Service Innovation in Franchising Convenience Store: An Exploratory Study

In the retail industry, store expansion has always been the main practice of franchisers in increasing their market share and profitability. However, simply expanding the store quantities to maintain one’s competitive advantages does not always assure success nowadays. Instead, service innovation has become the key strategy to stay on the lead. Since the franchise industry of convenience stores in Taiwan holds the world record in store density to population, we investigate how these stores operate innovatively to maintain their competitive advantages. To cite, the analysis on the news published by the top three franchising convenience stores in the top seven newspapers from 2004 to 2006 provides us with an overall understanding of the activities launched by the stores. After gathering relevant information about the state of the franchising industry in Taiwan, we asked the senior manager from each of the three stores to identify the activities they believe to be the most successful ones. Thereafter, questionnaires were developed based on those successful activities. The survey results were later compared with the data gathered from the three managers to identify the cognitive differences that exist between the stores and their consumers. The findings revealed that new product strategy is frequently used by retailers, while new service offering is instead believed to be more successful by the senior managers. As for the “degree of innovation”, launching new products through "product line extension" method is widely used, while “product improvement” is frequently found in those successful activities. In the end, we present the managerial implications of these results.