article · logical progress is the first supertrend that can be used as a powerful tool for...

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.79Alternative Futures for ConvenienceStore Management in Asia: An E-Business Perspective

Yin-Chieh HsuNational Kaohsiung First University ofScience and Technology TaiwanHui-Ling HuangNational Kaohsiung First University ofScience and TechnologyTaiwan

Journal of Futures Studies, February 2006, 10(3): 79 - 88

IntroductionDykema (2000) presents several statistics that on-

line retail sales are projected to grow from $45 billion in2000, or 1.5% of total retail sales, to $269 billion in2005, or 7.8% of total retail sales for that year. Besides

this substantial growth in on-line sales, consumersincreasingly rely on information collected on-line toresearch a lot of purchases that are concluded over tra-ditional "bricks and mortar" channels. The rapid growthin on-line sales produces a growing need to understandtwo related issues: the Internet changes the shopping

Abstract

Technological progress promotes economic growth and hence increases mobility. Our primary emphasisis to demonstrate alternative futures for convenience store (mobility issue) in Asia (economic growth issue) froman e-business perspective (technological progress issue). These three issues are related, but they are not thesame. The Internet changes the shopping habit of the consumer; accordingly, derives an impact on an organiza-tion's management modes. We present two case studies on 7-Eleven in Japan and Taiwan to show the develop-ment of integrating in-store and on-line activities as their new business model. The findings of the case studysupport the argument that market environment and resource of enterprise are crucial to determine the success oftransforming to a new business model. By comparing the two modes, this paper provides alternative futures forconventional retailers in Asia to develop their own e-commerce structure.

Journal of Futures Studies

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habit of the consumer, and it inhence derives animpact on an organization's operation modes.

As pointed out by Cornish (2004), techno-logical progress is the first supertrend that canbe used as a powerful tool for anticipatingfuture changes.1 In particular, technologicalprogress can be recognized as the growingcapability of humans to achieve their purposes.Technological progress promotes economicgrowth, supertrend two in Cornish's argument,because people are eager to use their know-how to produce goods and services, both fortheir own use and to sale to others.Furthermore, both technological progress andeconomic growth cause an increasing mobility,supertrend four in Cornish's argument, sinceinformation and goods move from place toplace faster and in greater quantity than everbefore.

By projecting the above three supertrendsforward in time, technological progress drivedby the Internet, economic growth in Asia, andincreasing mobility shown by convenience storeoperation, our primary emphasis is to alterna-tive futures for convenience store in Asia froman e-business perspective. We note that ourpaper is not definitely thought of a forecast, butrather of a simply description about what mayhappen in the future e-business of the conven-ience store management in Asia.

Tapscott (2001) points out that theInternet is an unprecedented global communi-cation media, and evolves in a way beyond peo-ple's imagination. Porter (2001) argues that theInternet can be recognized as a competitiveadvantage; yet, there is no such thing as the"Business Model" for the enterprises, regardlessto say, the "New" business model, what exists, isa crucial enterprise strategy to achieve its partic-ular purpose in the future. Porter further statesthat successful enterprises are not those whointentionally segment the new Internet busi-ness and the existing business; instead, arethose who make good use of the Internet todraw on the strength and offset the weakness.While the Internet fever has cooled down,many of the enterprises are phased out, yet,there are few enterprises survived. This phe-nomenon brings out the question of how to

find out the best balance for the enterprise toput its weight on the e-commerce manage-ment. Under the circumstances, the new infor-mation technology utilization is recognized as acrucial issue in the age of changing Internet.Under the supertrend of technological progressin since of Cornish (2004) an enterprise shouldfurthermore think about how to create thetrend.

In the global trend of the e-commerce, the"clicks and mortar" has been considered to bethe most potential one among the electronicretailing operation modes (Reda 2001). As forthe reason, conventional retailers who alsoadopt the "clicks-and mortar" do not get lost inthe trend triggered by the Internet. Instead,they carefully think about their own competi-tive advantage, from the marketing-orientedview, they try to understand the e-shopper'sneeds, then to create a new core competitiveadvantage that will satisfy the consumers.According to the survey with the electronicretailers by STORES in 2000, among the Top 20electronic retailers, nearly half of them operatedby traditional ones. Also, with more and morelarge retailers (e.g. Wal-Mart, Sears, Kmart,ToysRus) entering the e-commerce market withtheir existing competitive advantage, this trendwill be more and more popular.

However, the core benefit of the Internetis "convenience", including the time and space.The convenience of space breaks the limit ofthe geographical boundary, whether domesticor international (Troy 2002). This advantage ofconvenience (time and space) is the directionfor the growing and the development of theconvenience store, since they share the samecore competitiveness. So given the current stateof e-commerce, what should conventionalretailer concentrate on?

