Analysis: Why 7-Eleven Failed in Indonesia

Group Video Analysis

(GROUP ASSIGNMENT 2)

Disusun oleh Kelompok 3:

Aryo Wicaksono A. (21/472700/EK/23236)
Carla Patricia S. (21/472644/EK/23225)
Farrel Ramadhan E. (21/472720/EK/23241)

FAKULTAS EKONOMI DAN BISNIS

UNIVERSITAS GADJAH MADA
2022
I. Problem Identification (Synopsis and Description)
7-Eleven is known for their convenience, practice, and a go-to place for people to
get their needs quickly. This is proven because they have over 60,000 Outlets spread all
over the world. But unfortunately for them, it didn't work out for Indonesia. In Indonesia,
Convenience stores are one of the most profitable and fastest growing businesses of all
time. There are more than 20,000 convenience stores spread all over Indonesia and 92%
of them are local brands which are Indomaret and Alfamart. 7-Eleven started making
their way to Indonesia in 2009, their first store was in Jakarta, which then started to
expand in Jakarta with 100 stores by 2012. At their peak sales which was in 2014, they
hit $78 million with 190 stores in place and 7-Eleven in Indonesia is managed by PT.
Modern International who is a local company. At first, it became a trending hangout spot
for locals as it brought the 7-Eleven originals such as Slurpee and also alcohol, but sadly
it ended up with a tragic loss.
With the amount of population in the country, 7-Eleven is crowded most of the
time but the problem is that the crowd does not spend money on 7-Eleven. There are
many reports that said there was a huge crowd and 7-Eleven but they only spend on a few
drinks and sit for hours without buying any additional goods. They also faced struggles
with old and new competitors, this being Indomaret, Alfamart, and Family Mart.
Indomaret and Alfamart are top dogs in this game. They have been in the industry for
longer than 7-Eleven has been in Indonesia and theyAlso have more outlets and locations
in Indonesia. Indomaret has 15,000 outlets and Alfamart has 10,000 outlets whilst
7-Eleven only had 190 outlets and it is exclusive to Jakarta.
In 2015, the Indonesian government banned the sale of alcohol in convenience
stores and this also badly impacted 7-Eleven. The following year of the ban, 7-Eleven
suffered from a drop of the net sales by 24%. On the other hand, their competitors gained
an increase in sales in the same year and number of stores. Another reason why 7-Eleven
flopped in Indonesia is because they could not or have not expanded outside of Jakarta
which is the main city/capital of Indonesia. This is due to the regulations of international
franchise owners not being easily accepted by the government to support local brands.
Eventually, in 2016 7-Eleven started to close up their stores starting from those
who are underperforming and then in the following year they closed the rest of their
shops due to their great loss in the market.
II. Analytical Thinking
A. Additional Information
Depending on the sales of alcoholic beverages
After the nationwide ban of alcoholic beverages in minimarkets and
convenience stores, 7-Eleven started to lose revenue and closed their stores
one-by-one.

It can be seen from the graph that the sales of 7-Eleven outlets started to
drop after 2015, which was the year of the alcohol ban.
Lack of research in marketing

7-Eleven perhaps did not perform a deep down research for the Indonesian
market, because 7-Eleven branded itself in Indonesia as a “premium minimarket”.
But the truth is not many people in Indonesia have that much purchasing power.
As a result, the customer that comes to 7-Eleven only buys a few drinks and then
stays there for a couple of hours without spending money again.
 Demographic factor

As the fourth largest population of the world, Indonesia offers many potential
customers. But, not all of them who are expected to buy, will buy. Large
population means there is more consumption and more consumption means more
need of money or economic belongings. Therefore, the field of work is smaller
than other countries who have little population and with the high competition for
work, There are more chances of people being in lower economic class or even
homeless. This is why the branding of a “premium convenience store” Is relevant
only to those who have the money, which is only 21% of the country’s population.

