7-Eleven: Loyalty, AI & Redefining Convenience for the Next 100 Years (#793)

Paula: Hello, and welcome to Let’s Talk Loyalty and Loyalty TV, a show for loyalty marketing professionals.

Paula: I’m Paula Thomas, the founder and CEO of Let’s Talk Loyalty and Loyalty TV, where we feature insightful conversations with loyalty professionals from the world’s leading brands.

Paula: Today’s episode is hosted by Nyeleti Sue-Angel Nkuna, a customer loyalty strategist with a proven record of helping blue chip global brands forge deeper connections with their customers.

Nyeleti: How do you win with loyalty when you’re dealing with more than 100 million members, 13,000 stores and just a 3% margin?

Nyeleti: Now, that is the reality behind one of the world’s most recognizable retail brands, 7-Eleven.

Nyeleti: My name is Nyeleti Sue-Angel Nkuna, and today on Let’s Talk Loyalty and Loyalty TV, I sit down with Raghu Mahadevan, the Chief Digital Officer at 7-Eleven, the brand that not only invented the concept of convenience retail a century ago, but continues to sit at the frontier of the evolving customer experience into the AI digital world.

Nyeleti: So, if you’re curious about personalization at scale, what AI really costs your business and evolving consumer trends, then this is the episode for you.

Nyeleti: Raghu, when you were lost here on Let’s Talk Loyalty and Loyalty TV, the world was in the middle of a pandemic, and 7-Eleven had to adapt fast.

Nyeleti: You introduced a lot of very innovative stuff like the mobile checkout, countless payments and delivery.

Nyeleti: And five years later, you’re back, but the pace hasn’t slowed down.

Nyeleti: If anything, with AI, it’s accelerated.

Nyeleti: So today is a good opportunity to talk about what’s happening since then.

Nyeleti: So as part of the lineup in our conversation today, I would like to talk about the scale of 7Rewards, the Speedway acquisition, where you stand with personalization and the thing that’s keeping you up at night.

Nyeleti: And I could imagine that has to do with AI, if executives that I talk to say have anything to do with it.

Nyeleti: But welcome.

Raghu: Yeah, thank you, Nyeleti.

Raghu: Thank you again.

Raghu: Great to be here.

Raghu: Things have progressed pretty awesome, pretty much in a very awesome way.

Raghu: But yeah, happy to be here.

Raghu: Thanks for having me and look forward to exchanging and having some good dialogue here.

Nyeleti: Absolutely.

Nyeleti: And you would be familiar that we love to start the conversation with getting to understand what you are reading.

Nyeleti: And I know that it’s a book called Proximity.

Nyeleti: So perhaps you could tell us more about that and why you decided to pick that one up.

Raghu: Oh, yeah.

Raghu: Yeah, happy to share.

Raghu: So probably a month or month and a half back, maybe a couple of months back, I attended a session by a gentleman called Robert Walcott.

Raghu: He’s a professor of innovation in Kellogg and University of Chicago.

Raghu: So and pretty an amazing speaker and an amazing session that I had.

Raghu: And the session was all around, how is innovation rapidly evolving to deliver to the customer, as close to the customer as possible, and also talking about customization to basically one-on-one customization.

Raghu: And there were a lot of different topics we discussed in that session.

Raghu: Going back to even Netflix was, how do you get on demand for the customer right next to the customer?

Raghu: Now, content is not being generated real time, but who knows, maybe even that will happen one day.

Raghu: But it started there, and he mentioned a lot about this book he wrote, which was Proximity.

Raghu: And so that’s what I’m holding on to right now.

Raghu: I’m trying to see what does that mean for business leaders?

Raghu: What does it mean for, how do you get closer to the customer?

Raghu: It’s not necessarily just the customer, it’s also businesses, and it could go anywhere from energy generation to, I mean, you name it.

Raghu: So it’s a very interesting book.

Raghu: Let’s see how this, but it’s a good read.

Nyeleti: I definitely will pick it up, and just on the topic of personalization, when you spoke to us last time, the ambition was very clear.

Nyeleti: Now, if a customer loves a certain product, let’s call it product A, you want to reward them with product A because you understand from their behavior that this is something that they would likely be happy to receive.

Nyeleti: And often people just talk about personalization about that way.

Nyeleti: What do we know from what you’ve purchased and let’s reward you something that is similar to keep you engaged.

Nyeleti: But where do you currently sit in that curve on personalization because it’s a lot more than that.

Raghu: Yeah, it’s been a journey.

Raghu: We started with, I mean, just like how almost everyone starts, right?

Raghu: We start with some segmentation, we start with segments, and then we slowly start moving towards the segment of one.

Raghu: I would say we have a mix of approaches on personalization today.

Raghu: In some formats, we move to a segment of one, and we want to exactly appeal to the customer on what the customer is doing.

Raghu: In some other places, we are still working our way to a segment of one.

Raghu: I’ll give you an example.

Raghu: Previously, last time when we spoke, we were talking very specifically about rewards, and it was about, hey, Nyeleti, which product did you buy today?

