Why 7-Eleven Failed In Indonesia

Summary

7-Eleven's Indonesian venture failed due to a shift in customer behavior, intense local competition, regulatory challenges, and limited geographic reach. Despite initial popularity as a hangout spot, the stores struggled with low spending and a drastic drop in sales post-alcohol ban. With a market share of just 0.7%, 7-Eleven closed its 190 stores in 2017. However, the company remains hopeful about re-entering the market with a new partner, drawing lessons from its successful Japanese expansion.

Takeaways

• 🌏 There are over 60,000 7-Eleven stores worldwide, but the brand failed in Indonesia, closing all its stores in 2017.
• 📍 7-Eleven's Indonesian venture was managed by a local operator, PT Modern Internasional, which started in 2009.
• 🏪 The stores in Indonesia were more than just convenience stores; they became popular hangouts, especially for university students aged 18 to 25.
• 🍺 Before the 2015 alcohol ban, 7-Eleven was a popular spot for post-class or post-work socializing with free Wi-Fi and food.
• 📈 The business initially expanded rapidly in Jakarta, reaching 190 stores by 2014 with peak sales of around 78 million.
• 👥 Despite popularity, 7-Eleven faced a significant issue where customers spent less money, often buying just one item and staying for hours.
• 💥 Intense competition from local Indonesian convenience stores, Indomaret and Alfamart, which had a much larger store count, posed a major challenge to 7-Eleven.
• 🚫 Regulatory issues, including the 2015 ban on alcohol sales in convenience stores, led to a 24% drop in 7-Eleven's net sales in the following year.
• 📊 While 7-Eleven struggled, its competitors Indomaret and Alfamart managed to increase their revenues by offering a wider range of products and services.
• 🗺 7-Eleven's inability to expand beyond Jakarta and its surrounding areas was a significant disadvantage compared to its competitors who had a nationwide presence.
• 🏢 The economic slowdown in Indonesia and the challenges of foreign ownership and franchising regulations were also cited as reasons for 7-Eleven's failure.
• 🔄 Despite the closure, 7-Eleven remains hopeful about re-entering the Indonesian market with a new international partner, similar to its successful entry into Japan.

Q & A

How many 7-Elevens were there globally before the Indonesian closure?

There were more than 60,000 7-Elevens across the planet before the closure of its stores in Indonesia.

Why did 7-Eleven fail in Indonesia?

7-Eleven failed in Indonesia due to several reasons, including intense local competition, a ban on alcohol sales in convenience stores, and the inability to expand beyond Jakarta and its surrounding cities.

Who was the local operator responsible for 7-Eleven's rollout in Indonesia?

PT Modern Internasional was the local operator that ran 7-Eleven's rollout in Indonesia.

What was unique about 7-Eleven's approach in Indonesia compared to the US?

Unlike the US, where 7-Eleven capitalized on to-go items and late-night snacks, in Indonesia it became a trendy hangout spot for locals, offering fresh local food and alcohol.

Which demographic was 7-Eleven particularly popular with in Indonesia?

7-Eleven was very popular with university students, particularly in the 18 to 25 age range.

What impact did the 2015 alcohol ban have on 7-Eleven's sales in Indonesia?

The 2015 alcohol ban led to a nearly 24% drop in 7-Eleven's net sales over the following year in Indonesia.

What were the two main competitors of 7-Eleven in Indonesia?

Indomaret and Alfamart were the two main competitors of 7-Eleven in Indonesia.

How did Indomaret and Alfamart manage to withstand the alcohol ban in 2015?

Indomaret and Alfamart were able to withstand the ban because they offered a wider range of products and services compared to 7-Eleven.

What was 7-Eleven's market share in Indonesia before the closure?

Before the closure, 7-Eleven held just 0.7% of the market in Indonesia.

What was the peak number of 7-Eleven stores in Indonesia?

The peak number of 7-Eleven stores in Indonesia was 190.

What is 7-Eleven's strategy for a potential return to Indonesia?

7-Eleven is hoping to find a new international partner to renew its efforts in Indonesia, similar to its successful partnership with Ito Yokado in Japan.