B. Analysis of Consumer Behavior (KA-5)

Figure 1. Factors Influencing Consumer Behavior (Principles of Marketing, 2018)

Culture : In contrast to its American counterpart, which focused on to-go
products and late-night snacks, Indonesia's 7-Eleven became a popular hangout
location for local people where they spend little money yet stay for hours. This
culture has hurt 7-Eleven revenue significantly. Moreover, Indonesian culture
forbids drinking behavior whereas 7-Eleven sold alcoholic beverages.
 ● Subculture : 7-Eleven only operates in Jakarta where Hypermarkets are
more preferred. Moreover, Indonesian economic slowdown in 2014 has
also resulted in 7-Eleven revenue decline.
● Social class : Due to greater product pricing than rivals, only upper high
and high income clients are targeted. Meanwhile, Indonesia population
mostly comes from lower-middle income

Social : 7-Eleven aims to become a grab-and-go market, while in Indonesia

people value quality time with their relatives with little willingness to spend
money. For example, people might just buy one drink but sit for three hours.
● Roles and status : its main customer is university students which value
affordability whilst 7-Eleven provides higher product price compared to
its competitors
Personal factors :
● Occupation : 7-Eleven is only popular among University students who like
to explore brands, and buy cheap snacks. However, 7-Eleven offers a less
diverse product and more expensive price tag unlike its competitors like
Indomart and Alfamart.
● Age and Life Stage : Striving Singles Life Stage according to PRIZM
Lifestage. This life stage may be found in both urban and rural areas, often
with low earnings as a result of part-time work they do while attending
college.
● Economic : Indonesia is in the lower-middle class, but 7-Eleven sold
products at higher prices.
● Lifestyle : 7-Eleven slurpees, local food, and alcohol only popular among
students

Psychological
● Motivation : consumers’ is looking to fulfill its physiological need (e.g.
Food) first, but 7-Eleven doesn’t offer wide variety of food and beverages
 ● Learning : 7-Eleven does not learn from its competitor to expand beyond
Jabodetabek, and provide diverse set of brand

C. Analysis of Value Creation (KA-7)

Figure 2. Creating Value for Targeted Customers (Principles of Marketing, 2018)

Segmentation
● Geographic Segmentation:
- Only served Jabodetabek area with only few numbers of stores
compared to competitor and competitors has already expanded all over
Indonesia
● Demographic Segmentation:
- Only targeting 18-25 yo customer, competitors has a wider range
- Only targeting upper high and high income customers, because of
higher product prices than competitors
● Psychographic Segmentation:
- Fast Fixer : Youngsters (18-34), blue collar employment, single
income
- Junior Junk Junkies : Students (16-21)
- Go-getters : Youngsters (18-34), white collar employment, double
income
● Behavioral :
- Occasion segmentation : sales peaked only at after school hours and
weekend
 - Benefit sought : convenient fast food, accessibility, and affordability.
Yet, 7-Eleven does not have many branch and sells at higher price
- User Status : non- users, ex-users, potential users, first-time users, and
regular users of 7-Eleven. But, they don't have sufficient promotion
and after-sales service
- Loyalty status : brand-switcher

Targeting
● Undifferentiated marketing strategy where 7-Eleven Indonesia ignores
market segment differences and targets the whole market with one offer.
Meanwhile, 7-Eleven mainly targets millennial customers (18-25).

Differentiation
● 7-Eleven says “Always There for You”, but they only situate in
Jabodetabek and not expand their branches.
Positioning