Raghu: And then, what can we interest you in?

Raghu: Today, we have extended that to fuel.

Raghu: Our fuels business and our fuels approach in our fuels business has really upped the game to, they’ll know, all right, Nyeleti is coming to our, or fueling with us four or five times a month, whereas Raghu is coming only once a month.

Raghu: And how do we get that level of customization to offering a fuel discount for A versus B?

Raghu: And so that you get smarter in terms of telling, okay, what does the loyalty discount look like for a high-volume customer versus what is it looking like for a lapsed customer or a low-volume customer?

Raghu: And how do you bring that together?

Raghu: And, but that’s only a one business view.

Raghu: So now we have extended that to, if it’s a fuel customer, how can we personalize the offer for a delivery, for a delivery experience versus an in-store drink?

Raghu: And how do you bring that together?

Raghu: Are we all the way to bride?

Raghu: Sadly not.

Raghu: We want to keep going forward and keep going faster in trying to put the technology around it to ensure we can deliver that seamless experience.

Raghu: But at least we are morphing towards that way.

Raghu: And that’s kind of the journey we have been.

Nyeleti: And it’s quite an interesting example that you said, because given the example of Nyeleti in this case, if there’s a specific route that I take to work and I have a long journey, and when I go to 7-Eleven and fuel, where you might have the fuel, I would be thinking about what more do I get?

Nyeleti: Is it a coffee?

Nyeleti: Is it just good customer experience?

Nyeleti: Why would I stop there and not at the next fuel station?

Nyeleti: So one of those, you know, the micro decisions that a customer makes just on a little bit of like getting something back and that they are aware that I would not have this benefit if I was at the other place.

Raghu: In fact, when you say that Nyeleti is going to be a commute, having a long commute, you almost think about what’s it going to look like tomorrow.

Raghu: It’s going to be an autonomous electric vehicle.

Raghu: So then I have to figure out how to get you through the autonomous vehicle to stop at a 7-Eleven for your charge.

Raghu: But that’s a separate conversation.

Raghu: No, today, I think it’s a good question.

Raghu: And this is where we try to approach it in a couple of ways.

Raghu: We actually have a couple of approaches.

Raghu: If you have a regular kind of IC engine vehicle, internal combustion engine vehicle, you come to a fuel stations and then you have an approach at the pump when the person is fueling on what could the offer look like.

Raghu: And that might be more of a generic offer if not personalized if the customer is not identifying themselves.

Raghu: Yes.

Raghu: There is a generic offer.

Raghu: But for a personalized offer, you push in the app saying that here’s the offer that is available for you while it’s pumping, especially for customers who are using our mobile fuel pay experience.

Raghu: As it’s fueling, you see the app, and you see the offers coming in the app because while the pump is fueling.

Raghu: So that’s how we appeal to that customer.

Raghu: For our EV customers, and this is more of a journey that we are on, we try to figure out whether there is a restaurant appeal in those locations.

Raghu: So that because the EV charge is not more of a two minutes, it’s probably a little bit more.

Raghu: Maybe it’s the five, 10 minute charge.

Raghu: So you want to engage the customers a little bit differently, but in either case, it is a product or a need state that the customer is looking to engage in that you try to appeal them for.

Nyeleti: But that geotargeting that you’re mentioning, Raghu, like, you know, how long has it been in effect?

Nyeleti: Because I do know that in some of the few retail conversations that I’m having, there’s a lot of complexity around adopting that within a situation where somebody is potentially pouring fuel.

Raghu: I think we’ve been slowly working our way.

Raghu: And, you know, if you know our 7-Eleven business in the US, we have a variety of different fuel brands that we have.

Raghu: We have our own 7-Eleven brand, and then we have a lot of Gallup brand.

Raghu: You have Exxon, and you have Son of Oz, and so on.

Raghu: So we started with our 7-Eleven pumps, where we have a fully integrated experience at our 7-Eleven.

Raghu: That’s how we started.

Raghu: Today, it’s across different brands.

Raghu: It’s been for a good part of three, three and a half, four years.

Raghu: Once you are there, the fueling experience can be all managed through the app.

Raghu: That’s all you do.

Raghu: You manage it through the app.

Raghu: The only time you need to touch it is to remove the handle, and then buy it in.

Raghu: Fuel, fuel, handle, and pump it in.

Raghu: Maybe hopefully one day robotics will take care of that.

Raghu: I’m sure it’s being done right now.

Raghu: There are examples of that.

Raghu: When that happens, you know exactly who the customer is, because they’ve identified through the app, that they’re using the mobile fuel pay.

Raghu: And that level of customization with the pump in terms of what they require, and there is also a feature, and I’m just going back to one thing that you made me remind me of, which is we have an experience in our fuel called fuel price lock, where a customer can lock in the fuel price for up to four days.

Raghu: And especially in today’s environment where you know the volatility of fuel, it gives the customer a lot of calm to lock the fuel price.

Raghu: And when they lock the fuel price, it’s usually a lower price than what they will find across different gas stations.

