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.

Outlines

00:00

🏪 7-Eleven's Struggles in Indonesia

7-Eleven, with over 60,000 stores globally, faced a significant setback in Indonesia, where it closed all its stores in 2017. The brand's entry into Indonesia in 2009 was managed by PT Modern Internasional, aiming to appeal to the youth with trendy hangout spots offering both traditional 7-Eleven items and local food and alcohol. Despite popularity, especially among university students, the stores struggled with low spending per customer. The introduction of an alcohol ban in 2015 further reduced sales by 24%. Intense competition from local chains like Indomaret and Alfamart, which had a much larger store count and a wider range of products, compounded the issues. Geographic limitations to Jakarta and surrounding areas, regulatory challenges for foreign franchises, and the country's economic slowdown were also contributing factors to 7-Eleven's exit from the Indonesian market.

Keywords

💡7-Eleven

7-Eleven is a well-known international chain of convenience stores with more than 60,000 locations globally. In the video, it is highlighted as a company that experienced a significant failure in Indonesia, which is the main theme of the video. The script discusses the reasons behind its failure and contrasts its success in other countries, like Japan, with its struggles in Indonesia.

💡Indonesia

Indonesia is the country where 7-Eleven failed to establish a successful business. The script provides a detailed account of the factors contributing to this failure, such as intense competition, regulatory issues, and economic slowdown. It is central to the video's narrative as the place where 7-Eleven's strategy did not work.

💡PT Modern Internasional

PT Modern Internasional is the local operator that managed 7-Eleven's rollout in Indonesia. The script mentions this entity as the company responsible for the adaptation of 7-Eleven to the Indonesian market, which included turning the stores into trendy hangout spots rather than focusing on to-go items and late-night snacks as in the U.S.

💡Alcohol ban

The alcohol ban in 2015 is a regulatory issue that had a significant impact on 7-Eleven's sales in Indonesia. The script explains how this ban led to a nearly 24% drop in net sales for 7-Eleven, while its competitors, who offered a wider range of products, were able to report revenue gains.

💡Indomaret and Alfamart

Indomaret and Alfamart are Indonesian convenience store chains that are presented as 7-Eleven's main competitors in the script. They are highlighted as having a long history in the country and being top players in the market, with a much larger number of stores and a significant market share compared to 7-Eleven.

💡Market share

Market share refers to the percentage of the total market that a company controls. In the context of the video, 7-Eleven's market share in Indonesia was a mere 0.7%, which is significantly lower than the 38% and 47% held by Alfamart and Indomaret, respectively.

💡Economic slowdown

The economic slowdown in Indonesia is mentioned as one of the factors contributing to 7-Eleven's diminishing revenue. The script indicates that this broader economic context affected the company's performance, leading to the closure of underperforming stores.

💡Expansion

Expansion refers to the growth of a business into new areas or markets. The script discusses how 7-Eleven failed to expand beyond Jakarta and its surrounding cities, unlike its competitors, which were able to establish a presence throughout the country.

💡Regulatory issues

Regulatory issues are legal or governmental restrictions that can affect a business's operations. The video script highlights the alcohol ban as a regulatory issue that negatively impacted 7-Eleven's sales, but also implies that there were other regulations that made it difficult for the company to expand or operate as freely as local competitors.

💡International partner

An international partner is a company or entity from another country that collaborates with a local business. The script suggests that finding a new international partner could be key to 7-Eleven's success in Indonesia, drawing a parallel with the company's successful partnership with Ito Yokado in Japan.

💡York Seven Co.

York Seven Co. is the company formed by 7-Eleven's partnership with the Japanese chain Ito Yokado when it entered the Japanese market in 1974. The script uses this as an example of a successful international partnership that eventually led to 7-Eleven becoming the global owner of the American chain and having more than 20,000 stores in Japan.

Highlights

7-Eleven operates more than 60,000 stores worldwide but failed in Indonesia.

7-Eleven's Indonesian venture was managed by local operator PT Modern Internasional.

Indonesian 7-Eleven was a trendy hangout spot rather than a quick-service store.

The store offered a mix of traditional 7-Eleven items and local food and alcohol.

7-Eleven was popular among university students aged 18 to 25 in Indonesia.

The store provided a place for socializing with free Wi-Fi and food options.

Alcohol ban in 2015 led to a significant drop in 7-Eleven's net sales.

Indonesia's retail outlet count grew exponentially, intensifying competition.

Indomaret and Alfamart were 7-Eleven's main competitors with a vast store network.

7-Eleven held only 0.7% of the market share in Indonesia before closing.

Regulatory issues and the alcohol ban affected 7-Eleven more than local competitors.

7-Eleven's inability to expand beyond Jakarta was a significant limitation.

Local brands Indomaret and Alfamart faced fewer restrictions in expansion.

Indonesia's economic slowdown contributed to 7-Eleven's diminishing revenue.

7-Eleven closed 25 underperforming stores in 2016 and all stores in 2017.

7-Eleven is open to finding a new partner to re-enter the Indonesian market.

The success of 7-Eleven's partnership with Ito Yokado in Japan offers a blueprint for a potential comeback.

Transcripts

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.