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The world's largest convenience store
chain is on a roll, after tapping "marketing whiz" to run
its 23,000 stores
By Tom Nugent
 Ask
7-Eleven president and chief executive officer James W. Keyes
'77 to describe "the most important single ingredient" required
for success in the high-stakes world of convenience store
retailing, and the former Holy Cross baseball shortstop doesn't
miss a beat.
"The key to success is creativity!" booms Keyes,
the 47-year-old retailing wunderkind who took the
helm at the $31-billion-a-year convenience-store empire in
mid-2000. "You know, a lot of people believe that running
a major corporation is mostly a matter of crunching numbers
and analyzing data. "Wrong! To get this job done, you have
to know how to think creatively. You need imagination and
intuition. You've got to be able to look down the road and
predict what's coming—and then work like hell to make
sure your products are perfectly positioned to take advantage
of future trends."
According to the peripatetic Keyes—an enthusiastic
world-traveler who shuttles endlessly among the 19 countries
where his 23,000 stores (6,000 in the United States) are
now operating around the clock—effective corporate leadership
also requires "a fair amount of nerve … the willingness
to take a risk now and then in order to stay out in front
of the next sales trend."
Sounds pretty convincing, right? But can the high-flying
Keyes give us an example of the risk-taking that takes place
almost daily in his office on the 40th floor of 7-Eleven
world headquarters in Dallas?
"You bet!" snaps the CEO, a nationally renowned marketing
whiz with an amazing ability to sniff out the next convenience-store
buying trend ("He's got a genetic gift for retail," says
one close associate). "I was in Singapore a little while
ago, and I'm pleased to tell you that our 7-Eleven 'cash
cards' are going great guns over there. What we've done in
our Singapore stores is going to be a model for the U.S.,
starting in the next couple of years. What happens is, the
customer comes in and buys a prepaid card with a microchip
in it. And let's say the card costs $100.
"Okay, from this point on—no more money! The next day
the customer walks into the store and buys a gallon of milk
and 10 gallons of gas. Then he hands the card to the clerk.
Bingo! The card slides under a scanner, and in a flash, the
customer is out the door and on his way. We think it will
be a big winner at 7-Eleven, and we're already talking to
Coca-Cola and Pepsi about implementing these cards. Can you
imagine what it would be like, to get rid of all that change you've
been carrying around in your pocket?"
He pauses, then slides into another rollicking laugh, and
you suddenly realize a startling fact: In spite of the grinding
pressure and the endless headaches, this corporate executive
is actually having fun on the job!
"We think these cash cards are a pretty creative wrinkle,
and we're willing to take a risk by introducing them into
our stores in the U.S. And we're betting that the rest of
the nation will soon start following our lead. New innovations
like this one are the future—and staying ahead
of the curve is the name of the game, if we're gonna keep
7-Eleven on top!"
The Competition: "Tougher Every Day"
When 7-Eleven celebrated its 75th birthday last July 11,
Keyes toasted his company's remarkable growth in recent decades
with thousands of giveaway-Slurpees for customers.
But Keyes also took advantage of the birthday shindig to
tick off some of 7-Eleven's major accomplishments, including
the following:
- Launched in Texas in 1927 as the Southland Ice Company
(and re-named "7-Eleven" in 1945 when its hours of operation
were extended from early morning to 11 p.m., seven days
a week), the convenience store chain has mushroomed from
a few outlets—first known as "Tote'm" stores—to
today's 23,000 units located in 19 countries.
- During those seven-and-a-half decades, the company expanded
its product line from such staple grocery items as bread
and milk to more than 2,500 "convenience" products—everything
from flashlight batteries to auto lubricants to candy bars,
hot dogs and slices of pre-cooked, ready-to-eat pizza.
- Under Keyes' savvy marketing leadership, during the past
few years the chain has begun to move aggressively into
consumer financial services, including ATM machines, check-cashing
services run out of special in-store kiosks, and even a
few specialized forms of "e-commerce"—such as ordering
flowers nationwide or buying state fishing licenses online.
