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  • 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 and 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 they 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 in terms of 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 has 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.

There are more than 60,000 7-Elevens across the planet.

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Why 7-Eleven Failed In Indonesia

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    Liang Chen posted on 2018/12/24
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