Thus, the objective of this paper is in thefollowing: First, our goal is simply to identifythat under the authorization of the same 7-Eleven U.S. system, 7-Eleven in Japan andTaiwan have developed the websites based ontheir own resources and competitive advan-tages to provide the consumers more conven-ient differentiated services. Second, this papercompares the differences of e-commerce strate-

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gies and performances between 7-Eleven inJapan and Taiwan, and considers that the activi-ty to the future of e-commerce should fit theresources of the conventional retailer.

Literature ReviewThe economic logic of a business model

helps to explain how we can deliver value tocustomers at an appropriate cost. From strate-gic viewpoint a business can be as a strategic fitamong many activities and highly sensitive tothe environment. The Internet has broughtabout a revolution in retailing environment.Levy and Weitz (2001) found, purchasing via theInternet is one of the most rapidly growingforms of shopping, with sales growth rates thatoutpace buying through traditional retailing. E-commerce can be a true extension of shoppingin the physical world, but not all stores are cur-rently in a position to take advantage of it. Inthe virtual world as in the physical world, peo-ple want a board selection of goods when theygo shopping (Carr 2000). Producers of goodsand services would use their Web sites to con-nect directly with customers (Carr 2000). Theadvent and proliferation of on-line shoppinghave motivated many conventional retailers toprovide on-line service. Some Internet-basedretailer also transform into "clicks and mortar"retailers-establishing warehouses and physicalstores to give customers faster access to inven-tory and to handle returns and service issuesconveniently and personally is not an admissionthat the Internet-retailing model doesn't work(Christensen and Tedlow 2000). But the productthey sale is no different as those in the physicalstore. How to get the whole sales of on-lineshopping is still many, many shades of gray.

Two types of intermediaries, however, cangain a share of profits in e-commerce (Carr2000). One type is based on the niche such asspecialized content site and the other is big e-tailer serve as gateways to purchase, gaining ashare of all sales, like American Online.Meanwhile, Rangan (1999) suggests that thesources of on-line competitive advantage comefrom the delivery of product, service and thetrust of customer. In the words, the terms of

competition is changed. The scarcely resourceare no capital, labor or technology but theknowledge and trust from customers. No mat-ter what, intermediaries should be customer-orientated to provide qualified value for e-loyal-ty. Price does not rule the web; trust does(Reichheld and Schedter 2000).

Clicks as transactions over the web, witheach transaction, a company must becomemore knowledgeable about the customer andhence better able anticipate and fulfill that cus-tomer's needs. That knowledge can be used totailor, in real time, the customizing the optionspresented to the buyer and guiding the evolu-tion of entire product assortments and to spotnew growth opportunities at their earlieststages (Slywotzky 2000).

Christensen and Tedlow (2000) considerthe Internet negates the importance of location.However, we just agree their option partially.The Internet hasn't changed priorities. The mainconcern of management is shifting to how toutilize the opportunity of Internet-based mar-keting to enhance competitiveness in harmonywith existing marketing channel (Turban et al.1999). As Rangan (1999) suggests the delivery ofproduct, service and the trust of customer arevery important to the e-retailer. The importanceof location of Convenience store is same asretail brand in the physical and virtual worlds.Many conventional retailers are highly pre-dictable in the way they face the dilemma ofhow much to bet their futures on e-commerceand how much to concentrate on traditionalretailing. They leverage the physical stores andreputations. These existing location and brandcharacteristics can offer relative advantage com-plements and greatly reinforced.

Retailer can tailor a e-business model to itsown particular market and competitive situa-tion, dramatically increasing the odds of e-busi-ness success (Gulati and Garino 2000). The elec-tronic shopping mall (or e-mall), including elec-tronic distributor and electronic brokers (e-bro-ker), is one kind of popular e-business model.Turban et al. (1999) defines the electronic dis-tributor takes responsibility for order fulfillment– for example, JCPenney Online, in contrast e-broker only help the search process – for exam-


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ple, Choice Mall. But e-service model combinesthe features of electronic distributor and elec-tronic brokers, limited by the resources andrelated knowledge.

The case of convenience stores character-istic around our life, the location advantage todelivery the product, and their brands are sofamous to get the trust from the customer,bridge well the store and Internet activities. 7-Eleven in Japan builds 7dream.com as electronicdistributor (e-distributor), but Taiwan 7-Elevenintegrates network of business to 7eshop.com.com based on e-service concept. We nextdemonstrate the history of 7dream.com and7eshop.com.

