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Every time we talk about convenience stores we’ll be reminded of 7-Eleven. For many years, it has been in the top spot in global supermarkets and chain convenience stores. Japan's convenience store, 7-Eleven, with its powerful supply chain system, has been smashing from a small convenience store and even dominates global convenience store retail. Now, 7-Eleven has more than 70,000 chain convenience stores around the world. However in Indonesia, 7-Eleven suffered unprecedented setbacks. It was a place to buy cigarettes, snacks, and slurpees. Popular with 18-25 years-old, it was a shop-by-shop for Wi-Fi, socializing and extremely-cheap alcohol. On June 30, 2017, 7-Eleven officially closed all its outlets all over Indonesia[1]. Let’s investigate and find out the reasons why 7-Eleven didn’t work in Indonesia!
1. Say No More to Alcohol
The downfall of 7-Eleven in Indonesia can be pinpointed in 2015, with the government banning the sale of alcohol in mini-markets. This exercise was taken in order to “protect Indonesia’s youth”. When the government stipulates that convenience stores are forbidden to sell alcohol, 15% of 7-Eleven’s sources of income were cut off directly[2]. “I think it started going down when the government banned on selling alcohols in minimarkets. I also watched a video about it and it is said that 7-Eleven opened way too much branch in just the span of a few years,” said Tannia Susilo, 19, a Communication student of President University.
2. “Too Pricey for Me”
Some people also think that come of the product’s price is one of the reasons why. “Some of the products; prices are reasonable but some are not,” said Josephine, 19, an Information Technology student of President University, who used to go to 7-Eleven for its slurpee.
We also find out that people prefer to go to other convenience stores, because some of the products offered in 7-Eleven are considered to be pricey. “In my opinion, the biggest reason that makes 7-Eleven did not succeed is its operational cost that’s too high and its income was too low,” said Daniel, 19, a Visual Communication Design student of President University.
People’s perceptions, influenced by their environment, is also one of the factors why they didn’t want to go to 7-Eleven. “I have never been to 7-Eleven because my friends told me that their products are quite expensive. They also told me on how they sell foreign food, which is not suitable for my liking, therefore I don’t go there,” said Ferry Susanto, 41, a staff of Celecton Hotel Cikarang.
Furthermore, In 2017, the Trade Minister of Indonesia, Enggartiasto Lukita, stated that the purchasing power of people was weak. People are getting wiser in choosing where they want to spend their money at.
3. Flawed Marketing and Distribution Strategy
7-Eleven came with a premium mini-market concept. However in reality, it cannot be both, effective and premium. 7-Eleven was not as effective as other convenience stores in Indonesia, like Indomaret or Alfamart, and it can’t position itself to be “that” premium, like Starbucks. 7-Eleven also failed to target its customers. As the convenience store that provided snacks and coffee for the youth, that led to people going to 7-Eleven only to hang out for hours! As a result, that cost 7-Eleven a lot. People used to buy a can of soda and stayed to use its Wi-Fi for hours! Not only that, the distribution of 7-Eleven is very scattered in one degree, and Indonesia has not formed a large-scale operation. Therefore, the supply chain is different in each place. High operational costs, low enthusiasm by the people, leave to 7-Eleven in Indonesia without a market.
3. “I Want Convenience”
When you think about convenience store, you would definitely expect convenience. You want all your needs to be fulfilled in order to feel convenient. “I have been in Indonesia for more than 20 years, when I first time saw this store appearing in Jakarta, I am looking forward it, but now they’re all closed. In Taiwan half of 7-Eleven's incomes from services: Hydropower coal payment, ATM withdrawal, express delivery, dry cleaning, and so on, these service income accounted for a large proportion of 7-Eleven revenue. But in Indonesia, services such as water, electricity, gas, ATM, and express delivery have not been well developed payment in convenience stores. When the convenience store is no longer convenient, then there is no meaning of existence.” Said Frank Chang, 45, a Chinese enterprise senior management.
So, those are our investigation results on why 7-Eleven did not work out in Indonesia. However, in one of CNBC YouTube Channel videos, 7-Eleven stated that Indonesia is an important country for them and that it won’t be the end of 7-Eleven’s business in Indonesia.
Let’s hope that if the time has come, it will come back with success.
[1] Danang Sugianto, “Alasan 7-Elevn Tutup, Bisnis Rancu Antara Restoran dan Minimarket”, https://finance.detik.com/bursa-dan-valas/d-3546031/alasan-7-eleven-tutup-bisnis-rancu-antara-restoran-dan-minimarket, retrieved on April 18 2019.
[2] https://biz.kompas.com/read/2017/07/17/143000428/belajar-dari-kegagalan-7-eleven-di-indonesia, retrieved on April 18 2019.
Written by: Elizabeth, Arya M. Gandhi and Hansen Angsoko
thats cool
Informative !!! Thanks