NEW YORK (CNN/Money) -
Your trusty neighborhood 7-Eleven may end up looking very different one of these days.
The Dallas-based convenient store chain has quietly been testing a more "upscale" format in a few dozen stores in Austin, Texas, industry analysts say, adding that the new format, if rolled out nationwide, could change the "King of the Slurpee" forever.
One 7-Eleven (SE: Research, Estimates) store on Lamar Boulevard in Austin has been selling fresh fruits -- apples, oranges and bananas, grilled-pressed sandwiches, bakery goods and a variety of salads to customers, a store employee said.
Some industry watchers say CEO Jim Keyes is pushing a "fresh food" strategy that borrows a page from 7-Eleven Japan, the company's more successful overseas affiliate.
Fresh food accounts for about 40 to 45 percent of 7-Eleven Japan's sales compared to just 10 percent of the sales in its 5,800 stores in the United States and Canada, according to estimates from industry analyst Kit Case at Southwest Securities.
7-Eleven, with annual sales in North America of $11.4 billion, also licenses about 21,000 7-Eleven stores in 17 other countries, including Japan. The U.S. company has been controlled by IYG, a Japanese holding company, since 1991.
At a 7-Eleven in downtown Tokyo, fresh food products are delivered three times a day and customers have a variety of high-quality prepared food to choose from, including fruits, gourmet rice balls and oden, a hot stew of vegetables, chicken and sea food.
"Jim Keyes is a big believer in what Japan has done with the chain," said Case.
"Even though the convenience store sector is more competitive in Japan, with five or six competing chains, the company has maintained good profit margins and good comparable sales. Jim believes the company can replicate that level of success here," he said.
Case thinks 7-Eleven's transformation is in its early stages and could take at least a few years.
Nevertheless, he said, the retailer is well-positioned for such a change because it owns a majority of its vast distribution network.
"This makes it possible to restock products quickly and on a daily basis," Case said. "The company also operates commissaries and bakeries next to its distribution hubs."
|Customers have a variety of gourmet food to choose from at a 7-Eleven in Japan. (Source: 7-Eleven Japan)
Retail consultant Howard Davidowitz said he believes 7-Eleven's moves could have major implications for supermarket chains in this country.
"This radical transformation could have a tremendous impact on American food stores because it becomes another alternative channel for consumers," he said. "Grocery stores already are suffering at the hands of discounters and dollar stores and here comes 7-Eleven, which is almost on every street corner around the country."
The moves underscore how retailers are being forced to change or risk going out of business, Davidowitz said.
For instance, in the past, convenience store chains built their business primarily around gasoline, cigarettes, chips and sodas. But big discounters such as Wal-Mart (WMT: Research, Estimates) and Costco (COST: Research, Estimates) started building their own gas stations and luring customers with lower-priced gasoline.
"7-Eleven is reacting the right way by shifting gears and turning to higher-margin products in food and other categories," Davidowitz said.
Officials at 7-Eleven were not immediately available for comment.
--analysts quoted in the story do not personally own shares of 7-Eleven and their firms do not have an investment banking relationship with the company.