Figure 3. 7-Eleven Positioning Map in Indonesia

Bigger image indicates bigger market share. 7-Eleven
only accounted for 0.7% of Indonesia minimarket’s
market share. Meanwhile, Indomaret and Alfamart
occupied 47% and 38% market share respectively.
III. Solution and Recommendation
Recommendation based on Consumer Behavior Analysis
● Culture: provide in-store fast-food restaurants to cater Indonesian customers that
value quality time. The restaurant can be outdoor to reduce the operation cost
such as air conditioning, and electricity. Besides that, 7-Eleven can offer a wider
range of snacks and beverages such as coffee or slurpees products to replace the
alcoholic drinks. Moreover, 7-Eleven can expand their stores outside Jabodetabek
to gain bigger market share. Likewise, 7-Eleven can lower their product price by
reducing the product size or quantity (shrinkflation) to cater the lower income
consumers.
● Social : 7-Eleven can offer new types of stores like “7-Eleven Plus” which have
in-store lounges or restaurants for locals to spend their time. Likewise, targeting
new customer segments like family or fresh jobbers will help 7-Eleven to gain
more customers as currently they only target university students. Following this,
7-Eleven can offer products such as cooking ingredients, household products, etc.
● Personal factors : 7-Eleven can cater to a diverse occupation segment, not just
students. For example, they can open a “7-Eleven Premium” supermarket like the
successful Indonesian “Ranch Market” that sells premium products to cater to
high-income segments in urban areas like Jakarta. Meanwhile, to cater the lower
income segment, 7-Eleven can offer the conventional minimarkets in both rural
and urban areas.
● Psychological : 7-Eleven can learn from its competitors (Alfamart and Indomaret)
marketing strategy and expansion. Afterwards, 7-Eleven can find the right
International partnerships not just relying on PT Modern International for its
expansion project to compete with local minimarkets. Finally, 7-Eleven should
fulfill the physiological needs of consumers by offering a diverse variety of
products as well as offering value to fulfill the other hierarchy of needs such as
premium products to satisfy customers’ esteemed needs.
Recommendation based on Value Creation
● Geographic Segmentation : 7-eleven's coverage region should be expanded.
Because rivals have entered the wider Indonesian market while 7-eleven is only in
Jabodetabek, the market generated by competitors is of course larger, so 7-eleven
must develop branches in other locations while making modifications to local
customs and knowledge. By offering Western as well as local menus, the
company will be able to differentiate itself from rivals.
● Demographic Segmentation : 7-Eleven should pay more attention to their target
market. 7-Eleven's current target market is extremely small, 7-Eleven has not
been able to recognize prospects in the culture of Indonesian people in that age
group. 7-eleven should understand more about Indonesian behaviors in general to
be able to identify holes in these habits and thus target wider age and occupation
segments such as the 30-60 age range.
● Behavioral Segmentation : One of 7-Eleven's drawbacks in comparison to rivals
is that its peak hours are during the school day and on weekends. Meanwhile,
rivals may entice customers to purchase at their location at all hours of the day
and night. As a result, 7-Eleven must be able to adapt its habits of seeking for
possibilities from its target market's habits, such as what their purchasing behavior
is like, and take advantage of their target market's consumptive behavior that
loves to hang out. In terms of advantages purchased, 7-Eleven's pricing is more
costly. The answer to this difficulty is that 7-Eleven should either locate a
different supplier for them or charge a higher margin on their specialty food or
drink than rivals do on their basic items. Likewise, 7-Eleven can shrink the
product quantity to reduce cost
● Targeting : Perhaps, in addition to millennials, 7-Eleven can gain a foothold in
other demographic segments, such as generation Z. Based on the fact that
Generation Z has habits and purchasing behavior comparable to millennials, the
potential that can be noticed from Gen Z is that they prefer to play games; maybe
7-Eleven can offer things such as gaming vouchers (steam, play store, and app
store) to enhance their sales. Likewise, 7-Eleven can cater Generation Y by
supplying household utilities
● Differentiation : 7-eleven should be able to grow its market across Indonesia
using the slogan "Always there for you." A bigger demographic market share may
greatly enhance a 7-eleven company's revenue. If 7-eleven is having problems
building additional branches across Indonesia, the company might modify its
business plan and become a franchise. In addition to being able to build 7-eleven
branches in distant regions of Indonesia, 7-eleven's brand in Indonesia will be
strengthened, allowing it to become a viable company in Indonesia.
Reference :
Team, B. W. S. (2018, November 7). Why 7-eleven totally failed in Indonesia.
WowShack. Retrieved March 20, 2022, from
https://www.wowshack.com/why-7-eleven-totally-failed-in-indonesia/

Team, B. W. S. (2018, November 7). Why 7-eleven totally failed in Indonesia. WowShack.
Retrieved March 20, 2022, from
https://www.wowshack.com/why-7-eleven-totally-failed-in-indonesia/