--- title: "US to Close 8,640 Retail Stores! How Did This Japanese Company Still Net 10 Billion?" description: "The global retail industry is facing a wave of store closures, with the US expected to close 8,640 stores in 2017, surpassing the 2008 peak. Amid this turmoil, Japanese convenience store chain 7-Eleven has thrived by leveraging a shared economy model, connecting small retailers, factories, and distribution centers to achieve high efficiency and profitability." author: "颜艳春" publisher: "New Distribution" email: "zhaobo258@gmail.com" telephone: "+8615854817671" published: "2017-08-27" language: "en" canonical: "https://xinjignxiao.com/en/articles/us-to-close-8-640-retail-stores-how-did-this-japanese-company-still-net-0739744f/" markdown: "https://xinjignxiao.com/en/articles/us-to-close-8-640-retail-stores-how-did-this-japanese-company-still-net-0739744f.md" original_source: "https://mp.weixin.qq.com/s/S__2mLOqKxKS95DazIc-Mg" translation: "https://xinjignxiao.com/zh/articles/%E7%BE%8E%E5%9B%BD%E8%A6%81%E5%85%B38640%E5%AE%B6%E9%9B%B6%E5%94%AE%E5%BA%97-%E8%BF%99%E5%AE%B6%E6%97%A5%E6%9C%AC%E5%85%AC%E5%8F%B8%E5%8D%B4%E5%87%80%E8%B5%9A100%E4%BA%BF-%E5%87%AD%E5%95%A5-0739744f.md" attribution: "New Distribution — https://xinjignxiao.com/en/articles/us-to-close-8-640-retail-stores-how-did-this-japanese-company-still-net-0739744f/" usage_policy: "https://xinjignxiao.com/ai-policy.txt" --- # US to Close 8,640 Retail Stores! How Did This Japanese Company Still Net 10 Billion? > The global retail industry is facing a wave of store closures, with the US expected to close 8,640 stores in 2017, surpassing the 2008 peak. Amid this turmoil, Japanese convenience store chain 7-Eleven has thrived by leveraging a shared economy model, connecting small retailers, factories, and distribution centers to achieve high efficiency and profitability. Click on the image for details Author | Yan Yanchun, Founder of eFuture and Fuji Holdings Source | Zhenghedao (ID: zhenghedao) The death knell for global retail has sounded. According to incomplete statistics from Lianshang.com, in 2016, 46 companies in China's department store, shopping mall, and hypermarket sectors closed a total of 185 stores, with department stores and shopping malls closing 56 stores and hypermarkets closing 129 stores. The actual number of closures is likely much higher. Globally, Walmart closed 269 stores in 2016, Tesco closed 43 stores in the UK in 2015, and Carrefour closed over 15 stores in China in 2015. In 2017, there have been 9 retail bankruptcies in the US, with sporting goods retailer Sports Authority and the largest chain of discount shoe stores Payless having filed for bankruptcy protection. The large number of retailer bankruptcies over the past 12 months has left many vacant storefronts in major shopping malls, leading to a staggering rate of mall closures. According to Credit Suisse analyst Christian Buss, "The number of store closures in the US since 2017 has already exceeded the number closed in 2008 due to the economic recession. So far in 2017, 2,880 retail stores have closed in the US, compared to 1,153 during the same period in 2016. Approximately 8,640 stores are expected to close in the US in 2017, surpassing the 2008 peak of 6,200." **Behind these numbers lies the end of an old era.** Today, both brick-and-mortar stores and e-commerce companies are facing a harsh winter: retail wars, transformations, store closures, bankruptcies, layoffs, broken capital chains, plummeting stock prices, and even bankruptcies are unfolding on the global retail stage. **This list is long now and will likely be longer in the future. New retail is on its way.** **The Industrial Map of New Retail: A Super Species** The new industrial map of new retail is still being drawn, but some new contours are emerging: Retailers are inherently platform enterprises, connecting bilateral or multilateral markets. New retail is a super species that evolves from traditional franchise chains into an empowering shared economy platform. The empowering shared economy will become the highest-return platform for managing idle assets. **1. From Traditional Franchise Chains to Empowering Shared Economy** Moving from the physical economy and e-commerce economy to a shared economy, in every category, at least one exponential organization or unicorn enterprise will emerge. These are what we call platform companies. **Exponential companies and asset-light companies represent a new dividend for our future organizations** and also represent a new path from the e-commerce economy to an omni-channel economy and a shared economy in the new retail era. **7-Eleven is a typical shared economy species.