Case Study: E-Distributor and E-Service Business ModelThe business model for 7-Eleven inJapan

According to the survey by the E-com-merce Promotion Council of the Ministry ofEconomy, Trade, and Industry of Japan, in 2001,the B2C scale of the electronic market hasreached at 1.484 trillion Yen, when comparedwith year 2000, it has a growth rate of 80%.Japan is by far the most successful country interms of the mobile business. According to theestimation by the Mobile Office PromotionAssociation Japan in 2001, the mobile businessmarket in Japan, while in 2002, 22,132 hundredmillion yen and 9,690 stores. Currently, theJapanese government is undergoing the Gigabitnetwork appliances and the legislation for the e-commerce market.

The 7-Eleven in Japan was founded in1973, and have been long taking the slogan of"Adapting to Change" as the operation beliefwith innovation for the enterprise to maintainthe competitive advantage. The 7-Eleven inJapan develops electronic distributor mode byinvesting the virtual websites. 7-Eleven in Japan,they sought the cooperation partner, to buildup an independent e-commerce company. InFebruary 2000, invested 50 hundred millionyen, in association with NEC, NRI (NomuraResearch Institute,) SONY, SONY MARKETING,

Mitsui and Co., LTD, JTB (Japan Travel Bureau,)and Kinotrope, built up an online shop called7dream.com. Companies that joint ventured toset up the 7dream are all industry leaders inthere own fields. They all have the richresources required in that industry and thetechnology to develop new products. The7dream.com, after integrated the informationon consumer purchase habit in the e-com-merce, as well as the other specializedresources in the allied companies, had devel-oped 8 categories of the service contents toprovide, which includes travel, music, photo,merchandise selling, bills, book, car related serv-ice, and mobile phone.

At the same time, 7-Eleven Japanannounced that, it, together with its parentcompany Ito-Yokado, they want to invest onsetting up the IY Bank. Also, with the Ito-Yokado Supermarket and the 7-ElevenConvenience Stores, to provide the consumerbanking services such as the ATM and so on.This strategic investment not only increased thenumber of the customers visited and enhancedthe customer loyalty, but also, it can use thestrategic differentiation of the merchandisesand services to lift up the loyalty of the fran-chisees toward the company. Besides, in orderto expand its target markets with the operationof the e-commerce, they have set up the 7mealservice website. With the aging phenomenonand the market structural change in the Japansociety, it can provide the health foods, person-al care products, as well as the accessories andservices related. It attracts the vast senior citi-zens market, and makes them the new cus-tomers of 7-Eleven Japan.

The business model for 7-Eleven inTaiwan

The 7-Eleven Taiwan was established bythe President Enterprise Group in 1978, untilnow, it has approximately 3,800 stores all overTaiwan (as of May 2004). The 7-Eleven Taiwan,in February 2000, chose the end logistics opera-tion as the entry point in the operation of the e-commerce. At first, it had cooperated in theform of "strategic alliance" with the virtualonline retailer live.net.tw. With the increasing


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number of the enterprises cooperated, as wellas the experiences of the e-commerce opera-tion, the 7-Eleven Taiwan has, invested thebooks.com.tw (50.52% share). However, inorder to provide a direct communication routewith the consumer, 7-Eleven Taiwan had set upan independent website 7eshop.com.com.tw(the original website service was under www.7-11.com.tw). It plays the role of agent and logis-tics of the online shopping portal website andcooperates with 52 enterprises.

The 7-Eleven Taiwan had started to planthe related preparation works in the operationof the e-commerce within its own system groupof internal development in the organization, didthe organization transformation, and the opera-tional direction were conducted by the market-ing division. In February 2000, it builds up thefinance flow and logistics flow platform of the e-commerce. Also, provided the e-Map system(the map of the stores' location all over Taiwan),to let the consumers have a more personalizedonline shopping environment.

However, in order to expand its businessrapidly, it had established a shopping website,the 7eshop.com.com. Also, in cooperation withHiTRUST and Acer e-Enabling Data Center, theyhad built up the "online shop-opening mecha-nism." They provide a secure and economicoption to those enterprises that want to oper-ate in the e-commerce market. For those enter-prises, they just pay as few as 1,200 hundred(NTD) for leasing the system, they can join the7eshop.com, share the complete mechanism ofthe e-commerce, as well as the fullday networktechnical customer service line. Later on, inSeptember 2001, they had completed the con-struction of the membership mechanism calledthe 7Passport. With the membership mecha-nism, 7-Eleven Taiwan can collect the completecustomer information, enforce the one-to-onerelationship marketing securely, and achievethe ultimate goal that is to satisfy the cus-

tomers' needs.