Raghu: So if you end up going there, you will see that you get the lower price.

Raghu: So we’ve been doing that level of geo-targeting.

Raghu: So you know that the customer is there and the fuel pay option will appear on your app when you are at the store.

Raghu: And that’s kind of how we manage it.

Nyeleti: That is such an amazing innovation.

Nyeleti: And especially when you look at the sensitivity around pricing, and around the consumer segments all around the world, right?

Nyeleti: Everybody is like tightening their belts.

Nyeleti: So wherever real value can be shown, and especially with commodities like Atful, with everything else that’s going around the world, that definitely could be a driver to gaining somebody’s loyalty.

Nyeleti: Which brings me to the question, how would you define loyalty?

Nyeleti: Is it about who gives me the most discounts?

Raghu: You ask the customer, you ask a segment of customers who are the most price-sensitive.

Raghu: I think that’s what you hear back from customers, which is, when am I getting the cheapest price?

Raghu: I think it’s a combination.

Raghu: I think its price definitely matters.

Raghu: I mean, we are in the business of convenience and value is a big part of it.

Raghu: Experience matters.

Raghu: So it’s also not just the price, the experience matters, of course, the base product itself.

Raghu: But I think you have the discount nature of the loyalty program, then you have what I call loyalty nature of the loyalty program, which is basically you get your price, but then what else makes you feel special?

Nyeleti: Yes.

Raghu: And what else makes that experience come together?

Raghu: When and whether that is a digital experience or even if customers do not identify through the app, if they are on in our store and use what we call customer facing device, how does that experience render itself?

Raghu: So in either case, you have price, but you also have the full experience.

Raghu: And I think it’s a two part.

Raghu: And I’m sure there are other parts and there are other frameworks, but at least broadly there too.

Nyeleti: I was about to say it’s measuring that field though, the emotional loyalty and how does that look like?

Nyeleti: You are running an operation of about 1,500 people, most of them with an engineering product and in our business.

Nyeleti: So it’s easier to measure incremental value, but how do you go about measuring engagement or participation, and how many actions need to be taken by the customer before we can actually assess that this person is engaged and they engage because there’s an emotional behavior that we can detect?

Raghu: Yeah, I think engagement is also a spectrum, right?

Raghu: Every customer who becomes a loyal customer starts with the first transaction.

Nyeleti: Yeah.

Raghu: Right.

Raghu: And we have our own metrics of engagement that we track.

Raghu: But the first one starts with, can we get you to come back to a second purchase?

Raghu: After your first purchase, because most certainly, today in our customer segments, they don’t start with the app.

Raghu: They walk in, they go into a store because they happen to be at a store.

Raghu: So can you pull them into our ecosystem?

Raghu: It’s like step one.

Raghu: We have a very robust customer insights team, as part of the loyalty and marketing function.

Raghu: There are customer insights team in a couple of different places on targeting.

Raghu: One is loyalty, the other one is just product, to figure out what the product assortment is and what’s the customer craving.

Raghu: So we have a few different ones.

Raghu: The marketing loyalty one is, what’s the customer seeking?

Raghu: What are the different frameworks for where you are appealing to the customer?

Raghu: What customer journey do we expect them to take?

Raghu: Are they entering us through fuel?

Raghu: Is that their first purchase and how do you pull them into the store?

Raghu: Or is it the reverse?

Raghu: We have fuel in about 50%, a little bit more than 50% of our stores, so they may enter a store which doesn’t have fuel.

Raghu: They may be in a fuel market.

Raghu: So how does that work?

Raghu: So you have various different entry points into our ecosystem.

Raghu: How do you take them, nurture them, bring them into hopefully more of a digital experience?

Raghu: Because the more they engage digitally, the engagement itself increases across our ecosystem.

Raghu: So we have an insights team, and then we have a loyalty or a rewards team, which is tracking and figuring out what’s the customer telling us, and how do we meet them where they are?

Nyeleti: So these are acquisition source, how they enter, and then the nurturing is done based on that channel.

Nyeleti: How do we then get them to repeat their visit as one example, and that is then layered to see how engaged this person is based on those visits as one metric?

Raghu: As one metric, and also if they are taking us on on the different experiences that we have, it’s just not the in-store versus the fuel, but it’s also whether are they using our self-checkout experience, or are they using our mobile checkout experience, or they’re just getting products delivered to their door.

Raghu: So we have all of these different experiences, or are they using our 7-Eleven wallet, which is in the app, which is obviously only in the app.

Raghu: One is the repeat orders or the repeat trips per month, which is great.

Raghu: The other one is, how many different ways are they using 7-Eleven?

Raghu: We naturally find that the more number of experiences they want, they try out with us and they participate in, the more they shop with us.

Raghu: There’s obviously a causation correlation question here, but the correlation is certainly super high.

Raghu: So as soon as you get them to try it out, the experience then hopefully gets them into, yeah, this is my go-to place when I want to go and shop.

Nyeleti: So making those reasons to return, very compelling and very clear from the get-go.

Raghu: From the get-go.