- Intent on protecting its original marketing niche as
a retailer of prepared foods from attacks by such aggressive
competitors as McDonald's, Wendy's and Burger King, 7-Eleven
recently rolled out a new "Big Eats" marketing program
in which deli sandwiches are made at central kitchens,
then trucked to 7-Eleven outlets three times a day. Says
the super-competitive Keyes: "A lot of people won't believe
this, but the fact is that we can actually make a fresher
sandwich than the sandwich they give you at Subway [an
especially formidable competitor, with 15,000 outlets worldwide].
Why? It's simple. At Subway, they re-stock their sandwich
ingredients periodically. But we make our sandwiches from scratch,
with totally fresh ingredients that have just been manufactured
that day. And then we put them into the customer's hands
within a couple of hours."
Although 7-Eleven clearly ranked as the world leader in
convenience store retailing in 2002, the 73-percent, Japanese-owned
company faces some formidable threats in the next few years.
Among the major adversaries are Wal-Mart Stores, which have
been mounting furious attacks on 7-Eleven's highly profitable
retail gasoline operations in recent years. And several national
retail grocery chains have recently launched "deli sandwich" and "coffee
bar" operations aimed at cutting into 7-Eleven's core business
as a retailer of "portable foods"—items that are usually
carried away and consumed off-premises.
"The competition out there is getting tougher every day," admits
Keyes, who nonetheless managed to orchestrate increases in
both gross sales and shareholder earnings during the first
three quarters of 2002. "We're not kidding ourselves about
the threats we face from the fast food industry and the grocery
chains, among other competitors.
"At the same time, we've worked long and hard to become
'nimble' retailers. We think we're quick on our feet, and
we think we know a few things about how to anticipate future
trends and then get there first.
"Of course, maintaining that kind of nimbleness means that
you have to keep doing your homework, even as you search
for the kinds of creative solutions that will allow you to
keep your edge."
A Lesson From Father Lapomarda
Ask Keyes where he developed the kind of "creativity and
nimbleness" required to run the 7-Eleven empire, and this
savvy marketer will surprise you by giving "a whole lot of
the credit" to a Holy Cross history professor.
"As an undergraduate, I had been intent on studying prelaw," says
Keyes, who arrived on campus in Worcester in the fall of
1973. "But then a very interesting thing happened.
"I took a history course from Father Lapomarda (Rev. Vincent
A. Lapomarda, S.J., who still teaches history on campus),
and he wound up changing my life. I'll never forget how he
asked me to stop by his office one day after class. He sat
me down and told me: 'Jim, I know you're determined to become
a lawyer. But you've got too much creative energy for that!
Law is a very narrow, very disciplined field. Have you ever
thought about studying business, maybe entering an M.B.A.
program after you leave Holy Cross?'"
The more Keyes thought about Fr. Lapomarda's suggestion,
the better he liked it. And instead of going on to law school,
he wound up at Columbia University's School of Business,
where his M.B.A. degree (1980) would soon land him an exciting—and
highly creative—job as a gasoline retailer at Gulf Oil
Corporation.
After climbing the ranks at Gulf for a few years, Keyes
signed on as marketing director for 7-Eleven's retail gasoline
subsidiary, Citgo Petroleum, in 1985. Named vice president
of that division by 1991, he then zoomed up the ladder at
Citgo's parent company, en route to becoming 7-Eleven's chief
financial officer in 1995. When he was tapped to become chief
operating officer in 1998, the stage was set for his elevation
to CEO two years ago.
"I owe a great deal to Father Lapomarda and the other Jesuits
at Holy Cross," says Keyes, "and not just for the professional
guidance they gave me. I'm also grateful for the fact that
they taught me the importance of giving back to the community.
And that's why I was so eager to launch our national charitable
foundation—'Education Is Freedom'—earlier this
year, so that we could start awarding scholarship money to
youngsters who show academic promise but lack the financial
resources to attend college."
Along with spearheading the education foundation, Keyes
currently serves on the boards of a half-dozen other cultural
and philanthropic organizations, most of which are dedicated
to educating young people to the fact that "they can be anything
they want to be, if only they're willing to study and work
for it!"
