A risky business decision, it taught us a lesson: 7-Eleven Indonesia operator on shutdown

Chains are used to lock the front door of a 7-Eleven convenience store in Jakarta, Indonesia June 27, 2017. The signs say 'Shop Closed'. REUTERS/Agoes Rudianto

Modern Internasional, the beleaguered 7-Eleven Indonesia operator, admits its plans to “expand too aggressively in the beginning” proved to be the biggest reason behind its collapse. Rising competition, a ban on alcohol sales and its failure to rope in new investors pushed the firm to finally close all its 175 outlets in the country.

“It was a risky business decision and it taught us a lesson,” Modern Internasional president commissioner Donny Sutanto said at a press conference on Friday.

The company is now laying off about 1,200-1,300 employees at its convenience stores business. It plans to sell its assets – consisting of land and buildings – to pay off debts and remaining liabilities.

Despite the spectacular shutdown of its business, Modern Internasional intends to pick itself up and continue operating, focusing on its other, older business divisions. Its core business had been medical equipment and copier distribution before it signed a deal with 7-Eleven to become its franchise operator in 2009.

“We can say for now that we will refocus on developing these other units, which we believe still have great market potential,” Sutanto said.

“What, how, and when we’re going to do that is still something that we need to work on. Right now we are focusing all our resources to solve liabilities and consequences (from shutting down 7-Eleven),” he explained.

The company has also expressed its wish to stay listed on the country’s bourse.

Modern Internasional started to notice the decline in the 7-Eleven business in 2012, which continued until 2015, when it reported a net loss of Rp 58 billion ($3.75 million). Its net losses had reportedly surged to Rp 447 billion in the first quarter of 2017.

The deal with Charoen Pokphand that wasn’t

Modern Internasional had announced that it was going to sell the 7-Eleven business to a Charoen Pokphand Group affiliate, Charoen Pokphand Indonesia. Sutanto said the deal was scrapped because Charoen Pokphand failed to get approval from US-based 7-Eleven, Inc.

The official explanation given for the scrapping of the $75-million deal was “non-agreement of the parties concerned”.

According to a Reuters report, Japan’s Seven & i Holdings Co Ltd, the parent firm of the global 7-Eleven chain, would “search for someone to take on the franchise and hope to restart business soon.”

“Indonesia is an important country for us. This is not the end for 7-Eleven’s business,” a company spokesman was quoted by the report.

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