7-Eleven has entered India, but the challenges before it are many

To folks living in developed countries, 7-Eleven is a familiar name and a store format that they frequent quite often. Based on the model of spending limited time inside, it typically sells small, consumable packaged products. Earlier this month, it made its India debut by unveiling its first store in Andheri, a suburb in western Mumbai.

In a master franchise agreement with Reliance Retail Ventures Limited (RRVL), the aim is to get a meaningful chunk of India's retail pie, which is now estimated to be close to a whopping $1 trillion. In a statement, Reliance has said it will now have a "rapid rollout in key neighbourhoods and commercial areas in Greater Mumbai." It was in early 2019 that the Texas-based 7-Eleven inked an agreement with Future Group, Kishore Biyani's promoted entity. Once Biyani landed himself in a challenging position financially, the plan went on to the backburner with not one store having opened. Globally, 7-Eleven has in excess of 77,000 outlets in 18 countries.

The format is new in the Indian context and, according to Harminder Sahni, Founder & Managing Director, Wazir Advisors, there is a significant opportunity in India's urbanisation story. "As India moves to having smaller families, one will see a greater need for the 7-Eleven format. It is highly visible in large cities like London, New York, and San Francisco," he says before adding that the model is to "pick up something on the move."

For Reliance, it is another step to a larger presence across retail formats; it has Reliance Fresh, Jio Mart, Reliance Digital, and Reliance Trends to name a few. Abneesh Roy, Executive Director (Research), Edelweiss Securities is of the opinion that 7-Eleven will provide shoppers with a unique style of convenience, offering a range of beverages, snacks, and delicacies along with a refill of daily essentials. He thinks this move by Reliance is interesting given they are already India's largest retailer before putting in a word of caution. "The neighbourhood convenience stores in India has been quite challenging with many failures." He names a few issues to contend with such as the rise of e-commerce, the model having high operational costs, a limited assortment, and importantly, how 7-Eleven globally "makes most of its money in cigarettes and alcohol," which could be tricky in India.

To Sahni, the format has taken time in India because of a limited product portfolio. "In the developed markets, categories such as chewing gums, nut packs, and energy bars have a lot of demand," he says. Given the low-ticket value, the game in 7-Eleven will be around getting in the volumes and ensuring people visit the outlet as often as possible. "If you make a margin of say 2 per cent, three visits a day means 6 per cent. In that sense, it comes down to the number of turns that an outlet can manage to do."

In most markets, these stores are barely 600 square feet but located in places where walking to the corner store is not difficult. How that will be addressed in India could be the one to track.

Also Read: Future Retail terminates agreement for 7-Eleven stores in India

Also Read: Reliance Retail to launch 7-Eleven convenience stores in India