DiscussionConvenience stores through the process of

continuous learning and innovation, have builtup the chance to develop a new businessmodel. The convenience stores have advancedinformation system, complete logistics system,quite good enterprise images, as well as com-plete store networks. First, they provide betterconveniences of the time and the place.Second, they provide the customers varioustypes of delivery options at a low cost with theexisting logistics system of B2C or C2C delivery.Third, they integrate the existing POS system toanalyze the information more efficiently.Fourth, payment security is the most concernedby the customers, not only convenience storescan eliminate the safety concern with the vari-ous types of payment and delivery system, alsothey can allow the customers to complete thewhole transaction procedure in the store. Thiscan push the existing customers of the conven-ience stores become the frequent customers ofthe Internet market.

The "clicks and mortar" retailers have morefundamental resources than the "clicks-only"retailer. On the other hand, when comparedwith other "clicks and mortar" retailers, whichhave higher total sales amount, the fundamen-tal resources that they have are apparently lessthan the convenience stores. Thus, the conven-ience stores have richer fundamental resourcesand better operation niche when it comes tothe "clicks and mortar". 7-Eleven in Japan andTaiwan have the common strategic considera-tion depicted above, with the integration of theresources that they own as well as the societiesand competitive environments they are in, theyhave chose different e-business model to fitenvironment and resource in Fig. 1.

Pursuing the continuous growth is the


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goal for all enterprises. 7-Eleven Taiwan as a e-service mode and the 7-Eleven Japan as e-dis-tributor mode have sought the growing chanceof the enterprises. As shown in table 2. E-dis-tributor, 7dream.com in Japan, has purposes tothe long-term growth opportunity and prof-itability. The main revenue comes from the salenet profits. E-service, 7eshop.com.com, inte-grated variously of experienced e-tailers on theweb to provide customer-oriented service anddistribution efficiencies. E-service is also one-stop shopping and can be the initial mode forretailer to future of e-commerce under theongoing cash flow. Most physical businesseswouldn't be able to make money on pennytransactions; but e-service integrates the sheervolume of activity and gathers millions of them,then e-service gets a business.

ConclusionIn this paper, we have acquired some use-

ful knowledge of the future management ofconvenience store because of the continuitybetween the past and the future. Given thegrowing role that e-commerce palys in the con-venience store market, this paper focuses onhow the Internet is affecting the market, andhow the resulting e-business compares to itsconventional market in terms of managementmodes.

There are many differences on the soci-eties and the competitive environmentsbetween Japan and Taiwan. The rich resourcesand the cutting-edge information technologythat 7-Eleven Japan has have built up its ability

to cultivate in the e-commerce deeply. As for 7-Eleven Taiwan, from the "second to best" philos-ophy on its way of growth in the past, until nowon its way of active innovation, at first, it is donethrough internal development with the newdivision. Later on, when there were enoughexperiences and resources accumulated, itoperates in the form of the subsidiary. Thus,currently, it seeks no transfer of the main corecompetitiveness, however, on the other hand,to strengthen its core competitiveness. Thiskind of strategic choice achieves the goal of thedifferentiation and the growth of the enterpris-es as well.

The high-density store network providedby the convenience store release time andspace restricts on the pay and pickup. In termsof the logistics flow, the complete logistics sys-tem of normal temperature, frozen tempera-ture as well as culture merchandises have con-tributed to the great competitive advantage onthe "last mile" service quality in terms of thedelivery of the items. In terms of the informa-tion flow, cutting-edge information appliancescan lower down the cost on information pro-cessing in the e-commerce. With the operationof the e-commerce, it can strengthen the exist-ing information appliances. When it comes tothe payment issue, which is, what the con-sumers concerned most, the brand equity ofthe convenience store provides the most secureguarantee. All in all, they have built up the fun-damental resources required for conveniencestores to operate in the future e-commerce.

Correspondence

Fig. 1 A framework for e-business model


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Yin-Chieh Hsu2, Juoyue Rd., Nantz District, Kaohsiung 811Taiwan, R.O.C.Tel: 886-7-6011000. Ext. 9219. Fax: 886-7-6011043. E-mail: [email protected]

Hui-Ling Huang59, Hun San Rd., Hun Shan Village, YenchauKaohsiung 824, Taiwan, R.O.C.Tel: 886-7-6158000. Ext. 3308. E-mail: [email protected]

Notes1. Cornish (2004, pp. 22-26) present six possible

supertrends shaping our futures. There aresupertrend one: technological progress, two:economic growth, three: improving health,four: increasing mobility, five: environmentaldecline, and six: increasing deculturation.

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