An enthusiastic trumpet player who loves to jam with friends
when he can find the time, the 7-Eleven czar also gets a "huge
reward" out of his current volunteer post as chairman of
the Dallas Symphony Orchestra, where he and wife, Margo,
frequently attend concerts.
What was Keyes like as a student at Holy Cross? "We were
best friends in those days, and I can tell you that Jim was highly motivated," says
Steve Senior '77, who majored in economics. Adds Senior,
who today operates an air freight-handling service in Boston: "I
never saw anybody throw himself into work like Jim did. During
our time at Holy Cross, he managed a McDonald's restaurant,
played baseball, and also served as president of the center
for day students—the Worcester House. And don't forget
that he graduated Phi Beta Kappa, with top grades. Jim was
a winner then, and he's a winner today."
Adds Jack Wilkie, the vice president for national franchising
at 7-Eleven in Dallas: "I think he's a remarkable leader
because he can combine the analytical skills you need with
lots of creativity. I remember riding in a limousine with
him last summer, on our way to Radio City Music Hall in New
York, where they were about to kick off the 'Education Is
Freedom' campaign. Jim had been given some prepared remarks
written by some of the top writers in network television.
But he didn't like what they'd written; he thought it was
too stiff, too formal. So you know what he did? He grabbed
a pencil and an envelope, and he scribbled some lines down.
He took a few phrases from John Lennon's song, "Imagine," and
he built an informal talk around them—'Imagine all the
people, sharing all the world?'
"And you know what? He wowed 'em! The audience loved it,
and even the professional entertainers on hand were all raving
about his ability to reach the audience with his message.
"I'm telling you, this guy's middle name ought to be 'creativity!'"
7-Eleven: The Numbers Tell The Story
Who's the World Champion of Convenience Retailing?
It's no contest. With more than 23,000 stores now operating
around the clock and around the world—and with yearly
gross receipts in excess of $35 billion—the mighty 7-Eleven
retailing chain easily ranks as the number-one convenience-store
empire on Planet Earth.
"When it comes to stop-and-go shopping, there's no doubt
that we're the largest," says 7-Eleven President and Chief
Executive Officer Jim Keyes. "But that doesn't mean we can
afford to rest on our laurels and take it easy.
"Convenience retailing is actually one of the most competitive
businesses in the world. As CEO, it's my job to make sure
we keep pace with the changing needs of the convenience customer.
If we stay ahead of the curve—by figuring out in advance
what will serve our customers best, and then delivering the
goods to them at an attractive price—then we'll remain
their preferred convenience retailer."
Like corporate CEOs everywhere, the hard-charging Jim Keyes
worries endlessly about future sales trends. Yet the record
shows clearly he and his 7-Eleven lieutenants have "gotten
it right" over and over again in recent years … while
cranking out one blockbuster sales-winner after another.
Some eye-catching examples:
- According to company audits, 7-Eleven customers are
now guzzling more than 33 million gallons of "Big Gulp" soft
drinks each year—enough fizz-water to fill 75 Olympic-sized
swimming pools.
- The company's hugely popular Slurpee frozen treat
has become a monster best seller in recent years. The retail
chain now serves up 11 million Slurpees a month,
and more than six billion have been sold since the gelid
confection was introduced in 1966. (The Dallas-based titan
also takes credit for introducing a new phrase into the
English language: "brain freeze"—a term company officials
invented a decade ago to describe the icy brain-wallop
delivered by their summertime superstar.)
- When it comes to peddling hot dogs, 7-Eleven is clearly
wearing the pants. At last count, the Texas monolith was
grilling-and-bunning more than 100 million "Big Bite" hot
dogs per year. Says Keyes: "We think one of our greatest
strengths is our ability to merchandise delicious 'portable
food'—carry-out items like the Big Bite hot dog that
customers can take with them back to the workplace."
- For millions of workers all around the United States,
each day begins with a run to the 7-Eleven for coffee and
doughnuts. Last year the retailing giant unloaded a million
cups of coffee each day, along with a yearly total of 60
million doughnuts and pastries—enough gooey goodies,
if placed side be side, to reach from Boston to San Diego
and back.
Tom Nugent is a free-lance writer from Hastings,
Mich.
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