Good morning!

This year marked the 50^th anniversary of the first 7-Eleven to open in Asia.

Today, there are more than 50,000 7-Elevens across Asia – and a million other CVS globally – 350k of them part of NACS.

There’s a popular quote by futurist William Gibson:  The future is already here —it’s just unevenly distributed.  That means that some of the things you may be thinking about for your stores may have already happened elsewhere – like the Philippines, where we have 3,600 7Es.

We have 70% market share – that may sound high, but it’s not unusual in Asia, where there are typically 2-4 players per country.  This is because of population density.  When enough stores are close together, you can build your own unit-pick distribution centers – to maximize shelf space and reduce receiving costs.

Without them, you’d be at the mercy of DTSD vendors, and would only be able to stock 500 SKUs instead of the 2,500 we do.

That’s why independents don’t really exist in Asia.

The US has 30x the land area of the Philippines with only 3x the population. Without the density to support proprietary DCs, almost everyone relies on 3rd party unit pick wholesalers and DTSD vendors, which lead to fragmentation.  Nobody gets too big, and independents can survive.

A good thing, except it also leads to pain points that don’t exist in Asia

— like swipe fees and channel pricing.

It is also why NACS plays such a large role here.  But it doesn’t exist there.

3 players getting together is not an association – it’s a cartel.

I’ll tell you in a bit why NACS could be even more important.  But first let me tell you a bit about how I got here.  Like every ambitious high schooler in the 80s who didn’t know what they wanted to do, I wanted to work on Wall Street, because well, greed was good then, right?

I figured: engineering degree, corporate blue chip, ivy league MBA, find my Gordon Gekko. Halfway thru, I realized: numbers were easy, people were hard.  Americans, harder. American girls? I give up.

So after 6 lonely years in PA and NJ, I returned home.

My father asked if I would help with the business while I figured out my next step.  He co-founded 7-Eleven Philippines ten years earlier, and needed to go from 40 stores to 100, so his investors could IPO.

Reporting to dad as Construction and Maintenance Manager for a CVS wasn’t quite making it on my own, and cvs back then wasn’t exactly glamorous but it was way more interesting than I expected, and I was soon in charge of everything – except the stores.

My father worried that my ‘overly logical’ approach would threaten the store-first culture he had built, so they reported to him directly.

This was frustrating for the usual reasons, but the father-son thing made it unbearable.

See, the shadow that I was trying to step out of was a large one – my father was widely respected in business circles for his service in the Cabinet and Senate.

But he had yet to build a successful business of his own.

I thought I could both help him do that and prove myself, if only he’d let me.  When we got to 100 stores and the IPO in 1998, I told my dad that I valued our relationship too much to continue to work under him.

Tech was the new investment banking, so I co-founded a payments company.

Meanwhile, 7-Eleven Taiwan acquired a majority stake post IPO, but things weren’t going well, and a competitor threatened to pass us.  Wanting to localize management, they approached me with a pitch: “You know the business.  Come back, build it to a couple thousand stores, and that’s your tech platform”.

I figured that might be actually faster – and a lot more fun – than waiting out the dot- com bust, so I joined them.

I was right on both counts.

We had 2,500 stores before the payments company was acquired by a telco 5 years ago. And it has not just been fun, but grown me in ways I never imagined.  It allowed me to truly understand why people and relationships were more important than numbers, difficult as they still were for me

Because only culture can scale you to 2M (mostly) happy customers per day.

I was fortunate to be able to step out of my father’s shadow enough to see things more clearly before he died 10 years ago – “I never thought we’d ever get to 1,000 stores when 100 was such a struggle”.  “I’m proud of you, son”, he told me.  “The cultural foundation you laid made it easy, dad.  You were right to be so protective of it”, I said.

I wish I could tell him today that the reason it took him 10 years to get to 40 stores was because, perfectionist that he was, he was really laying the foundation for 4,000 stores.  With him gone, just sustaining it as we grow is the one thing that keeps me up at night.