** 7-Eleven's business model unites the weak players in the upstream and downstream of the industry chain. Following strict pairing principles, it carefully selects small local factories, mom-and-pop stores, and small distribution centers, investing heavily in building its own industrial router to directly connect over 19,000 mom-and-pop stores, more than 170 factories, and over 150 distribution centers. Through big data and AI algorithms, it personalizes supply-demand pairing and recommendations based on customer needs in each store's region and trade area. Through the shared economy (shared R&D, shared procurement, shared logistics, shared IT, shared finance) and the "four no-earnings" principle (no price difference, no channel fees, no advertising fees, no transaction commissions), **it has established the deepest value depression, minimizing the overall supply chain costs and the friction of inter-organizational transactions, creating the greatest competitiveness and the most profit for the entire 7-Eleven shared economy organization**. It then shares gross profit with the small stores, deducting 38-65% based on annual agreed indicators for different store types, with monthly settlements. This Japanese company has 8,000 employees and generates nearly 10 billion RMB in net profit, with per capita efficiency close to 1.2 million, comparable to Alibaba. It has been on a continuous exponential growth path for the past 30 years. 7-Eleven is by no means a traditional convenience store company species. **2. Returning to Two Old Origins** "**The essence of retail always revolves around customers and products.**" Products and customers are always the two protagonists in the retail saga; they are friends most of the time, sometimes enemies. In the era of mobile internet and social media, they often fight side by side. Only extreme products can become self-media, able to evoke loud praise from customers. Customers can create customers, which easily triggers word-of-mouth. But those of us in retail always think we can control customers' thinking. In fact, many of our practices are still centered on our own enterprises and our own products. "**The essence of competition always revolves around efficiency and cost**: from seeking internally to seeking externally." The essence of competition is efficiency and cost. The traditional farmer-like model of quantitative linear growth in old retail is no longer sustainable. Only through transformation and business model innovation can we achieve efficiency-based exponential growth, which offers a way to survive and grow. **3. Following Three New Rules** New retail must rely on new rules, including: the Dam Rule from "zero-sum" to "positive-sum", the 590 Power Law, and the Einstein Rule. **➤ The Dam Rule** We all know the Three Gorges Dam. **The Three Gorges Dam is entirely a model of the shared economy.** The dam's approach is to connect the existing Dongting Lake, Poyang Lake, Jinsha River, Jialing River, and Small Three Gorges into the Three Gorges Dam. When 50 Dongting Lakes and Poyang Lakes are connected, it might be only 100 meters deep, but when 1,000 or 10,000 are connected, and the Three Gorges Dam reaches 175 meters deep, it will backflow. Thus, all participants not only achieve rapid growth but also gain a wider moat, gradually strengthening. Through years of support and empowerment, 7-Eleven has amplified the production capacity of many small factories by 10 times, increased the profits of small stores by 3-5 times, and enabled DCs to achieve 2-3 times growth. This is the effect of "small rivers rise, the big river fills; the big river has water, small rivers are full"—the dam effect. It for the first time solves the zero-sum model of traditional market economies, where it's either you die or I die. **➤ The 590 Power Law** Whether in consumer internet or industrial internet, the market landscape will fully enter the curse of the 590 Power Law. Today in e-commerce, **the top 5 companies control 90% of market share**. Alibaba's Tmall, JD.com, Vipshop, Suning.com, and Gome Online have together controlled 91% of China's B2C market. In the mobile phone industry, there is even a 190 rule, such as Apple alone capturing 91% of the industry's profits. **➤ The Einstein Rule** New retail has an important formula, which I borrow from Einstein: > **E = MC², where E is Earnings, M is Merchandise, C is Customer, and C² is the square of the customer.