Sun, 13 Jun 2010

From: The Jakarta Globe

By Arti Ekawati & Muhamad Al Azhari
For a global symbol of convenience, the 7-Eleven brand takes some beating for its presence on seemingly every street corner or mall basement.

Soon its orange, green and red storefronts will be as familiar in Indonesia as they have become in so many other Asian countries, if the local franchise-holder gets its way and can shake off controversy dogging its first months of operation in this country.

PT Modern Putra Indonesia owns the Indonesian rights to the global brand, which has over 36,000 company-owned and franchised stores worldwide.

Modern Putra, a subsidiary of photographic, electronics and telecommunications products retailer PT Modern Internasional, which has more than 1,500 outlets in Indonesia, signed a master franchise agreement with 7-Eleven in April 2009. It opened the first Indonesian store last November on Jalan Bulungan in South Jakarta, and there are now eight stores, all in Jakarta.

But Modern Putra has run into some of the sort of difficulties that are all too common for new businesses here, the most serious being the Trade Ministry publicly questioning whether it has the requisite licenses for the stores.

From soon after the first openings, there were local media reports alleging that it only had a restaurant license from the Jakarta Culture and Tourism Agency, which would only let it sell processed food and drinks, rather than general merchandise.

Meanwhile, the Trade Ministry has questioned whether Modern Putra has secured a franchise license and a license to operate modern convenience stores.

Modern Internasional spokeswoman Neneng Sri Mulyati denied there was any licensing problems. “We operate in accordance to the regulations,” she told the Jakarta Globe. “Whatever the licenses needed, we have already secured them. We are prepared to give explanations. If we are found to be breaching regulations, we are willing to submit to the law.”

But Subagyo, director general of domestic trade at the Trade Ministry, was not so sure. “We haven’t received any reports from Jakarta Trade and Industry Agency that they have applied for licences,” he said. “If they have already secured the required licenses, the agency should have reported that to us within a month of the licences being issued.”

The Jakarta Trade and Industry Agency, part of the city administration, is responsible for issuing franchise licenses and convenience store licenses in Jakarta.

Jakarta Culture and Tourism Agency head Arie Budhiman has confirmed that his office had issued a license to Modern Putra to operate a restaurant business.

“I gave them a permit to operate restaurant. Since they provide processed food and beverages and also provide places for consumers to eat their foods, it was categorized as a restaurant business. With this license they can sell food and beverages to consumers,” Arie said.

He said he had only issued the restaurant license on the understanding that Modern Putra had already secured a license to run a convenience store. “Without it I would not have dared to give them a restaurant license. But we will reevaluate it after one year.

Neneng declined to say which licenses the company had.

“We don’t need to clarify anything about our licences. The point is, we have run the business in accordance to the law,” she said. She voiced annoyance with media reports that Modern Putra didn’t have an appropriate license and said it was the company’s private business.

The issue looks set to come to a head next week, the Trade Ministry’s Subagyo hinted, as he told the Jakarta Globe that his department would be investigating more closely. “We are still coordinating with Jakarta city officials . That’s why I cannot explain to you right now about the licensing clearly. We will discuss it with the Jakarta officials by next week.

“On Tuesday there is a meeting to synchronize it. Why don’t you wait until Tuesday and see the result?”

Apart from the Bulungan store, there is a 7-Eleven also in Kemang, South Jakarta; Menteng, Central Jakarta; Matraman, East Jakarta; Teluk Betung, Central Jakarta; Cipete, South Jakarta; Mampang, South Jakarta and Terogong, South Jakarta.

When the Jakarta Globe visited the Menteng store it was selling a range of goods such as cigarettes, soaps and detergents, as well as apart from ready-to-eat-foods and beverages.

A kiosk owner nearby the Teluk Betung 7-Eleven said the store had hurt his businesses. “Before the store opened, I could earn about Rp 500,000 ($55) a day, said Aman, 40. “But during the last three months my income has dropped to only Rp 300,000 a day,” he said.

He said the 7-Eleven’s purchasing power meant it could undercut him on items such as cigarettes. “The price difference may not very large, only about Rp 500 per pack. But it’s still some money, and buyers look for the lower prices. A small vendor like me cannot compete on price.”

Imun, 19, the owner of a kiosk near the Bulungan 7-Eleven, said his income had fallen from around Rp 1,000,000 to Rp 800,000 a month since the 7-Eleven opened. After school, students used to hang out around his kiosk, but now they prefer to go to the 7-Eleven, Imun said.

License worries notwithstanding, Aman and Imun’s experience looks set to be replicated around Indonesia as Modern Putra is planning to roll-out more 7-Elevens around the country.

Neneng said the plan was to convert many of Modern Internasional’s photographic retail outlets into 7-Elevens. “We have around 80 Fuji Image Plaza outlets and 60 M Studio outlets in Jakarta. Not all of them can be converted, because of their locations.

“ I cannot tell you how many we will convert this year. But eventually at the right time we will also offer 7-Eleven franchises to the public and our business partners.”