Why 7-Eleven Failed In Indonesia

There are more than 60,000 7-Elevens across the planet. But there is one country where the convenience store chain flopped. Indonesia. In 2017, the chain of mini markets closed all of its stores there. Here's why 7-Eleven failed in Indonesia. Let's go back to 2009 when 7-Eleven got its start in the country. 7-Eleven's Indonesian rollout was run by a local operator, PT Modern Internasional. Contrary to its American counterpart that capitalized on to-go items and late night munchies, 7-Eleven in Indonesia became a trendy hangout spot for locals. It offered traditional 7-Eleven items like slurpees and snacks but also fresh local food and alcohol. 7-Eleven was very popular with university students, really the 18 to 25 age range. It was a place for them to hang out at all hours of the day, all hours of the night. Before the alcohol ban that was imposed in 2015, this was a very popular spot to hang out, have a beer after class or after work, have free Wi-Fi, have a bite to eat. As the business took off Modern soon started to expand within the capital, Jakarta. It opened its 21st store by 2010 and it hit 100 locations in 2012. In 2014, the company hit peak sales of around 78 million with 190 stores. The future of 7-Eleven in Indonesia seemed promising. The stores remained crowded but there was one problem. People weren't spending money. Well actually, there are some comment that yes, there is a huge crowd in 7-Eleven, but they might just buy one drink, one friend and sit for three hours. The company also attributed its lack of sales to intense competition from existing and new competitors. By 2016, the number of retail outlets in Indonesia had grown from 12,000 to 40,000 in just under a decade. With mini markets being the sector's fastest growing segment Two of 7-Eleven's biggest competitors were Indonesian convenience stores Indomaret an Alphamart. Both chains have a long history in the country and are top players in Indonesia's convenience store market. 7-Eleven had 190 stores in the country but its competitors store count absolutely squashed that. As of 2017, there were more than 10,000 Alfamarts and roughly 15,000 Indomarets in Indonesia, giving Alfamart a 38% share of the market and Indomaret 47%. That was the year 7-Eleven closed all of its shops. But before that, it held just 0.7% of the market. Regulatory issues also posed a major problem for 7-Eleven. In 2015, Indonesia banned the sale of alcoholic beverages in convenience stores and mini markets. After the alcohol ban took effect, 7-Eleven's net sales dropped by nearly 24% over the next year. Unlike 7-Eleven, its rivals Indomaret and Alfamart actually reported revenue gains that year. Alfamart and Indomaret were able to withstand the ban because the offered a wider range of products and services. 7-Eleven's geographic reach posed another big problem. The convenience store chain never managed to expand beyond Jakarta and its surrounding cities, but its rivals did. They are located in Jakarta whereas other mini markets can expand outside of Jakarta. One is, I think, the regulations for foreign ownership of or foreign franchise of convenience stores. Because Indomaret and Alfamart, Alfamart and Indomaret are basically local brands. So they have less restriction and come off expansion to other citizen regions. Modern also cited Indonesia's economic slowdown is a reason for its diminishing revenue. The chain closed down 25 underperforming stores in 2016, to cut down operation losses, and Modern closed the remainder of its 7-Eleven stores in 2017. However a spokesperson from 7-Eleven said Indonesia is an important country for us. This is not the end for 7-Eleven's business. The company is hoping to find a new partner to renew its efforts and it has good reason to believe the right international partner will make all the difference. Take Japan. 7-Eleven entered the country in 1974. They partnered with Japanese chain Ito Yokado, forming York Seven Co. to operate its stores. It was so successful that in 2005, it bought out the company. Seven and i Holdings became the global owner of the American chain. Today there are more than 20,000 7-Elevens in Japan. The US as less than 9,000. So seeking a new international partner may be the key to its success. Indonesian consumers will just have to wait and see.