** In the era of mobile internet and social media, customers not only consume products but also spread word-of-mouth, creating new customers for you. Only products that are ingenious, have a story, and can ignite consumer enthusiasm or even inner resonance can establish the customer-squared effect. So the product must at least be 1; if it's only 0.9, the ability of customers to create customers may be greatly diminished. If your product is mediocre, trying to ignite consumer enthusiasm is delusional. **4. Accelerating Four Major Transformations** To transform from a traditional franchise chain into a shared economy entity, organizations must accelerate four major transformations, aligning with the four organizational characteristics of the shared economy: asset-light, external empowerment, internal authorization, and exponential growth. **First characteristic: From asset-heavy to asset-light organizations** 7-Eleven Japan, apart from the 501 directly operated stores opened in the early days, has basically not opened its own stores, has no logistics infrastructure, and no factories. It is a thoroughly asset-light model. Its only heavy assets are the industrial IT platform and 8,000 employees. From a business model perspective, 7-Eleven is no longer a pure product company. Apart from new product R&D and software platform development, everything is outsourced. This crowdsourcing model ensures zero inventory and zero supply chain costs. **Second characteristic: From transactional to empowering organizations** From an external perspective, as a B2B shared economy entity, to ensure long-term market prosperity, it must step away from being a transactional organization and transform into an empowering organization that operates an ecosystem and co-builds it. 7-Eleven has over 8,000 employees, and 80% of their mission and work is to empower upstream and downstream partners in the industry chain. After more than 30 years of effort, they have surpassed the US headquarters and established six empowerment systems, including cultural empowerment teams (business philosophy consensus), R&D and factory empowerment teams, small store operation empowerment teams, logistics empowerment teams, IT empowerment teams, and financial empowerment teams. **Product R&D empowerment is the most important work that separates 7-Eleven from second-place Lawson and third-place FamilyMart in terms of huge profit gaps.** 7-Eleven has assembled a 150-person product development and factory empowerment team, with 100 responsible for new product development and 50 for lean management guidance in factories. They have introduced Toyota's lean management system into these companies, continuously improving manufacturing and quality control. In particular, every week (recently every two weeks), their chairman calls over 2,500 OFCs to Tokyo for a national business review meeting. Whether an OFC is in Hokkaido, Kagoshima, Osaka, or anywhere else in Japan, each OFC is a field operations consultant responsible for 7-8 stores. The chairman speaks each time, but more importantly, everyone is encouraged to share experiences. Each person must bring three questions to the meeting, and everyone helps each other. So 2,500 people in one venue exchange and discuss. When they bring frontline operational issues and doubts to the meeting, the next morning, the 8 small store owners also learn. The entire company and these small stores evolve at a rate of (1+0.02) to the 55th power each year. In logistics, finance, IT, and other areas, they have also established very professional empowerment teams and support. **Third characteristic: From controlling to empowering organizations** From an internal perspective, as a B2B shared economy entity, to ensure long-term market prosperity, **and to deal with a large number of uncertainties and black swan events, it must transform from a traditional controlling organization to an empowering organization that lets the frontline call the shots**. Let the frontline call the shots and iterate quickly. 7-Eleven's boss's motto is "change orders in the morning, change them again in the evening." New product development uses multiple parallel organizations, such as multiple salmon flavor groups, and then test marketing. The organization is evenly distributed nationwide, transformed into 501 retail laboratories to complete new product test marketing before entering the national market. The organization is highly empowered. **Fourth characteristic: From linear to exponential growth** A shared economy entity unites all the weak players in the upstream and downstream of an industry chain. But the platform's aggregation effect gives these weak players, who originally had no bargaining power, a scale bargaining power, further liberating productivity. Their costs decrease exponentially, and marginal costs eventually approach zero. 7-Eleven's basic approach is: "First, I establish an