7-Eleven sees success in Vietnam after failure in Indonesia?

15:55 | 11/07/2017
After 7-Eleven’s initial success in the Vietnamese market, people are still questioning its long-term achievements as competition among different brands of convenience stores in Vietnam is getting more intense, and especially after 7-Eleven’s failure in Indonesia.
7-Eleven sees initial success in Vietnam after failure in Indonesia
7-Eleven is looking to avoid the fiasco in Indonesia, but experiences tough competition in Vietnam

Youngsters love convenience

Currently, people are less crazy about 7-Eleven after four new stores were opened within nearly a month. However, some people may still wish to experience this famous chain of convenience stores, while others who used to live abroad, especially in Japan, Thailand, and China, may not be too excited about 7-Eleven in Vietnam.

At the middle of June, the debut of 7-Eleven in Vietnam lured great attention on newspapers and Facebook, there were even some rumours that customers were paid to queue in front of the first 7-Eleven store.

In real life, there is not much talk about 7-Eleven, because they think that 7-Eleven stores are just like other convenience stores that have appeared in Vietnam in recent years, such as Ministop, B’s smart, Circle K, Vinmart+, and Shop & Go.

Since three years ago, Nguyen Tan Minh, a communication employee at a big consumer goods corporation, said that he had not bought goods from traditional grocery stores or small shops on the pavements because he used to be sold the expired goods there, making him lose faith in these kinds of stores. Meanwhile, different chains of convenience stores are appearing everywhere, and the goods in these stores are regularly checked.

In addition, buying goods in a 24-hour convenience store helps Minh to save time more than buying at a supermarket. Minh is a frequent customer of Ministop but he said that he would not hesitate to leave Ministop and buy in 7-Eleven if one opened closer to his home.

“7-Eleven sells some kinds of homemade food that suit my taste, such as cakes or yogurt. I usually buy bread in this store for breakfast to save time,” Minh said.

Besides, 7-Eleven attracts consumers by its own advantages, such as the various imported confectionery products. Specifically, 7-Eleven has a menu of 100 dishes which are cooked in Vietnamese style, and the menu changes every day. This is not only 7-Eleven’s advantage, but also a point of differentiation.

However, the selling price at 7-Eleven is a little bit higher than some other stores. “This is not important, I love this store mainly due to its convenience,” Minh said and added that a little bit of difference in selling price does not originate from the popularity of a brand, but derives from the initial investment and lease fees.

All four 7-Eleven stores are at prime locations in Ho Chi Minh City, the most populous and dynamic city in Vietnam. Still, consumers like Minh hope that after the early stage, the prices in 7-Eleven will go down.

According to Minh, the only shortcoming of 7-Eleven is that there are few stores in the suburbs, so people in these areas must travel all the way to Saigon Trade Center at 37 Ton Duc Thang Street, District 1. However, this 7-Eleven store does not have its own parking lot for customers who drive motorbikes and it is such an inconvenience

Factors behind 7-Eleven’s success

Without aggressive advertising, numerous chains of convenience stores have silently entered the Vietnamese market in recent years, such as Circle K, B’s mart, Ministop, Shop & go, and Vinmart+. This year saw a boom of convenience stores with the participation of 7-Eleven.

“Basically, these convenience stores are similar. I often visit a convenience store because it is near my house, not because of its Japanese or Thai goods,” Thy Thy, a communication employee of Asus Vietnam, said.

Vietnamese customers’ habits often change quickly. Youngsters in Vietnam do not stick to certain brands and are willing to try new convenience stores if they offer various products at competitive prices, but above all comes convenience.

Thus, 7-Eleven has the strategy of developing its chain of convenience stores everywhere, on crowded streets or in small and narrow lanes in residential areas.

In Vietnam, 7-Eleven targets to open 100 stores within three years and 1,000 stores within the next ten years. 7-Eleven is the first foreign retailer in Vietnam that sets such a high target.

The rumour among domestic retailers says that Henry Nguyen Bao Hoang, managing general partner of IDG Ventures Vietnam, the first technology venture capital fund in Vietnam, is the one who stands behind 7-Eleven stores in the country. He is also the person who brought the first McDonald’s to Vietnam.

Notably, Pham Phu Ngọc Trai, an excellent Vietnamese CEO over two last decades, is a shareholder of Seven System Vietnam Joint Stock Company, a franchisee of 7-Eleven in Vietnam. He has mastered the retail sector and consumer goods industry in Vietnam.

All of these things make people think that the 7-Eleven chain will flourish in Vietnam. However, the initial success does not ensure a bright future for 7-Eleven on its own.

Threats from domestic competition

While 7-Eleven is warmly welcomed in Vietnam, in Indonesia, it had to close all stores eight years after entering. Previously, Modern International, 7-Eleven’s franchisee in Indonesia, continuously expanded the brand outside the capital Jakarta.

Like in Vietnam, 7-Eleven induced a modern space with various foods at reasonable prices for Indonesian youngsters. However, these were not enough for 7-Eleven to survive in Indonesia, because at the same time, it had two strong domestic rivals, Alfamart and Indomaret, two chains with a long history and expansive networks all over Indonesia.

At first, Alfamart and Indomaret copied 7-Eleven upon seeing its success. Afterwards, they focused on raw and fresh food products rather than processed food.

This is one precious lesson for 7-Elven Vietnam, but at present, it refuses to answer questions about domestic competition. In Vietnam, Vinmart+ of Vingroup may become the Vietnamese version of Alfamart and Indomaret, posing a threat to 7-Eleven.

Vinmart+ entered the retail sector later than most domestic and foreign convenience stores and mini-marts, but it has one of the biggest number of stores. After only two years of operation, Vinmart+ has opened about 1,000 stores. It targets to open an additional 1,000 stores this year.

Currently, Vinmart+ focuses on fresh and raw vegetables and fruits instead of cooked food to attract youngsters, who love a quick and convenient life, but the store is changing its strategy.

Vinmart+ will supply clean vegetables and fruits from its eco-farm VinEco, necessities for housewives and busy officers, and fast food and processed food for youngsters. The food will be processed in VinmartCook and then distributed in Vinmart+ stores.

Convenience stores in Vietnam have their own ways to approach potential customers. However, customers’ psychology and needs are always changing and they seem to be reluctant to stick to a single brand. This demonstrates that convenience stores that aim for success must understand their customers and adjust to the trends.

7-Eleven sees success in Vietnam after failure in Indonesia?
7-Eleven sees success in Vietnam after failure in Indonesia?

After 7-Eleven’s initial success in the Vietnamese market, people are still questioning its long-term achievements as competition among different brands of convenience stores in Vietnam is getting more intense, and especially after 7-Eleven’s failure in Indonesia.

Vietnamese retailers brace for 7-Eleven entrance
Vietnamese retailers brace for 7-Eleven entrance

Japanese retail giant Seven & I Holding Group’s expansion to Vietnam is likely to create severe competition in Vietnam’s retail landscape.

By By Anh Hoa

What the stars mean:

★ Poor ★ ★ Promising ★★★ Good ★★★★ Very good ★★★★★ Exceptional

Based on MasterCMS Ultimate Edition Ver 2.9 2020