3 retail lessons from the father of Japan’s convenience store industry

In today’s episode on 27th May, we tell you why Japan’s 7-Eleven work so differently and three lessons Toshifumi Suzuki left behind for retail. Book a FREE call with Ditto https://ditto.sh/vx51ji

• 0:01Speaker 00

  Hello folks, you're tuned in different charts daily. Toshifumi Suzuki, the man who revolutionized Japan's convenience stores via 7-11, passed away last week. So, in today's episode, we tell you why Japan's 7-11 works so differently and three lessons Toshifumi Suzuki left behind for retail.

• 0:23Speaker 00

  Before we begin, here's a quick word from team Ditto. Life has a way of surprising us and not always in a good way. Sometimes it's a sudden illness or an unexpected hospital visit that can shake up everything. In India, families still pay about 39% of medical expenses directly from their own pockets and just one hospital's take can wipe out years of savings. The easiest way to protect yourself is by getting a good health insurance plan. It's way cheaper than footing one huge bill. And if you're unaware where to start, book a free call with Ditto. No spam, just honest, jargon-free guidance, trusted by over 8 lakh people for their health and term insurance needs. The link is in the description. Now, back to the story.

• 1:06Speaker 00

  Toshifumi Suzuki was known as the father of Japan's convenience store industry. So when he passed away last week, we knew we had to write a story in his honor to tell you why Japan's convenience stores, or Kunbi ni, especially 7-11, are so special. But before we get to that, you'll need a little context. See, 7-11 didn't begin life as a convenience store. It started with an ice stock. Yes, back in 1927, a man named John Jefferson Green worked at Southland Ice Company, an ice company in Dallas, Texas. This was before refrigerators became common in homes, so people regularly stopped by to buy blocks of ice. That footfall gave Green a simple idea.

• 1:49Speaker 00

  While customers were already there, why not also sell basics like milk, eggs and bread? His boss agreed. That tiny experiment quietly laid the foundation for what would become the world's first non-convenience store. Over time, the stores grew and by 1946, they had started staying open from 7:00 in the morning to 11:00 at night. That's where the name 7-11 came from. Decades later, the business expanded overseas. In 1974, Japanese retailer Ito Yokado opened the country's first 7-11 franchise. And this is where Toshifumi Suzuki enters the picture. At the time, Suzuki worked at Ito Yokado. He later negotiated a bigger licensing deal with Southland Corporation,

• 2:34Speaker 00

  the American parent that is, helping 7-Eleven expand rapidly across Japan. But back in the US, the company that invented the convenience store was beginning to lose its way. By the 1980s, Southland Corporation had drifted far beyond convenience stores, expanding into all sorts of businesses including dairy farms, video rentals and oil. The core business suffered, debt piled up, and by 1990, Southland filed for bankruptcy. Meanwhile, Japan's 7-Eleven was heading in the opposite direction. Instead of spreading itself too thin like its American counterpart, 7-Eleven Japan went deep. It became obsessive about understanding what customers wanted,

• 3:14Speaker 00

  built systems around fresh food and trained store managers to think more like analysts than shopkeepers. So while Southland struggled, 7-Eleven quietly became Japan's highest crossing retailer. Then for the twist, in 1991, Ito Yokado bought 70% of Southland for $4.30 million. So yes, strangely, the company that invented the convenience store was now being owned, managed and rebuilt by the Japanese retailer that had taken the idea and perfected it. But how exactly did this happen, you ask? Well, much of this traces back to Toshifumi Suzuki itself. And here are three ways how he did it, which in effect became the lessons he left behind for retail.

• 3:59Speaker 00

  Lesson number one, treat your staff not as stalkers but as analysts. For most of the retail history, stores worked on a model where they restocked what sold. So a store shelf was, in a way, a record of past. But Suzuki didn't believe this was the right approach because he noticed that Japan had changed. Through the 1950s and 60s, the country ran on a seller's market. When people needed things, they would simply walk into a store and buy any beer, any rice or any jacket. That's how shelves emptied themselves. But by 1970s, people had moved beyond just fulfilling basic needs. Buying any functional product was no longer enough.

