7-11 Japan Case Discussion

Q1. Identify the major obstacles to e-commerce in Japan.

Connection Charges

Since Nippon Telephone & Telegraph (NTT) and its subsidiaries NTT East and NTT West controlled 95% of Japan’s telephone lines, the pricing of access charges to the Internet was decided upon by this company. Although the company decided to cut monthly fixed charges by 50%, the price charged for connection to the Internet was still high. Also, connection to the Internet was charged by the minute, deterring Japanese from surfing the Internet or staying at a website for very long.

Japanese Culture

Japan was a cash-based society. The most commonly used payments are cash and bank note. Cash-on-delivery and bank transfer are the most commonly used methods for online shopping. Cheques were not used. Credit card payment was not popular because Japanese were afraid that their credit card information and other personal data are stolen by hackers.

Japanese were used to buying offline because they could see and touch the products and perhaps obtain discounts. Offline shopping was very convenient in Japan. Mail-order and catalogue shopping were very common. There were also streets packed with stores selling daily necessities. Also, convenience stores were almost everywhere. Most of them were open all night.

Many Japanese homes were tiny and had no space to accommodate a personal computer. End-fulfillment of online orders was also a problem for many people since most customers were not home during the day to receive parcels ordered by them online and they were also worried about receiving their parcels from online stores, either due to mailing errors or non-fulfillment on the part of the stores.

Q2. Describe the proposed 7dream.com business model.

Seven-Eleven Japan Co. Ltd, the country’s largest convenience store chain with 8,200 outlets, established an ecommerce business model called 7dream.com, with seven other Japanese companies, including NEC Corp., Nomura Research Institute, Sony Corp., Sony Marketing (Japan) Inc., Mitsui & Co., Ltd., Japan Travel Bureau,Inc., and Kinotrope, Inc.

Place/Distribution

The consortium launched the website in July 2000 to handle a wide range of operations, including distribution, sales and services, with product delivery and payment made at any Seven-Eleven convenience stores nation-wide. Also, Seven-Eleven installed in-store multimedia terminals for consumers to order products.

The basic concept behind the 7dream model is that after the consumer places an order on the web, they can pick up and pay for their purchases at any Seven-Eleven stores on a 24-hour basis (credit card payments, reliable pay-on-delivery and home delivery courier services are also available). The customers can choose “Payment at a 7-Eleven store" as their payment method. Payment slips with bar codes would then be printed out from the customers' printers OR payment reference number to the cashier at the 7-Eleven store. (Adapt to the Japanese traditional buying behavior).

Product

7dream.com offers services in eight content areas: travel; music; photographs; Merchandise, gifts and mobile phones; tickets; books; car-related items; and information. This diverse range of merchandise was specially aimed at the buying pattern of most Japanese consumers and to complement the range of goods offered in the 7-Eleven stores.

Price

Orders on 7dream.com’s site would probably only be charged a minimal cost, which would be largely lower than the shipping and handling charges levied by other e-commerce companies because the delivery system was already in place.

Promotion

The targeted group is youngster. They had taken to the Internet most enthusiastically. These characteristics made this group an ideal target to market an on-line shopping site.

(High acceptance of youngsters, get popular in a partial and potential groups and spread out to the whole society)

One of the channels under consideration was Internet-enabled multimedia kiosks. Once 7dream.com's Website was enabled, Suzuki planned to start placing these multimedia kiosks in a few participating 7-Eleven stores in October 2000, aiming for a kiosk in all stores by June 2001. The idea was to whet people's appetite for computers and the Internet. These kiosks would enable consumers who did not wish to connect to the Internet at home, or did not have personal computers with Internet access, to access the full services of 7dream.com. Once consumers savored what 7dream.com had to offer, it was expected that the utility-packed kiosks would offer enough value to attract the consumers into using the kiosks more often to access 7dream.com's services in order to satisfy their shopping needs. The kiosks would be equipped with a screen to access the services of 7dream.com, a digital printer for instant printing and delivery of pictures purchased or photographs taken with the in-built digital camera, and a MiniDisc drive and MemoryStick slot to allow customers to save purchased songs.

Q3. How does 7dream.com define and differentiates its offerings from its traditional model?

Traditional Model	7dream.com
Products
Food & Drink, Newspaper, Daily necessities, etc.	Travel, Music, Photographs, Merchandise, Gift and Mobile phones, Ticket, Books, Car-related items, Information
Target Market
Japanese around the store	Mainly young people who enjoy community life in Japan such as socializing with friends, paying for utilities, having the habit of access Internet and convenience stores
Payment System
Pay by cash or credit card face to face	Pay for their purchases by credit card over the Internet or pay at 7-11 store. Customers can print the payment slips with bar codes, and then visit any 7-11 store with these slips to make their payments or just state the assigned payment reference number to the cashier
Delivery System
Face to face transactions at 7-11 stores	Customers can choose to have their orders delivered to their home or other delivery address, or choose to pick up their purchases at 7-11 store
Marketing
Developing merchandise to meet the customers' needs	Placing the multimedia kiosks in 7-11 stores with a screen to access the services of 7dream.com, a digital printer, mini disk strive and MemoryStick enable customers who cannot connect to the Internet at home or do not have personal computers with Internet access, to access the service of 7dream.com

Q4. Identify the critical success factors of the business plan of 7dream.com.

7dream.com has the first-mover advantages in Japanese e-commerce by using their information system:

Point-of-Sale (POS)

·       Showing real time information, e.g. merchandise sell-out schedules, shelf-stocking methods,

·        Responsive to customer's shifting tastes quickly

·       Weather prediction (The system remind operators to put umbrellas next to the sales counter during bad  weather)

Total Information System

·         Linking all the 7-Eleven stores through satellite communications and ISDN telephone line

·         Transmitting large volume of information at high speed

·         Reductions in missed sales opportunities and inventory write-offs

Low Delivery Charges

·         Obtaining the products directly from the warehouse of its suppliers

                -  No inventory and warehouse cost

·         Leveraging on an existing delivery system

              -  Customers would not be charged for extra cost

              -  Potential saving in operating cost

Lower Internet Costs

·         Payment based on the amount of data transmitted or received instead of duration

·         Allowing more consumers to purchase from home

·         Internet-enabled multimedia kiosks

              -  Connect to 7dream.com even customers did not have personal computers with internet access

                 -  Attract customers to access 7dream.com more often

Create Demand with New Online System

By showing real-time information such as merchandise sell-out schedule, shelf stocking, the weather and local event, the online system (through promotion, kiosks, etc) allowed stores to be extremely responsive to consumers’ shifting taste.

The business practice overcomes the buying culture of the Japanese

It convinces them that buying online is an acceptable and safe practice. Also, the system and the transaction make sure that customers can rely on this method of purchasing. This can be done by making sure every order is filled on time.

Government Support
Government Support through deregulation of the e-commerce environment, splitting the Nippon telephone & Telegraph and combining ISP and phone cost.