Nyeleti: So let’s talk about numbers.

Nyeleti: When you were last in the program, your loyalty membership was sitting at 55 million, that was five years ago.

Nyeleti: Where are you sitting today?

Raghu: It’s grown significantly.

Raghu: You’d mentioned in your, when we started our conversation that Speedway and 7-Eleven came together, maybe a year or so right after we spoke last time.

Nyeleti: Yes.

Raghu: As part of that, Speedy Rewards, which has been a beacon program in the industry, the convenience industry from back in the 2000s.

Raghu: So the Speedy Rewards and 7Rewards are now together.

Raghu: They are still independent programs, but we have a customer base that spans Speedway and 7-Eleven.

Raghu: So the total customer base registered is upwards of 100 million.

Raghu: And what we really focus on is how many of them can we get to be active customers over a certain period of time.

Raghu: We can define a 30-day, 90-day, I mean define the span of it.

Raghu: But that’s what we are really focusing on.

Raghu: How much is that and then what portion of that can we continue to trickle into our digital ecosystem?

Raghu: Because no one wakes up and says, yeah, got it, I’m going to go and do this.

Raghu: At least today it’s become like common nature because today, when you take the customer acquisition today, you have a much higher probability it starts in the app.

Raghu: We have a large customer base that necessarily did not start in the app.

Raghu: The question is, how do you move that to a more engaging digital ecosystem?

Nyeleti: If 100 upwards million is the headliner in terms of the membership right now with the acquisition with Speedway, what is the number that the business is actually working with when you’re talking about that engagement for 90 days?

Raghu: Yeah, the 90-day active for us, that’s our guiding metric.

Raghu: That is close to 30 million and 30, and that is something that is our KPI.

Raghu: Because you have a lot of people who come in, but how are we going to try and keep them as an engaged customer?

Raghu: That’s what we try getting to.

Nyeleti: Every 90 days, a customer comes and visits once and then they qualify to be an active customer, and that is the KPI that you are tracking.

Raghu: One of the.

Nyeleti: One of the.

Raghu: One of the.

Raghu: One of the two, yes.

Nyeleti: But going back to that acquisition with Speedway, of course, you mentioned right now, Speedy Rewards and 7Rewards are two different loyalty programs, but you have that combined customer base.

Nyeleti: But for the customer, are they aware of this and is it important for them to be aware?

Nyeleti: Or are they just engaging with a program of their choice?

Nyeleti: And is there future plans to combine it?

Raghu: Yes and yes.

Raghu: Or maybe, maybe and yes.

Raghu: How about maybe and yes?

Raghu: I think there’s a, are there future plans to combine it?

Raghu: Let me start there.

Raghu: Definitely.

Raghu: And but we want to, going in, we say, we always ask the question, do we want to, do we want to separate rewards program when the company or the organization is one and the customer has really access to, if the Speedway customer had access to 3,500 stores and 7-Eleven customer had access to 9,500 stores and now you have 13,000 stores.

Raghu: So now you’d really want the customer to shop equally between either of the brands.

Raghu: You don’t want to say, oh, you have a Speedy Rewards, so you can’t get anything in 7-Eleven, unless you have a 7 Rewards.

Raghu: So the answer to the question is very clear.

Raghu: You want the compatibility to eventually become one.

Raghu: But the journey has, so now going to your first question, does the customer know?

Raghu: The customer knows.

Raghu: I mean, you have two programs.

Raghu: One of the things that has the pros and cons of this is that the footprint of ours is not fully overlapped.

Raghu: So we have Speedway had a footprint which was heavy Midwest, where 7-Eleven had a sparse presence.

Raghu: Not that we’re not there, but sparse presence.

Raghu: There are some states where Speedway is Speedway.

Raghu: Then elsewhere, you have a lot of 7-Eleven.

Raghu: So the question thereafter becomes, what’s the right time to change and how do you work yourself towards the change?

Raghu: When the programs have been fundamentally different, they’re both very valuable programs.

Raghu: The richness of the program is there.

Raghu: One program, obviously, because they started differently.

Raghu: One program is richer than the other.

Raghu: Richer than the other by give or take.

Raghu: There are a few things really good in this, few things really good in this, but ultimately is really rich.

Nyeleti: Yes.

Raghu: But one thing is the program, how I measure the program.

Raghu: The other thing is how the customer measures the program on how the perception of what the program is for them.

Raghu: I think ensuring that the program works for the customer has been the way in which we have moving the programs forward eventually towards bringing them together, which should happen at some point in time.

Nyeleti: When you look at the differences across the markets, you mentioned the Midwest, where Speedway is very dominant.

Nyeleti: What are you seeing as the value exchange there within that rewards that keeps those customers engaged and makes that reward program valuable, as you’ve said, versus perhaps your people who are in California who might be more inclined to use 7Rewards?

Raghu: 7Rewards, yeah.

Raghu: It’s a good question and it’s been a journey.

Raghu: It’s been a learning experience for us as well.

Raghu: Speedway, historically, has anchored on fuel.

Raghu: Speedway fuel.

