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7-Eleven is the world's first and largest
convenience store chain worth nearly $37 billion.
It has over 70,000 stores in 17 countries and the most
locations in Japan, where sales are more than double.
But, it hasn’t always been this way.
7-Eleven once rejected the idea of opening a store in Japan.
And long before then, the business was only an
ice block store up until a junior employee took
a chance on pitching a bold idea to his boss.
In 1927, John Green worked for the Southland Ice Company
a chain of stores that sold ice blocks, in Oak Cliff, Texas
One summer, John decided to keep the store that he worked
at open for 16 hours, seven days a week so that it was
easier for customers to keep their perishables fresh.
At the time, no other store had ever dared to
remain open that long, even though there were
few shopping options outside major cities.
Not many people drove cars, and
refrigerators were also sparse.
As a result, John’s customers began to make requests
for other needs besides ice, like milk and eggs
It was then that John realized what his
customers really needed was convenience.
So he asked his manager and one of Southland’s owners,
Joe Thompson, if he could expand their product offerings
and become business partners offering a $1,000 investment.
“You supply the items and I’ll pay
the power bills,” John suggested.
Fortunately, Joe agreed, and together, the two
created the world’s first convenience store.
After introducing more products beyond ice,
crowds began to quickly form outside the store.
Recognizing its immediate success, Joe decided
to open more locations throughout Dallas
and later renamed them to Tote'm Stores.
The idea came to mind after an employee placed a souvenir
totem pole from Alaska outside one of the stores.
The totem pole attracted so much attention
that other employees suggested the new name
since customers “toted away” their purchases.
Joe then decided to further unify his stores by training
staff to have daily sales talks and provide quality service.
Afterward, he began to build and lease gas
stations at many of the stores, leading to
business booming up until a devastating event.
One year after Southland’s expansion, the Great
Depression hit and plunged the company into bankruptcy.
However, a banker named W.W. Overton Jr.
managed to help Southland survive by organizing the
purchase of all its bonds, a form of a loan from
investors who receive regular interest payments.
As a result, Southland’s board of directors ended
up having a controlling interest in the company.
Two years later, Southland began to financially recover
when the prohibition, a nationwide ban on alcohol — was
lifted and Tote’m Stores began to sell ice-cold beers.
Over time, the increase in sales helped Southland run 60
Tote’m stores throughout Dallas and Fort Worth, Texas.
Southland continued to thrive even when World War II began.
The company became the lead supplier of ice for the
construction and operation of Camp Hood, the U.S.
Army’s largest training camp.
To ensure they could meet the demand, Southland
acquired City Ice Delivery, which owned two
ice plants, 20 stores, and property in Dallas.
By the time the war ended, Southland owned
stores all over Texas and operated from 7 in
the morning to 11 at night, seven days a week.
Around this time, the company hired an advertising firm called
Tracey-Locke to suggest a new name for their Tote’m stores.
The firm decided on “7-Eleven” to highlight their
commitment to long hours to better serve customers.
Over the following years, Southland
identified more opportunities to grow.
First, they acquired Texas Public Utilities, which owned 20
ice plants making Southland the largest ice company in Texas.
Later, Joe’s oldest son, John P. joined Southland’s
board of directors and came up with the idea of a
new strategy after a meeting in Washington, D.C.
The night of the meeting, a blizzard blanketed
the city and made driving impossible.
However, John P. noticed that people still walked to stores
on street corners to purchase necessities
like canned soup, tissue boxes, and medicine.
At that moment, Joe realized that Southland’s
business strategy needed to consider traffic
patterns around busy corners when opening new stores.
Unbeknownst to Joe, the strategy would lead to taking his
father’s company to new heights and eventually many lows.
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Five years after the expansion, John P.
became the vice president of Southland and
his brother, Jere, became the VP of 7-Eleven.
Afterward, 7-Eleven expanded beyond Texas and
throughout Virginia, Maryland, and Pennsylvania.
At the same time, the chain began to open stores in
the suburbs and were quick to eliminate unpopular
products, contributing Southland to reach a
major milestone: $100 million in annual sales.
However, the Thompson family experienced a
devastating loss that same year
Joe passed away from brain cancer at 60 years old.
Following the loss of his father,
John P. incorporated Southland and set an ambitious goal
growing the company’s annual sales to $1 billion within 10 years.
Under the Thompson brothers’ leadership, major
changes were made to 7-Eleven’s operations.
First, the chain’s daily hours extended from
16 to 24 after a store in Austin stayed so busy
after a football game that it couldn’t close,
leading to other stores wanting to do the same.
Not long after, 7-Eleven began to franchise its stores,
expanded across the US, and introduce new products most
notably, the first fresh coffee in to-go cups and the Slurpee.
Four years later, John P. became Southland’s CEO
while Jere took his former position of VP.
John P. also accomplished the goal he set for Southland
after his father’s passing: achieving $1 billion
in annual sales within 10 years.
And only one year later, the Thompson brothers managed
to take Southland public on the New York Stock Exchange.
By then, there were thousands of
7-Eleven stores across the U.S.
and Canada.
However, the Thompson brothers wanted to expand even further,
and fortunately, the perfect opportunity came to them.
Over six thousand miles away, a young executive in
Japan named Toshifumi Suzuki travelled to the U.S.
on behalf of the company he worked for, Ito-Yokado.
At the time, Ito-Yokado was one of the top
supermarket chains in Japan and wanted to branch
into other businesses, beginning with Denny's, a
chain of family restaurants founded in California.
