3. 7eleven does not have stores in Germany so far. Therefore, the Head of strategy is requested to outline how promising a market entry that applies the Japanese concept of 7eleven would be in Germany and which regions/store locations within Germany would provide the best potential.
Before making decision on entering German convenience store distribution segment, let’s point out aspects of German market and criteria for 7 eleven market entry.
Regarding aspects of German market, firstly, Germany has very competitive market in food distribution sector with strong discount players as EDEKA, ALDI, LIDL and others. All of these food distributors have strong presence in every region of Germany with large amount of stores all around the country. The discounting power of most German food distributors is that on daily basis they provide products in its stores with majority of private label goods and small number of consumer product goods of well-known brands. In this case they can discount most of products and utilize economy of scale. Based on this discounting power, 7 eleven can’t compete with major food distributor stores in Germany. In addition, in case any retainer starts lowering its price while entering German market, local food retailers are able to take strategic decision to lower prices more or match them with new competitor.
Regarding spending power of customers the administrative districts of Starnberg, Hochtaunuskreis and Munich have highest numbers. For example, the spending power in the Starnberg administrative district is 32",194 euros, which is 44.8% higher than the German average .
Apart from this, Germans traditionally still going to local, specialized small stored such as bakeries and groceries. These small competitors with thousands of small stores around country and high presence in every city are real treat for convenience stores and could decrease demand for them .
Nevertheless, German food distribution segment have several weak points and thus opportunities for entering. Special fact about German retail is that all of stores are shuted down on Sundays. The only major exemptions are small bakeries and convenience stores located inside filling stations, railway stations and airports.
Major food distribution stores provide customers with relatively limited range of products in its stores. Also the variety of each product is limited by few options and brands, which looks opposite to Walmart stores for example. Moreover, the level of service in food stores is average and sometimes even low. Another aspect relates to the fact that in Germany there is no clear premium food distributor.
For 7 eleven market entry there are several important criteria. Firstly, identify which product range will be on the shelves. In Japan 7 eleven very successfully utilize 4 categories of goods with optimized distribution system. Japanese 7 eleven stores are provides four categories of food: chilled, warm, frozen and room-temperature with majority of processed food (53%). Also they sell beverages, magazines, CD, and some consumer goods. In this aspect 7 eleven has no any advantage over existing German food retailers and can’t compete with price.
On the other hand, 7 eleven is so successful in Japan because of its services. They provide wide range of services for their clients starting from paying the bills, ticket sales till providing pick up location for deliveries and Government service such as residence permit. This approach with emphasis on various essential services for customers can be key for 7 eleven in Germany. The area of services in Germany has a room for improvement and that can be an advantage for 7 eleven as a main focus in their business.
Another criteria for 7 eleven is locations of the stores and its size. Major food distributors as EDEKA, LIDL, ALDI are easily walkable or reachable by car and convenient for their clients with parking areas. Possible location’s recommendation for 7 eleven is to open stores in the same area where main competitors are with same size of stores, approx not more 10",000 m2 . The decision of moving and installing store outside traditional locations might lead of low clients’ traffic. Thus, while entering German market 7 eleven should focus on big number of stores in the same location as competitors with same store size.
In the end, to enter German market 7 eleven should focus on following aspects:
- 7 eleven business should be focused on customer services, online shopping rather than food retail as major advantages over competitors;
- While entering Germany 7 eleven should enter in one or several administrative districts rather that enter into the whole country. This approach is advantageous to set up firstly small distribution system and after a while develop it to other regions.
- 7 eleven should enter with big number of stores in similar location as main competitors with similar size of stores
- Distribution system can be integrated with other 7 eleven distribution systems in Scandinavian counties.
- Apart from providing various services for clients other advantages over competitors has to be determined as going into premium food retail segment.