Raghu: Every Speedway store has fuel.

Raghu: So the rewards has always inherently had fuel as a dominant part of what the customers have seen and find a huge deal of value in and still continue to.

Raghu: 7Rewards, on the other hand, is a little bit more merch forward.

Raghu: It started more with the merchandising and in-store.

Raghu: And from those standpoints, there is more of an attachment to the value each program is providing for the customer.

Raghu: So the customers go in, the program is great.

Raghu: So when we ask the customer, say, what do you really want in these programs?

Raghu: The value in the program stands out more than, I would say, both are important, but it stands out more than the affiliation to, I’m going into a Speedway, I’m going into Speedy Rewards, this is what Speedy Rewards is getting for me.

Raghu: So as long as you say, I’m going to come up with Nyeleti Rewards, but the rewards program is actually delivering that value and keeping the customers happy.

Raghu: I think that’s what the customers are looking for.

Raghu: Now, how you bring the balance between fuel rewards and merchandising, like the store rewards together.

Raghu: We have evolved in that both Speedway is more, Sue is more, has packed in more offers in the store.

Raghu: We have packed in to the examples I gave more offers in the pump, so that now we are bringing some parity towards bringing it together.

Nyeleti: Yeah.

Nyeleti: In this journey of bringing two different programs together, two different cultures and customer behaviors, so what have been some of the surprises in the learning journey that has come up from this journey and you said you’re still on it?

Raghu: I think the real fundamental thing that you had to kind of peel the onion behind is that the value of the program to the perception of the value of the brand.

Nyeleti: Yes.

Raghu: That’s been a learning experience and it’s evolved over time.

Raghu: I mean, 2022, when we were with the both companies came together, I think that was a ton of learning by both teams.

Raghu: As we coalesced into a single organization.

Raghu: I think that was an interesting part of how do you take the hypersensitive customer segment, which was a bit more dominant in the Midwest to the course that we have in New York, like in Los Angeles and Los Angeles and so on.

Raghu: So how do you bring all of that together?

Raghu: And what’s the learning that we had versus what are we finding as we talk to the different customers?

Raghu: I think that was a pretty key.

Raghu: And teasing apart the fact that I just mentioned, which is the value in the rewards program scores higher than potentially the perception.

Raghu: Because over a period of time, as you see the products co-mingling inside the store, it slowly starts changing the perception.

Raghu: But the value in the rewards program is the one that keeps the people in the program.

Raghu: And trying to anchor around that was the bigger learning for us.

Nyeleti: And so if the rewards program has a higher perceived value from the customer facing, what is that saying about brands going forward in terms of how they connect with the customers?

Raghu: I think it goes both ways.

Raghu: I think sometimes, I know customers react to me.

Raghu: You ask the customers, you want XYZ, I mean, you get an answer.

Raghu: I think that sometimes the value in the rewards program, what drives the perception of the brand in many ways, right?

Raghu: It’s not, it’s very hard to say you can just tease it apart and just say they are separate.

Raghu: So for example, 7Rewards is packing a whole bunch of value.

Raghu: That defines what 7-Eleven is.

Raghu: So you can’t like put, you can’t peel them apart.

Raghu: But at the same time, you have to really watch for what is the sense is standpoint.

Raghu: We’ve done so many conjoined analysis of me tweaking what’s the rewards offers and getting customers to react to it.

Raghu: And after that, it becomes like a very analytic exercise from what customers say to how it actually scores.

Raghu: But then you put all of that together.

Raghu: That’s where we say that the value in the rewards slightly overscores and perhaps even defines the perception you have the brand.

Nyeleti: Interesting.

Nyeleti: And it goes back to the question that I raised earlier to say when does a member become loyal versus just being a discount seeker if the perception of the rewards scores so high.

Raghu: We have an internal way of tracking them.

Raghu: It’s more internal than customer facing.

Raghu: And you normally think there are people who visit us a few times a month.

Raghu: There are some people who visit us a few times a week.

Nyeleti: Yeah.

Raghu: And there are some people who visit us daily.

Nyeleti: Yeah.

Raghu: And based on their frequency of visit, we would obviously love for everyone to visit us daily.

Nyeleti: Yes.

Raghu: And so that determines what an engaged customer is.

Raghu: So we have our, you could call it internal tier, say bronze, silver, gold, platinum.

Raghu: And then we see how customers migrate from being, I would say, infrequent customer to a frequent customer.

Nyeleti: Yeah.

Raghu: To a loyal customer.

Raghu: Yes.

Raghu: And what keeps them there?

Raghu: So we have a ton of data, as you would imagine, a ton of data.

Raghu: A 360 view of the customer, of the products that they purchase, the things that they like, the things that they don’t like, the feedback that they leave us in the store, through our call center, to our customer support and customer service teams.

Raghu: There are so many things that we piece together to tease out, yeah, what’s the next for the customer?

Raghu: What do we have to go and fix for the customer?

Raghu: Because clearly, there are always things to fix, always, and there are so many opportunities.

Raghu: So how do we prioritize?

