Why 7-Eleven Failed In Indonesia - YouTube

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.