove of sales data to discover that customers would likely go for a Candy Gulp, the company didn't actually have to exchange data with Nabisco.

But for the kind of large-scale technology synchronization that full supply-chain collaboration requires, 7-Eleven must either rewrite key parts of its system, convert to packaged applications or attempt to connect to other companies' systems with translation software that uses Web standards. The Web is what it's trying first.

"The current architecture does hinder us some in the types of functionality we can add on," acknowledges Tom Ingram, director of merchandising and logistics at 7-Eleven. "That's why we need, as much as we're able and as quickly as we're able, to convert to Web technologies."

For example, smaller suppliers are being encouraged to interact electronically with 7-Eleven through integration products from webMethods Inc., of Fairfax, Va. WebMethods offers a secured Internet link between 7-Eleven and its suppliers, which is less expensive and more flexible than old-style electronic data interchange technologies. Such integration could allow 7-Eleven to automate communication with suppliers, making delivery schedules more precise.