Raghu: What are we going to do and what’s next best?

Nyeleti: And there’s so many reasons to visit 7-Eleven.

Nyeleti: I was just at one of the local shops here in Copenhagen, and I was very pleasantly surprised to see an entire fresh salad bar.

Nyeleti: And so 7-Eleven is also just in its retail concept, it’s continuing to re-imagine itself and lead the way.

Nyeleti: You started the whole concept a century ago and are still leading the game.

Nyeleti: So what’s your take on that just entire in-store experience and how it’s evolving, and what are the changes that you’re seeing?

Raghu: Yeah, I’ll tell you one quick follow up on what you just mentioned in terms of the salad bar.

Raghu: You’ve seen this in these more recent articles in terms of the first question that anyone asks about food.

Raghu: If you visit 7-Eleven in Japan, they talk about the egg salad sandwich, and it’s like the egg salad sandwich.

Raghu: One of the questions that you will get from any customer who’s been in Asia is that, when are you going to bring these sandwiches here to the US?

Raghu: When is this going to show up here?

Raghu: It’s already done.

Raghu: If you talk to our Senior Vice President of Fresh Foods, there has been unbelievable advancement in the quality and the assortment variety of fresh food over the last three, four, five years, especially in the last couple of years.

Raghu: It continues to evolve, just like you were mentioning about the salad bar.

Raghu: We work with Japanese Commissaries and we have a product assortment which both in the cold and in the hot space, which has something that is very different.

Raghu: Now, whether everybody knows it is the question.

Raghu: That’s something that, again, like you said, it’s more in the last couple of years and then that’s the progress.

Raghu: Because we believe that food is an anchor for us.

Raghu: It is the significant anchor for us.

Raghu: We have a unique value there, which is what we want.

Raghu: Like we mentioned, what is the experience for the customer?

Raghu: It starts with our food product assortment, and it starts with fresh food and our proprietary beverages, but it starts with food.

Raghu: That’s our anchor.

Raghu: That’s where we start.

Raghu: Then you have the entire assortment around it, and then you have the shopping experience that you enable, which is both the in-store shopping experiences, the product stock, and there’s the supply chain working, and all of that stuff, and the digital shopping experience.

Raghu: You are able to navigate yourself in the app.

Raghu: Are you able to shop?

Raghu: You find the product, or check out using a mobile phone, or using self-checkout, either shop, check out the way you want, or you get it ordered.

Raghu: So that’s kind of how we build on, but it starts in the store and starts with food.

Nyeleti: Yeah, talking about that mobile checkout, so you brought out ScanPay Go around the pandemic.

Nyeleti: It was necessary at that time, but 12 years later, when you look at that data from those who are using it, and can you see differences in customer behavior, those who go the normal traditional way of going to the till, and those who use the mobile pay checkout, and what is it telling you in terms of what you should be also implementing going forward?

Raghu: This is another interesting topic.

Raghu: You could spend the whole hour just talking about mobile checkout, we call it ScanPay Go.

Raghu: It’s been a very interesting learning for us.

Raghu: The one thing we learned when we launched this, we launched this in 2019.

Raghu: We got it in pilot in New York City in 2019.

Raghu: It is the team launched it and we were chasing adoption, we were trying to get customers to adopt.

Raghu: This is a classic example of a certain customer segment where you always say let’s not build a product that doesn’t solve a customer problem.

Raghu: The learning for us is that that customer problem for which the mobile checkout fit the solution was not all customers.

Raghu: It was only a certain specific customer segment, which for example, you could say that customer segment did not one either was not really keen on a face-to-face interaction of the associate or they were more of I’m coming here for this cup of coffee, I’m going to scan and I’m going to be on my way.

Raghu: I’m not going to wait in the line.

Raghu: That line drives drive me crazy.

Raghu: So or it is just the Gen Z segment or back then Gen Z, and now it’s Gen Z, Gen Val, you can put it anywhere, it’s Z versus Alpha.

Raghu: It’s that new customer who basically says, I’m in and out, this is all I need.

Raghu: I got it, I got my drink, I’m heading out.

Raghu: So when we tried broad-based adoption, we quickly said we’re going to pivot from M’s mobile checkout for everyone to check out the way you want.

Raghu: That was a fundamental pivot, because now we have any kind of checkout, you can do it any way you want.

Raghu: We still find that there are some stores in which you get 100 transactions a day in MCO because you’re right around a college campus, and in some stores you get one.

Raghu: I mean, you see a spectrum.

Nyeleti: Yes.

Raghu: I think that was the learning as we went, and we have changed the experience as we went through this.

Raghu: We learned a bunch of stuff from customers during the pandemic.

Raghu: We put a whole bunch of confirmation stations, and you are coached to scan and so on, and now it’s more of a show and go, which is more you show the store associate saying, here’s what I bought, and it ensures that it’s a live payment, which you see, and you see that in many other places as well, and then you walk through the door.

Raghu: So that’s one of the learnings that we got from different segments as they use mobile checkout.

Nyeleti: Interesting.