industrial router for free connection, I also help you empower, I help you make money, and finally I deduct my share. If you earn the agreed 4 million in operating gross profit, I deduct from that 4 million. In this way, I get the most profit. If you don't reach it, I don't take any money." **Don't End Up Mediocre in the Midst of Constant Excellence** William Deresiewicz, a famous American author and literary critic, said in his speech at Stanford University's 2015 freshman convocation: "Don't end up mediocre in the midst of constant excellence." This sentence still echoes in my ears. **Most of our entrepreneurs are still in their comfort zones, sitting in the recliners of their past successes, mechanically repeating the experiences they are proud of, perfecting their craft on the sinking Titanic. But in this era of great change under consumer sovereignty, they are gradually moving from excellence to mediocrity, or even bankruptcy.** Starbucks Chairman Howard Schultz recently spoke about leadership at Tsinghua University. He said: "There are many different definitions in various textbooks. One trait I think is underestimated is vulnerability, especially for men. It's hard for people to imagine a man showing vulnerability in front of a group, admitting mistakes, and apologizing. Over the years, I've learned that the more vulnerable you are, the more people will help you. So, **vulnerability is also a trait of leadership, and I hope you can embrace it and accept it.** Conversely, being a leader doesn't mean you have all the answers. **In fact, seeking help is also a strength.** If you want to build a great company, you surround yourself with many people who have many ideas and different values. Some are skilled professionals, some may be smarter than you, more remarkable than you. But everyone must share a common set of values." Amazon's Jeff Bezos said: "There is no magic formula for success; the key is to get ahead of others." Walmart's Sam Walton said: "Celebrate success, stay optimistic in failure. Exceed customer expectations, control costs, be lower than competitors, charge bravely, and abandon traditional concepts." **New retail is the next generation of retail, not just innovative retail; it is also the fearless exploration of thousands of entrepreneurs.** "Even the beggars by West Lake are using QR codes to beg for money, keeping up with the times. Think about it, what's the use of resisting new retail?" said Jack Ma. Since tomorrow holds insecurity, we must live in the present and act quickly without fear. Let the storm of new retail come more fiercely! Only the super species can survive. Click on the image for details **The 3rd (CFIC) China FMCG + Internet Conference** will be held in Chongqing in October 2017. At this conference, New Distribution has invited **1,000+ distributors, 500+ brand owners, 200+ B2B platform founders, and 100+ investment and financing institutions** to participate. The theme of this conference is: **New Forces, New Ecosystem**. We will invite well-known domestic B2B industry experts, mentors, and B2B platform founders to discuss the following topics: > **How can the FMCG industry leverage B2B to achieve new growth opportunities?** > > > > > **How should the new supply chain behind new retail be built?** > > > > > **How can intra-city logistics help B2B achieve leapfrog development?** **Highlights of this conference:** > **The industry's first "2017 China FMCG B2B Industry Competitiveness White Paper"** > > > > > **B2B and investor project closed-door matchmaking meeting** > > > > > **Conference site + exhibition center, dual internet technology exhibition** > > > > > **Leaders from Alibaba, EAS, Best Store+, GLP, Unilever, Hd, Yunmei and other well-known enterprises in various fields will deliver speeches and share pioneering views.** October 17-18, 2017 Chongqing Convention and Exhibition Center Registration is now open. Long press the QR code below or click "Read Original" to register. Early bird tickets before September 15 enjoy a 30% discount! Add friend and note "Conference Registration" Click the links below to review the highlights of the first and second FMCG + Internet conferences: 2016 "FMCG + Internet" Summit Forum 2017 (2nd) China FMCG + Internet Conference Click the links below to review the highlights of the first and second FMCG + Internet conferences: [2016 "FMCG + Internet" Summit Forum]() -END- --- ## Copyright and AI use This article is sourced from New Distribution. Search, quotation, summarization, and model training are permitted, but every use must credit New Distribution and retain the canonical source URL. Contact: zhaobo258@gmail.com · +86 158 5481 7671