As night falls, groups of twenty-somethings gather at a popular hangout, chatting at tables laden with beer, iced coffee and nachos. Some couples cuddle over chocolate pudding, while others groove to music on their iPhones.
The nightspot has live bands, Wi-Fi and a growing clientele.
It also has a familiar green-and-orange sign hanging overhead: 7-Eleven.
“It’s a new concept of hanging out,” said Oka Dharmawan, 21, an engineering student who meets friends at 7-Eleven almost every night to log onto the wireless hot spot and drink Slurpees.
Ten years ago, young people in Indonesia gathered at street-side food stalls called warung to hang out and gossip. But with rapid economic growth has come social change.
‘’People still like to talk about their lives, they like to gossip,” said Henri Honoris, president director of Modern Putra, 7-Eleven’s Indonesian franchisee. “Now we give them an alternative. It’s a warung with better quality.”
The franchise’s strategy has been to blend a small supermarket with inexpensive ready-made food and seating, which attracts customers in a city desperately lacking outdoor recreation space and snarled by traffic jams that often restrict mobility.
“The neighborhood 7-Eleven has become recreational,” said Debnath Guharoy, Asia director for Roy Morgan Research, a market research company based in Australia.
Sixty-five percent of the franchise’s customers are younger than 30, and to reach them, it relies on another defining feature in Indonesia: a love of social networking. In one of the world’s most plugged-in countries, 7-Eleven has 57,000 Twitter followers and more than 44,000 Facebook fans.
Many of them spend hours browsing the Internet at 7-Eleven, which never closes, allowing young people to gather late into the night. When the store plays host to local bands, customers update their social networking statuses and help draw bigger crowds.
And now that many Indonesians have more disposable income, they are looking for what Honoris calls “affordable luxury.” The store’s appeal to both the lower middle class and the nouveau riche becomes apparent to anyone just looking at the parking lot, where motorbikes sit next to Mercedes-Benzes.
In many ways, the convenience store’s evolution was a given in a country like Indonesia, where the penchant for hanging out runs so deep that there is a word for sitting, talking and generally doing nothing: nongkrong.
Honoris said that he had seen the demand for a revamped 7-Eleven early on, but that it had taken two years to persuade the company, which has its headquarters in Dallas, to grant him the franchise.
When 7-Eleven finally opened its first 20 Indonesian stores in 2009, its first expansion into a new country in 16 years, he found his knowledge of the market paid off.
Since then, Modern Putra, which is also the national distributor for Fujifilm, has seen its sales jump fivefold, reaching Rp 320 billion ($34 million) in 2011. The company recorded a net profit of 57 billion rupiah last year.
‘’Before you had a dirty, sweaty little street shop, and that’s all there was,” said Guharoy of Roy Morgan Research, referring to the warungs. “Now you can go to a clean, air-conditioned shop and it’s a better experience.”
To appeal to local tastes in the world’s most populous Muslim country, 7-Eleven had to rethink its sales strategy.
The store offers ready-made fried rice, doughnuts and its signature Big Gulp soft drinks and flavored-ice Slurpees. Most outlets also sell beer and wine coolers — though each new shop conducts neighborhood surveys to get community approval first.
Meals can cost less than 23,000 rupiah (about $2.50), which appeals to families that might once have gone to McDonald’s, a close competitor. Novi, a 37-year-old travel agent who, like many Indonesians, goes by only one name, said she liked the comfort of being indoors and the international food options. Her favorite is chicken katsu, a Japanese-style fried cutlet.
“There is a different kind of atmosphere, a different kind of food,” she said, in comparing 7-Eleven with the food stalls she used to frequent. “There is air-conditioning here and there are no buskers to bother you.”
The store’s Big Bite hot dogs and cafe items — coffee and cappuccino — bring in the most sales. Small snacks like chips and pillow bread, tiny sandwiches filled with cheese or chocolate, are also popular.
With 69 stores in Indonesia, all of them in Jakarta, 7-Eleven lags behind its closest competitors, including McDonald’s, Dunkin’ Donuts and KFC, which together have more than 600 outlets.
But 7-Eleven is expanding much faster, having added 36 stores last year alone. In Thailand, 7-Eleven has one store for every 10,000 people. If the same ratio were applied in Jakarta, Honoris said, the city could see 2,000 outlets.
The swift growth of the middle class shows the enormous potential for expansion. From 2003 to 2010, about 50 million people entered the middle-income bracket, with disposable income of $2 to $20 per day, according to the World Bank. Indonesia’s gross domestic product per capita is now more than $3,600, exceeding that of India, the second-largest consumer market in Asia, after China.
The success of 7-Eleven, which was acquired by a Japanese company in 1991, has drawn attention from foreign fast-food retailers and other convenience store chains, all eager to take advantage of Indonesia’s seemingly insatiable consumption.
Lawson, based in Tokyo, which entered the country in July 2011, is on its way to opening 50 new stores by June. FamilyMart, also from Japan, announced in January that it would open 300 stores by 2015.
Local convenience stores are also expanding into special niches. Bao Bao Express, a chain set up in 2010 by a local Chinese-Indonesian businessman, caters to office workers by offering a laundry service and allowing people to pay their electricity and water bills at the register. It operates in office buildings and apartment towers, a strategic move that keeps it from running up against a zoning bylaw that prevents convenience stores from being too close to traditional markets.
For 7-Eleven, positioning itself as more of a hangout and less of a convenience store has made both its owners and its customers happy.
Rendie Sumadilaga, 26, said the store was even a decent place to meet girls.
“There’s lots of good eye candy,” he said, nodding toward a nearby table.
And that is just one of many factors Honoris is banking on.
“You can’t find these kinds of customers in other countries,” he said. “This is what Jakarta needs now.”
The New York Times