Nyeleti: It’s my view that every product has its ceiling.

Nyeleti: So at some point, it’s good to iterate and learn and capture learnings, and put it back in the feedback loop and innovate further.

Nyeleti: But when do you actually-

Raghu: The key is to stop when you do.

Raghu: When do you stop?

Raghu: Is that where you’re going?

Nyeleti: Yeah.

Raghu: The key is to stop.

Raghu: The key is to figure out when you stop pushing it or so.

Raghu: I won’t tell you that we were great at figuring out when to stop on this because we were really, like I said, the learning on this one was, we have this great technology which we launched so far ahead.

Raghu: If that worked, it would have been a huge boost for stores because it then frees up the store associate to take care of the customer in different ways to take care of the store.

Raghu: We were really looking at this from, this is going to be a great asset for the store and the running of the store because it frees them up to alleviate the labor pressure in stores that we have.

Raghu: But then if it doesn’t work for every segment, how do you say, done, let’s move to something else that might, if 20 percent of the folks want this, that’s great.

Raghu: Let the 20 percent use it.

Raghu: What’s the next 80?

Raghu: I think that we were a year at least late in pivoting.

Raghu: We were great to get to the problem upfront.

Raghu: We were great in innovating and being one of the first, I think, is us and then Sam’s, I could get myself wrong here, but we were one of the very early ones in 2019 to do this.

Raghu: But I think we could have pivoted earlier.

Nyeleti: That’s my learning.

Nyeleti: Were you driving, well, intending to change customer behavior or adapt into what was the customer behavior?

Nyeleti: Or maybe was that the learning in terms of when you actually did pivot and realized that they could be just two different segments and it’s cater for their needs as they are?

Raghu: It happened that way.

Raghu: It’s just also a little bit of timing and circumstance also.

Raghu: We launched the product.

Raghu: COVID actually pushed the need for that product because during COVID, people didn’t want to touch anything.

Raghu: You would walk in and there were plexiglass screens there and mobile checkout was great.

Raghu: So we thought, yeah, double down, let’s go because this is a great customer need.

Raghu: It’s a store need, it’s the environmental need, it’s a customer need, it should work.

Raghu: Then once it start going down, then it start flipping and that’s how the journey was.

Nyeleti: You know, the silver lining is in this for me, is just reinforcing the power of just in-person and just the face-to-face interaction, that people still want to go analog and actually have a conversation to whatever degree with their associates, whether it’s just a high or just small human contact.

Raghu: Right, right, you’re not going to substitute conversations.

Raghu: Although today’s environment, if you kind of read, then you say that people are talking to agents or having a great time just talking to agents, but hopefully there is something in like live conversations, right?

Nyeleti: And that’s where we should actually pivot to next.

Nyeleti: So conversational AI in shopping.

Nyeleti: You know, everybody’s talking about that everybody’s deploying one solution or another.

Nyeleti: Where are you sitting with that?

Nyeleti: What is happening with 7-Eleven and conversational AI?

Raghu: We’re absolutely exploring it.

Raghu: We’ve launched it in our app.

Raghu: It’s obviously a pilot.

Raghu: It’s actually nationwide.

Raghu: You can pick up anywhere in the US.

Raghu: You can pick up our app and you’ll see our agent, which is called Sevi in the app.

Raghu: And we are learning just like how everyone else is.

Raghu: And I think there are two part learning here.

Raghu: One is how is the customer discovering?

Raghu: And what’s the dialogue the customer is having?

Raghu: And what’s the different than a regular search experience versus in this?

Raghu: How is that happening?

Raghu: I think that’s first learning.

Raghu: The second learning is what is that need state, whether in the app or even outside, wherever the customer is searching, what does that commerce look like?

Raghu: And how does 7-Eleven take part in that commerce?

Raghu: So it’s a two part.

Raghu: One is how is that conversational experience happened in our own ecosystem?

Raghu: The second one is how is 7-Eleven going to be part of that conversation that is happening outside of the 7-Eleven ecosystem?

Nyeleti: And how do you influence that conversation?

Nyeleti: How do you put us in your own ecosystem?

Raghu: Yeah, and everyone’s talking about it, right?

Raghu: This is the CEO, now it’s AEO or GXO or however you want to call it.

Raghu: I mean, there are so many terminologies by what it goes, but that’s essentially it.

Raghu: Like how do you become part of the commerce solution for a customer in each state that they want you for?

Nyeleti: And back to the book that you read in proximity and staying at the tip of innovation.

Nyeleti: When it comes to the digital AI age, what are the few things, if you can give me three takeaways that you know that your team, 1,500 people under you, that should be thinking about?

Nyeleti: What would that be if you were having a town hall with your entire organization?

Raghu: I think the first thing everybody we have to have our eyes on is where’s the customer going and where do you think the customer is going?

Raghu: Someone has to take a bet, right?

Raghu: That here’s the customer’s going, but then here’s where they are going to end up.

Raghu: Because if you don’t know that, there are some companies who do that really well, like taking bets and ensuring that we’re doing something there.

