CASE STUDY: Seven-Eleven Japan Co.
Established by Ito Yokado in 1973, Seven-Eleven Japan set up its first store in Koto-ku, Tokyo, in May 1974. The company was first listed on the Tokyo Stock Exchange in October 1979. On September 1, 2005, Seven & iHoldings Co. Ltd., was established as the holding company for Seven-Eleven Japan, Ito-Yokado, and Denny’s Japan. As a result, detailed financial results for Seven-Eleven Japan have not been available since then and are reported only as the convenience store portion of Seven & i Holdings. Seven-Eleven Japan realized a phenomenal growth between 1985 and 2013. During that period, the number of stores in Japan increased from 2,299 to more than 16,000. Globally, the firm had more than 53,000 convenience stores by June 2014 and was the world’s largest chain in terms of retail outlets. Global revenues for Seven & i from convenience store operations were 1,899 billion yen in 2013 with an operating income of 221.7 billion yen. The firm was present in 42 of Japan’s 47 prefectures and planned to open 1,500 stores in Japan in 2014. Customer visits to Seven-Eleven outlets averaged more than 1,000 per store per day in 2013.
Company History and Profile
Both Ito-Yokado and Seven-Eleven Japan were founded by Masatoshi Ito. He started his retail empire after World War II, when he joined his mother and elder brother and began to work in a small clothing store in Tokyo. By 1960, he was in sole control, and the single store had grown into a $3 million company. After a trip to the United States in 1961, Ito became convinced that superstores were the wave of the future. At that time, Japan was still dominated by mom-and-pop stores. Ito’s chain of superstores in the Tokyo area was instantly popular and soon constituted the core of Ito-Yokado’s retail operations.
In 1972, Ito first approached the Southland Corporation about the possibility of opening Seven-Eleven convenience stores in Japan. After rejecting his initial request, Southland agreed in 1973 to a licensing agreement. In exchange for 0.6 percent of total sales, Southland gave Ito exclusive rights throughout Japan. In May 1974, the first Seven-Eleven convenience store opened in Tokyo.
This new concept was an immediate hit in Japan, and Seven-Eleven Japan experienced tremendous growth. By 1979, there were already 591 Seven-Eleven stores in Japan; by 1984, there were 2,001. Rapid growth continued (Table 3-3), resulting in 16,086 stores by 2014.
On October 24, 1990, the Southland Corporation entered into bankruptcy protection. Southland asked for Ito-Yokado’s help, and on March 5, 1991, IYG Holding was formed by Seven-Eleven Japan (48 percent) and Ito- Yokado (52 percent). IYG acquired 70 percent of Southland’s common stock for a total price of $430 million.
In 2005, Seven & i Holdings was established through a stock transfer combining Seven-Eleven Japan, Ito-Yokado, and Denny’s Japan. In 2013, convenience store operations from Seven-Eleven Japan and other subsidiaries in North America and China contributed 37.4 percent of total revenues from operations and 76.1 percent of operating income for the Seven & i Holdings Company (see Table 3-4 for details). The relative performance of convenience stores within Japanese operations was even more dominant. The discrepancy between Tables 3-3 and 3-4 results because Table 3-3 reports sales at both company-owned and franchised stores, whereas Table 3-4 reports revenues for only Seven & i.