• 4:37Speaker 00

  Didn't just want beer anymore. They wanted a particular brand of beer. And if you didn't have it, they would simply move on and look for it at a competitor store. This meant dead products started piling up on shelves. Suzuki called them as shelf warmers. And he realized that a computer tracking past sales could never solve the problem. So he built a system called Tanpin country. I hope I'm pronouncing that right, where store staff didn't just restock shelves based on past data, but on what customers would want next. They made predictions based on hypothesis. What will this specific customer in this specific neighborhood want today? But how would they know that? Well, let's explain this with a simple example.

• 5:20Speaker 00

  Let's say there's a local sports event tomorrow at a stadium three streets away, alright? That would mean the store needs to stock energy drinks, glucose, quick bites, soft drinks, and maybe even pom poms for the audience which are. That's how staff would decide what orders to place with supplies today, or take payday. Since Japanese workers are paid once a month, some stores would strategically lower the price of box lunches in the days before payday and raise them again afterwards. Another store may have noticed that a sunny morning during mons often meant unprepared customers by afternoon, so they stocked umbrellas. Basically, the local knowledge of store staff fed directly into what appeared on shelves. They worked more like analysts than simple store staff,

• 6:03Speaker 00

  observing and asking fresh questions every single day, staying true to Tanpin country, which literally translates to control of every single item. Tanpin, meaning every single thing, country, meaning control. Lesson number two, killing a product is not a failure. Tanpin country was not just a system for choosing what to stock, but also for deciding what to stop stocking and doing it quickly. See, because in retail, the standard instinct is to keep a product on shelves as long as it's moving, but Suzuki believed otherwise. He felt that stores shouldn't just focus on adding what sells, they should also be apologetic about ruthlessly removing what sells slowly to make room for what customers want right now.

• 6:47Speaker 00

  To make this work, store staff had access to a central system that helped them continuously examine, hypothesize, and reexamine product performance against demand patterns. Now, this helped them figure out exactly when a product's moment had passed. 7-Eleven was also able to create a system where a single truck could carry products from multiple suppliers. That meant stores could frequently order small quantities of a wide variety of items without driving up costs. It also reduced the chaos of having too many delivery trucks showing up every day. The end result was that by 2003, this constant rotation meant 7-Eleven Japan was replacing nearly 70% of its products every year. And while most other retailers found that alarming, to Suzuki, that was exactly the point.

• 7:32Speaker 00

  He believed that one of retail's biggest problems was letting shelves go stale. Over time, these products, which were merely good enough, crowded out the things customers actually wanted and quietly signaled that the store wasn't really paying attention anymore. Lesson number three: Consensus is not always your friend. In Japanese corporate culture, there's a long-fouled practice called nemewashi. Again, I hope I'm pronouncing that right. Basically, before making a big decision, top execs meet different teams one-on-one, gather feedback, understand if there are any objections, refine ideas, and only then move forward with a formal proposal to introduce something new.

• 8:13Speaker 00

  The idea is to simply avoid conflict and build consensus before taking any action. But Suzuki wasn't always a fan of this approach. He believed that too much consensus would slow down decisions that were good for the business, and he proved it when 7-Eleven Japan took control of Southland. He decided to shut around 1,200 underperforming stores and replaced its old distribution network, improved product selection, rationalized pricing, And most importantly, rolled out an integrated information system inspired by Japan's model. As you can imagine, not everyone liked it. Many franchise owners pushed back because they were losing the freedom to choose their own manufacturers, products and distributors. But Suzuki pressed ahead anyway.

• 8:57Speaker 00

  And the results spoke for themselves. By nineteen ninety-four, the US business was profitable again. Now, just to be clear, this isn't an argument for arrogance or ignoring expertise. Suzuki still listened. He just didn't believe that every good idea needed universal approval. Because sometimes chasing consensus only gives you the average of existing opinions. And Suzuki understood that customers can't always tell you what they want. If what you're building doesn't exist yet, they have to experience something new to like or hate it. And that, folks, as our seven eleven Japan became so different from the many other seven elevens around the world. Turning into a place where busy people don't just grab sandwiches, chips and drinks. But also pay bills with draw cash, photocopy documents, book tickets and more.

• 9:42Speaker 00

  Talking about seven eleven, I can't wait to go to Thailand again and experience the seven eleven stores there again. Alright folks, I'll see you in the next one.

• 9:53Speaker 00

  Thank you for listening to today's episode. And if you want to share your feedback or suggestions, do drop us an email to [email protected]. Until next time.