Raghu: Not every bet pays off, but you at least are taking the bet to see where the customer is going.

Raghu: Because if you don’t have that lens, it doesn’t matter what you do, there’s always a risk.

Raghu: That’s number one.

Raghu: I think number two, the second thing that we always tell ourselves internally here is AI is great.

Raghu: We are all pro-AI.

Raghu: We also want to balance that with governance on cost because nothing is free.

Raghu: Even the conversational AI piece runs a certain expense.

Raghu: The question is, how do you make that efficient and how do we govern ourselves or put the infrastructure so that we can scale on AI to deliver what we should be doing with extreme amount of productivity?

Raghu: I think that is number two, like in the overall conversation.

Raghu: And number three, how we prioritize?

Raghu: We can’t do everything.

Raghu: You have to pick and choose.

Raghu: You have to pick and choose.

Raghu: We could literally do an AI solution in every corner of our organization.

Raghu: Everything touching the customer, by the way.

Raghu: If you were to say, oh no, we only prioritize the one that touches the customer.

Raghu: No, everything touches the customer.

Raghu: How do you prioritize?

Raghu: I think that ruthless prioritization is key.

Raghu: I think those will be the three things.

Nyeleti: Just back to that, on everything is touching the customer and everybody is adopting the same thing.

Nyeleti: Talking about conversational AI.

Nyeleti: Well-met and perhaps Instacart, our destination points for shopping as well, and they’re also using the same tools.

Nyeleti: But the difference with 7-Eleven that it’s convenience, it’s impulsive, and even if you want to put more resources and get in 7-Eleven to surface more on a language model like ChatGPT, from a customer experience perspective, if I just want chocolate or a coke and salad, chances of me writing on chat to get an opinion is lower.

Raghu: So how is it?

Raghu: Yeah, we don’t know.

Raghu: We’ve had conversations with folks across the industry on this one in terms of conversational commerce or AI commerce, whatever you call it, this is evolving.

Raghu: People are more and more using, it’s very clear that discovery happens in that channel.

Raghu: Discovery for anything happens there.

Raghu: But you know it’s like Apparel and high-end electronics and all of that.

Raghu: There’s more in that bucket rather than saying, where am I getting my next pizza?

Raghu: But it is happening, but there’s just a differential pockets in which it is happening.

Raghu: So the question is in the pockets where it’s happening, how can we test and learn so that we give the customers what they want?

Raghu: And for some customers, our product is the best product, for others it’s not.

Raghu: And how do you actually get the maximum hit rate for the customers in the segment that we are in?

Raghu: So I think that’s the test and learn that we have to do.

Raghu: And we have some of our tests running right now in parallel for us trying to learn through this.

Raghu: We’ll see how this commerce evolves.

Raghu: I think maybe a year from now, we’ll have one idea, and then a year from now, this may transform into something completely different.

Nyeleti: I’ll be watching this space.

Nyeleti: And so Raghu, our time is coming to an end, but as we wrap up the very last question, this is the space that we all have to watch.

Nyeleti: You are celebrating 100 years since you basically invented the whole concept of retail in 1927.

Nyeleti: You digitized it, you’ve eliminated friction along the way, you’ve optimized it, and you’re still, you know, leading in terms of redefining what that looks like.

Nyeleti: So what are the new frontiers, and how does that look like for a business that is actually operating at a 3% margin?

Raghu: Yeah, margins are thin.

Raghu: I mean, they are thin.

Raghu: Let me go back to the first thing that you started with, which is convenience.

Raghu: Interesting you brought that up.

Raghu: Our centennial is next year.

Raghu: That is, it will be 100 years of 7-Eleven coming up next year.

Raghu: We started in 1927, and 2027 will be our 100th.

Raghu: And what you will hear all of us say is, we’re really looking to figure out, here’s where we are the last 100 years, the last 10 years.

Raghu: We’re really working on what’s the next 10 years, what’s the next 100 years, what is the stuff that we are going to do that defines what convenience looks like or addresses the need state of what convenience means for the customer for the next decade, next couple of decades, there’s many decades.

Raghu: That’s kind of the pivot point we are at.

Raghu: So I would say that one of the things that we are constantly trying to figure out is, along what dimensions are the customer evolving?

Raghu: How much is the product assortment need to evolve to meet the customer?

Raghu: How does the shopping journey need to evolve to meet the customer?

Raghu: As we enter our 100th year, that’s what we are really looking to do.

Raghu: And we have a North Star that is a kind of guiding North Star along some of these different dimensions or different vectors.

Raghu: And then we are mobilizing ourselves towards that North Star.

Nyeleti: Fantastic.

Nyeleti: Congratulations Raghu on the last 100 years and especially your tenure in it.

Nyeleti: How long have you been with 7-Eleven so far?

Raghu: It’s like a little more than eight years.

Nyeleti: A little more than eight years.

Nyeleti: Congratulations and thank you for being on the show tonight.

Nyeleti: It was fantastic to speak to you.

Raghu: Thank you Nyeleti.

Raghu: It’s great having your conversation.

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