Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
Mid Exam
Business Ethics, Law, and Sustainability
Mokhamad Zafar Nur Hakim
218190090
BLEMBA-24
HISTORY OF 7 ELEVEN IN INDONESIA
HOW IT GROW
SUDDENLY DISAPPEAR
ANALYSIS
CONCLUSION
HISTORY OF 7 ELEVEN IN INDONESIA
Indonesia had some typical Sixty-five percent of the franchise’s customers are
traits not found in other younger than 30, and to reach them, it relies on another
markets. For one, just hanging defining feature in Indonesia: a love of SOCIAL
out and doing nothing is so NETWORKING. Many of them spend hours surfing the
deeply embedded in Internet at 7-Eleven, which never closes, allowing young
Indonesian culture, the local people to gather late into the night. When the store
language has a special word for plays host to local bands, customers update their social
it: NONGKRONG. networking statuses and help draw bigger crowds.
HOW IT GROW
1. Wrong Concept
The sudden turn of events is no big surprise, "The stores were always crowded, but the customers never
bought much. They came to hang out and to enjoy the Wi-Fi. They would bring their laptops and stay for hours
but only buy a single drink.“ “The concept is interesting, but is it profitable?” said Tutum Rahanta, deputy
chairman of the Indonesian Retailers Association. “The crowd is created by people who just hang out, but those
who want to shop and who can really generate profits don’t go there.” Alfamart and Indomaret had long
operated as minimarkets, a format in Indonesia with a greater emphasis on fresh groceries than convenience
stores and less stress on serving food or selling alcohol.
"The income from [7-Eleven] sales does not cover operational costs like
electricity, lights, Wi-Fi and overhead," said Reza Priyambada, a retail
analyst at Bina Artha Securities in Jakarta.
ANALYSIS
2. Easy to Imitated
Ultimately, that was not enough for Modern, especially in the face of fierce competition on one side from
Alfamart and Indomaret. Both had initially reacted to 7-Eleven's early outward success with imitation. The two
had long operated as minimarkets, a format in Indonesia with a greater emphasis on fresh groceries than
convenience stores and less stress on serving food or selling alcohol.
“It is proven that 7-Eleven’s business model can be
adapted by other [convenience operators] and that it
could help them expand their business,” Roy Mandey,
chairman of trade group Indonesian Retailers
Association, said.
ANALYSIS
3. Change of Regulation
The good times were not to last. In April 2015, the government banned alcohol sales in convenience stores and
minimarkets. At the time, alcohol accounted for about 15% of 7-Eleven's revenues. Although the national
government relaxed the policy five months later, allowing local authorities to decide on implementation,
Jakarta, among other big cities, kept the sale restrictions in place.
Meanwhile, 7-Eleven might have been constrained in reorienting its focus by permitting issues, according to
Tutum Rahanta, deputy chairman of the Indonesian Retailers Association. The trade department in 2012 issued
a warning letter to 7-Eleven for selling retail goods without appropriate business permits, according to local
media reports at the time.
Amid the alcohol ban, 7-Eleven's sales for 2015 dipped 8.8% to
886.84 billion rupiah and Modern itself dropped into the red with a
net loss of 54.76 billion rupiah. Modern began closing 7-Eleven amid
the sales slump, shuttering 27 outlets in 2016. Chain revenues
slipped a further 23.9% to 675.28 billion rupiah. Modern fell into the
red on an operating level, with an operating loss of 764.32 billion
rupiah. Early this year, Modern closed about 30 more 7-Elevens.
ANALYSIS
In this case, I think Modern is neglect their competitor, such as Alfamart and Indomaret, and too focus with
their own business. Without them recognize, their competitor has already reach more variative segment of
market in other city, not only low to upper middle class in big city like Jakarta.
Daniel Kahneman said in his book “Thinking, Fast and Slow”, The consequence of competition neglect is excess
entry: more competitors enter the market than the market can profitably sustain, so their average outcome is a
loss. The outcome is disappointing for the typical entrant in the market, but the effect on the economy as a
whole could well be positive.
Strength Oportunities
- Urban market segment - Growing middle class
- Brand - Big City
Weakness Threats
- Limited Number of Store - Regulation
- Limited Location - Economic Change
- High Rent
CONCLUSION
7-eleven cannot reach their competitor because they slow response with change of customers
behavior. In Globalization era, Indonesian shoppers also increasingly rely on online delivery services,
reducing the chances of in-store impulse buying.
Focus on one big city can be a threats, because they cannot reach another segment of market, such
Urban people in growing city like Bandung or Surabaya. Their competitor focus to spread out their
store until to the village, to make customer easier to reach.
Why is global mass retailing so challenging? The products/brands sold by mass retailers are not
unique - and are already widely available in the country. As a later entrant, a global retailer is
unlikely to find the best locations available and it is unlikely to have a lower cost of operations than
local mom-and-pop stores. To succeed, the global retailer has to offer better customer experience
while hoping that savings from state-of-the-art global systems will more than compensate for the
higher real estate and operating cost disadvantages.
REFERENCES
Kahneman, Daniel. Thinking, Fast and Slow. New York: Farrar, Straus and Giroux, 2011.
https://www.reuters.com/article/us-seven-i-hldgs-indonesia/7-eleven-indonesia-where-popularity-
wasnt-enough-idUSKBN19L1ZE
https://www.scmp.com/week-asia/business/article/2102307/why-did-all-7-elevens-jakarta-
suddenly-disappear