I’m as old today as he was when he opened his first store, but with regards to the compassion and charisma building our culture took, I am still in his shadow – but this time gratefully so.

Back to why NACS is so important here:

Our industry has one unreplicable advantage:  We are closer to the customer than anyone else.  Nearest, for sure – 1 store per 2k people.  

But sometimes overlooked, the closest relationships. We see them more often than anyone else.

Everyone wants a piece of this – the FMCGs, banks, tech companies because they don’t have it, and know they never will – Amazon Go, anyone?

To make that happen, you need systems of course.  In the Philippines, 70% share makes the systems we built to make that happen, worth connecting to.

Take our payments business, where the tech companies need us because cash is how customers want to pay because people feel more comfortable handing cash over to someone they trust.  We are doing 100 transactions a day, 5x our sales.

Our competitors, meanwhile, have no payments business to speak of,  and it’s been ten years! Not because they couldn’t afford it – they are among the biggest companies in the Philippines, owning banks, supermarkets, etc. – but because, with only 10% market share, integrating to their systems wasn’t worth the trouble.

One actually installed machines in their stores from the second largest offline payments player, who operates a payments kiosk that works like a vending machine – and is about as trusted as one.

Their customers probably wondered why they didn’t trust their clerks to receive the cash the way we did.  Meanwhile, as our payments business grew, it led to a couple of new ones.

One is the recycler ATM business, where we deposit sales and payments 5x that every shift.

We started it primarily to protect culture. A store manager sitting on 5 years of salary in cash after a long weekend was giving me nightmares about how temptation might corrupt culture.

Our 3,000 recyclers so far has been our most requested new product, especially in places where the nearest bank is 2 hours away.

The other is the lending platform business.  It’s new, but I wanna tell you about it because if it succeeds it will be our first to unlock the value of those close relationships between clerk and customer in a measurable way.

Less than 5% of Filipinos have credit cards, but a bunch of new neobanks and fintechs flush with capital are looking to change that.  But with no FICO scores and default rates of 50%, they need data.

So when we asked them if they were interested in payments and loyalty transaction history on 40M unique phone numbers where we had permission to contact, their only question was – what do you want for us to be your exclusive partner?

Our answer? Sorry, but we want the best deal for our customers. So you’ll have to compete with everyone else.

I’m excited. Not just because it could really help our customers escape the loan sharks and payday lenders, not just because it was good for our brand, but because it could deepen relationships between clerk and customer.

You see, face to face vetting is standard practice even for digital lenders because it cuts default risk in half. We’re still doing everything online, but when we scale enough,clerks will vouch for customer-borrowers in return for a commission that grows each time that borrower repays his loan. 

They’ll cut that default risk in well more than half – because they TRULY know their customers.

As a wannabe banker and wannabe tech bro, it tickles me how much they want in on our humble stores.

Let me close with how I engaged with NACS from the other side of the world.

It was the idea of Tru Age.  It starts with age-verification, but I believe it could be the start of so much more. Some of which has already been proven elsewhere, like the PH – learn from our mistakes (like how bad an idea in-store hotdog eating contests are), but also our successes.

I believe it could become – a fintech aggregator that could help cut swipe fees, universal loyalty that could offset channel pricing – for operators big and small.  Most of all, it could unlock the value that our people have with our customers.

As Don Rhoads said earlier this week, “People are in generally a bad mood, but our industry can help change that”.

Why do I believe only NACS can do all this? Because as I’ve learned in the PH, the largest players with only 10% share can’t. And if it doesn’t happen, you won’t be able to get your customer the best deal, the way we’re doing with our lending platform.

And it certainly will NEVER happen without your support.  You’ve all been great supporters of NACS so far, but I hope you will take it to the next level.  

Starting with Tru Age.

And that, folks, is why I am honored and super excited to serve as your incoming chair this year.

Thank you.