Channel: CNBC

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Keywords: CNBC, business news, finance stock, stock market, news channel, news station, breaking news, us news, world news, cable, cable news, finance news, money, money tips, financial news, Stock market news, stocks, 7 11, 7 11 near me, 7 eleven, 7 eleven near me, 7 eleven locations, 711 locations, 7-eleven rewards, deadpool 7-eleven, when is bring your own to day at 7-eleven, 7-eleven store, nearest 7-eleven, 7-eleven hours

Id: tfGUJowHOPM

Length: 4min 47sec (287 seconds)

Published: Tue Nov 06 2018

Reddit Comments

[u/ml2000id]

I have heard that a major reason is the biz structure. 7-11 locations are all owned by PT modern. where else alfa or indomaret are franchised to individuals, with the locations being owned by them

[u/emon121]

Dunno about other 7-11 but near my place people only come just to buy 1 potato chips snack get unlimited cheese from machine, stay at there the whole night and refill their drink when no one see them, rarely i see people buying other things there.

TLDR : its always crowded but people ain't buying shit and only using 7-11 as tempat nongkrong

[u/cahlantana]

analisis sotoy gue bedasarkan "pemain pengganti" nya 711 yaitu family mart:

menurut gue salah satu yang menjadi penyebab utama 711 bangkrut dan family mart enggak (asalkan ikutin pola ekspansi sekarang) adalah LOKASI

gue setuju sama banyak analisis disini yang bilang bahwa 711 rugi karena banyak orang yang spent money gak sampe 10ribu tapi semaleman disana, dan hal itu sangat dipengaruhi lokasi nya.

711 (dan family mart) tau, model bisnis mereka sedikit beda sama indomaret (bukan plus ataupun point ya), bahwa mereka selain jual kebutuhan sehari2 dan snack, mereka juga jual makanan sama minuman signature yang harga nya gak seberapa dan margin nya mungkin hampir sama dengan snack-snack dari supplier.

dan mereka mestinya tau, bahwa mayoritas orang jakarta (karena adanya sejauh ini di jakarta doang) gak tau diri (tapi gak salah ya) sehingga kejadian kayak diatas sangat mungkin terjadi. sehingga ops cost gak nutup karena harus nyediain listrik kursi dan ruang untuk orang2 tersebut

nah disini lah letak perbedaan nya family mart dan 711:

dalam memilih lokasi, 711 cenderung nyamperin tempat yang memungkinkan orang buat nongkrong di store nya, sedangkan family mart (coba kalian cek gmaps) memilih lokasi mostly di perkantoran dan apartemen, dimana orang orang2 yang aware akan keberadaan mereka melihat family mart sebagai convenience store yang jual minuman murah dan enak yang bisa dibawa ke kantor atau room masing2, bukan kayak orang2 sekitar 711 yang melihat 711 sebagai tempat nongkrong murah meriah

nah disini lah mungkin yang ngebuat kita (gue sih sebenernya) gak sadar bahwa family mart udah punya 100 lebih store di jakarta dan bsd tapi pasti jarang liat di pinggir jalan. cuman waktu yang bisa jawab bener/enggakmya strategi mereka, tapi yang pasti mereka gak ngelakuin kesalahannya 711

[u/qeqe1213]

Isn't it because Indonesians(including me) just use 7-eleven, as a place to waste time?

[u/telorpete]

kalo menurut buku rhenald kasali, disruption, 7-11 gatot karena pengaruh perizinan pemerintah di mana 7-11 dianggap menjalankan dua tipe bisnis sekaligus, restoran dan ritel. regulator terlalu kaku sama ijin2 padahal konsep 7-11 sangat berbeda dan cepet populer.

[u/dimasterof32]

well sometimes ago, i go to several seven eleven and notice something. PRICE!!

idk why all groceries on 7-11 is a bit expensive compared to indomaret and alfamart.

and the shop all nearby. of course they will choose the cheaper one. the only things good is they sell hot food, and again normally indonesian folks rather choose to buy full course food on warteg rather go to 7-11 just to get some.

[u/treatyoyoself]

ah.. 711.. fenomena di 2011an sampe 2016ann yang bikin alfa ama indomaret naro kursi di teras mereka

[u/subvillain]

Tumbang karena ada Perda yg melarang miras. Lebih dari 50% penjualan mereka berasal dari situ (dan rokok). Karena penjualan menurun, sementara operasional costnya tinggi (sewa lahan tinggi, ac dan showcase minuman jalan 24 jam, wifi dll) ya akhirnya bangkrut.

Sumber: mantan pegawai

[u/raumdeuters]

indomeret