To secure a licensing agreement,
Toshifumi was sent to the U.S.
to work out the details.
During this time, he happened to discover
a 7-Eleven and was immediately intrigued.
The concept of a 24-hour convenience store didn’t
exist in Japan, even though many businessmen
worked long hours and would benefit from them.
Realizing its potential, Toshifumi pitched the
idea to his fellow executives at Ito-Yokado.
Fortunately, they believed in the
opportunity just as much as he did.
That same year, Ito-Yokado managed to negotiate
a 7-Eleven licensing agreement with the Thompson
brothers, in spite of being initially rejected.
The agreement allowed Ito-Yokado to have complete
control over 7-Eleven in Japan, resulting in
creating a subsidiary company for the business.
And only one year later, the first
Japanese 7-Eleven opened in Toyosu, Tokyo.
The Thompson brothers could have never imagined that a
once rejected offer would become 7-Eleven’s lifeline.
7-Eleven in Japan was very different when
compared to its American counterpart.
It was spelled as Seven-Eleven, was built as half the average
size, only stocked a third of the average inventory, and
delivered fresh food such as lunch boxes three times a day.
One item that the chain offered was quite unexpected:
onigiri balls of rice wrapped with nori, or seaweed,
and filled with a meat or vegetable filling.
At the time, onigiri was universally thought
of as something you only made at home.
Seven-Eleven was the first company ever
to turn it into a commercial product.
Over the next decade, Seven-Eleven became so successful that
it managed to go public on the Tokyo Stock Exchange, grew to
3,000 stores throughout Japan, and expanded its services to
allow customers to pay electricity and gas bills in-stores.
Meanwhile, Southland became one of America’s biggest
retailers and an even more worthwhile investment to
shareholders some who were happy to only have a small
share of the company while others secretly wanted more.
The Thompson family would only discover
the truth through an unexpected call.
One day, John P.
received a call from Samuel Belzberg, a
Canadian investor who owned shares in Southland.
Samuel had reached out to inform John P.
that his advisors were urging him
to buy more of the company’s stock.
“Don’t do that,” John P.
pleaded.
“You told me that you wouldn’t.”
At the time, Samuel was known as a feared
corporate raider who owned 5% of Southland.
Meanwhile, the Thompson family only owned close to 10%.
''I felt extremely nervous,'' Jere later revealed.
''A guy like Belzberg could go out
anytime and start buying a lot of stock.
He could make a real offer for the company.''
Fearing a hostile takeover, the Thompson brothers
decided to go private by buying out investors forcing
them to rack up $4 billion in debt and paying $2.5
million to shareholders who filed class-action lawsuits.
Overtime, the Thompson family succeeded
in owning about 50% of Southland.
However, they ended up having to sell many of Southland’s
non-7-Eleven operations to pay off their debt,
including the dairy and ice businesses they had founded.
Many employees were shocked and
about 2,000 of them lost their jobs.
Several years later, Southland plunged into bankruptcy again
failing to persuade creditors to agree to refinancing their
debt, marking one of the biggest
bankruptcy cases in U.S. history.
The Thompson brothers felt they had no choice but
to approach Ito-Yokado for help through a buyout
offer: 70% of Southland for $430 million in cash.
At the time, Southland owned 6,000 7-Eleven stores in the U.S.
and Canada and licensed 6,400 stores in 22 countries.
About 4,200 of the international stores were in Japan.
Fortunately, Ito-Yokado agreed to the deal to
acquire the company, and changed Southland Corp.
to 7-Eleven Inc.
Only one year later, Ito-Yokado turned Seven-Eleven into a
high-tech machine with efficiency rarely seen in the U.S.
Its fourth-generation point of sale system
helped to determine what to stock and charge, and
revealed customer demographics and sales patterns.
Seven-Eleven also introduced new products beyond fresh
food, including ones that were typically not found
in convenience stores such as imported luxury goods.
Today, Seven-Eleven in Japan is known for its convenience
and premium products, including Seven Cafe, an assortment of
cafe items such as hot and cold coffees, teas, and sweets;
Seven Premium Gold, an assortment of pre-packaged dinner
items such as ramen noodles, hamburger steaks, and bread;
Seven Premium Fresh, an assortment of fresh items such as raw
meat and fruits; and Seven Premium Lifestyle, a selection of
everyday items, such as clothing, utensils, and household.
As for its services, the chain continues to allow
customers to pay gas and electricity bills in stores
and offers both an ATM and foreign exchange machine.
Customers can also refill their metro passes,
buy tickets for concerts, access free WiFi,
and buy electronics such as phone chargers.
And to keep up with competitors in Asia such as FamilyMart
and Lawson, Seven-Eleven Japan has opened stores in
malls and train stations, and vending machines in
offices, factories, hospitals, and schools all of which
have contributed to around $42 billion in annual sales.
Meanwhile, in the U.S., 7-Eleven is more
known for its large-sized drinks, such as
the Big Gulp, and 24-hour accessibility.
However, 7-Eleven is making changes to step up
to its Japanese counterpart by offering healthier
food options and a restaurant experience,
even opening taco shops in some locations.
7-Eleven also continues to offer gas on-site,
and now, drive-thru and delivery services.
And while annual sales in the U.S.
are in the billions around 18 it’s
still 57% less when compared to Japan.
To date, 7-Eleven remains the world’s largest chain of
convenience stores with over 70,000 locations in 17 countries
most of which are in Japan and worth nearly $37 billion.
This is the story of how a junior employee took a chance
on pitching a bold idea to his boss and how a once
rejected offer sustained a billion-dollar business.
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