7-11 Closing Near 450 Stores
One of the best known United States convenience store chains is going to get a bit smaller.
Seven & I Holdings,, the Japanese company that owns 7-11, announced this on its earnings call. The reason given: declining cigarette sales.
This comes as the United States, like much of the world, is still dealing with high prices that are crushing household budgets. At the same time, the chain also suffered a slowdown in traffic.
Unfortunately, this is a wave that is likely to continue.
7-11 Closing 450 Stores
Convenience does not mean cheap.
It is easy to spend a fortune in these stores. Most enter to pick up something basic like a bottle of water or a 12 pack of beer. These prices are usually close to what other locations sell them for.
However, if you are there for other things such as food, it can get rather costly. The quality also is not there.
Another chain that is moving towards its day of reckoning is Starbucks. This is also a "boutique" type chain, where even a basic cUupof coffee is a few dollars.
7-11, in my uneducated observation, is doomed. The reason why I state this is because of what competition is doing.
When I look at the stores, they are old and run down. Compare that with Cumberland Farms, Quiktrip, and Wawa, we see a major difference. Those locations are newer and many offer cooked food. This means they are slotting above the convenience store hot dog and a low end sit down place like IHOP.
This is something that 7-11 has not transitioned to.
The Cigarette Downfall
It is interesting what the company claims is the reason for the decline in sales. Could this be the first business that is taken down by a lack of cigarette sales?
Additionally, the convenience market has noticed a decline in demand for cigarettes. “From January to June, we gradually improved sales each month... excluding cigarettes,” DePinto said, according to Seeking Alpha. The sales of cigarettes has gone down by 26% in the past five years, with smokers either opting for other nicotine products or quitting.
Here we have a very interesting take. I do not know the validity of it in the sense that perhaps this was a large enough margin generator to do some serious financial damage. However, it is not as if this decline happened in 3-6 months.
The numbers of smokers has declined steadily over the past decade.
To its credit, the company is looking at making some changes.
“Growing our proprietary products is an important part of our future. This platform offers our customers a wider assortment of hot food and specialty beverages,” DePinto said. The company intends to add bake-in-store items, self-serve roller grills, grab-and-go cases, espresso, cappuccino, iced coffee and lattes.
This could enhance the quality of what is offered. Will it be enough? As stated, in my area, 7-11 are also the oldest stores on any street corner, with other chains surpassing them in the physical context.
How much will it cost to revamp all these stores? A company like Wawa is expanding like crazy. While it only has 1,000 stores, it is located in basically ta handful of states. The penetration in those markets, however, is overwhelming.
We will have to watch and see how this industry unfolds. While this is not going to see a massive amount of technological disruption in the near term, other factors are at play.
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I've actually not heard of or seen Cumberland Farms, Quiktrip, and Wawa at all. I was assuming that 7-11 was struggling because people are generally struggling with higher prices the last couple of years and so they're getting all their items from grocery stores instead of convenience stores... it hadn't occurred to me that just nicer, better convenience stores were popping up.
Kind of reminds me that statistically not many companies at all last 100+ years.
Wawas is a private company that is only in a few states in the US. I liked what they were doing and wanted to invest in them about 6 years ago. Sadly, they are a private company. They now have about 1,000 stores.
Quiktrip is a big chain in SE US. I am not sure of the ownership but also have nice stores.
Cumberland Farms goes way back. They tend to follow 7-11 and Circle K albeit not as large.
As for the "freshness" of the stores, it reminds me of the McDonalds/Burger King deal in the US. McDs always seems like they are newer, refreshed. The atmosphere is light.
BK, on the other hand, their locations always looked their age. Maybe that is one of the reasons why they are struggling.
Hmm, that's a really good point, I've never really thought about it but McDonalds does tend to refurbish their restaurants regularly.
Looking into it a bit more... it looks like McDonalds the company sets deadlines for franchisees to make upgrades/changes and may offer to provide some financial assistance, but the bulk of the cost is paid for by the franchisees.
It's super interesting... a McDonalds franchise is usually a license to print money, but that comes at a high cost.
Yeah and it takes time. I think the money is made by having a number of restaurants. I knew a guy who did rather well with 1 BK. I am not sure that is the case too often with McDs. Perhaps the requirements of updates and other things ends up cutting into the single location profitability.
As always, make it up with volume.
I see several similarities of our 21st century food industry to the 19th century opium industry. Health and safety are of little concerned compared with the potential profits. Selling addictive products created a constant base of returning customers. Consumers want something quick and pretty and advertisers don't want them to think about what they are putting in their bodies. The general public is just outgunned. Tired hungry and empty people had no choice but to pick up a pack of Marlboros when they fill up a tank of gas. Seoul is filed with Starbucks on every other block and convenience stores in between that took over mom and pop shops. The convenience store chains are owned by the children of corporate giants. They are not looking at serving customers. They are just looking at a way to hand over the inheritance without paying taxes. It's not gonna hurt me if 7-11, slush puppies, slurpies and hot dogs are a little bt more difficult to reach. I could also do without a Dunkin Donuts Coolata or Frappuccino.
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The 7-11 closest to me closed several years ago (though there are several others in the area). They were always pretty busy though. My guess is that it came time to replace the underground gas tanks. They are building a car wash there now.
Starbucks has raised its prices recently (at least near me they have). I'm not sure that will end up being a net positive for them...
They still have a ton of stores. The closures represent only 3% of their total so not a catastrophic numbers. It does seem to be a lot more competitions.
Wawa is something I watched expand. I wanted to invest about 6 years ago but it isnt a public company.
As for Starbucks, what is the breaking point?
Hello hello!! it's a pleasure to be here, vote your post and say it back some thoughts about it.
First, thanks to expose this case and start and interesting economic conversation at Hive.
Something similar we lived in Venezuela with two supermarket and the evolution was wild indeed!
But let me talk about 7-11 case, obviously just what we think we aren't from USA and we don't use 7-11.
In many videos, 7-11 is the principal grocery store, but according with your words and many kinds off reviews they don't offer a good quality just a brand well growed.
Also the reduction of the smokers and drinkers affect that kind of the store where people just go for the trending or vicious things.
When it's about good food or good quality, people will seek another options, it's like McDonald's, why McDonald's are well growed? Because they offer trending, but when quality and healthy matter that definitely not the right option.
Well, in that sense, the evolution of our world is day a day more close to us.
Where we live two supermarket was in the memory of many citizens, today that place was rebuil with another brand satisfying the necessities and the new things for the people.
One of them was very similar to 7-11, today the place is the same but the branding and what they sell change the public the vision and the zone.
Can 7-11 update their business to keep alive or the market necessities and what people want remove them forever? That the challenge what they need to pass.
Thanks for this post to talk about what happened near to you, maybe near to others and know what happen in the world
I am not going to proclaim that the company is going out of business. In fact, the parent company of Circle K, another competitor, is trying to buy it.
So I think it will adjust over time.
Maybe, the facts are clear "innovation" not only about tech, maybe about the ideal buyer, products, services etc.
If they can even the problems solve that, don't doubt they will stay and if not, easy they need to sell.
Let se what happen, you're another post about will tell us