The food-retailing sector in high income countries is stagnating, while in developing regions such as Brazil, India, China, Southeast Asia, Eastern Europe and parts of Africa it is up-and-coming. This also aff ects the structure of the food stuffs that are in demand. The consumption of commodities such as rice and wheat is reduced in favour of dairy products, fruit, vegetables and fish.
Indonesia’s retail sector has been growing at a rapid pace since 2005 in line with the growth of the middle class. After sluggish growth of 5% in 2009, 2010 saw sector growth of 12% with 15-20% expected for 2011. Traditional retail habits that saw local markets as the centre of activity have been quickly replaced by that of malls and hypermarkets that offer convenience as well as entertainment. Partnerships among banks and the retail sector to offer incentives and consumer credit is also fuelling spending. Existing local and foreign companies are entering into ambitious expansion plans to gain a stronger foothold in secondary cities and developing regions throughout the country. Thus, competition in the sector is getting more intense as foreign companies seek to move in on the country’s huge retail potential and low penetration rate.
Since 1998, foreign companies were allowed into Indonesia’s retail sector which saw the entrance of the French multinational, Carrefour in the same year that has 64 hypermarket outlets to date (2011). Other players followed suit such as South Korea’s Lottemart and Japan’s Sogo in department stores. Foreign companies exist alongside large scale local retailers such as Matahari which is Indonesia’s largest retailer by market Global Business Guide Indonesia – 2012 value, Indomarco Prismatama and Hero Supermarkets. Hypermarkets have gained popularity in the modern retail sector since their introduction in 2003 and are now accounting for over 40% of the sector’s sales. Carrefour holds the leading market share at 40% for 2010 followed by Matahari’s ‘Hypermarket’ chain that has 52 outlets and Hero’s Giant chain. Changing lifestyles will see their dominance continue to gain strength as they offer a combination of convenience and low prices that appeal to Indonesian consumers.
Traditional markets still account for around 60% of total retail spending throughout the country as modern retail facilities are heavily concentrated in Java. This is expected to gradually decrease in line with the expansion plans of retailers and retail property developers to go into the regions outside of the main urban centres of Java and beyond. Carrefour announced plans in 2011 to open an additional 20 stores a year for the coming years. Matahari, following its decision to not sell its hypermarket business at the beginning of 2011, has announced plans of 17 new Hypermart stores with focus on provinces in Eastern Indonesia such as Papua. Lotte Mart, which came into the market by acquiring local retailer Makro Indonesia in 2008, is planning on opening 30 new hypermarkets by 2015. Mini market and convenience store chains also have ambitious targets to ride the retail wave. Sumber Alfaria Trijaya’s Alfamart chain that has 4,853 stores across the archipelago plans on adding a further 800 outlets while main rival Indomaret is targeting 800 new stores for 2011 to bring their total franchise portfolio to 5,755 stores.
As retail sales figures continue to soar to an estimated $513 billion USD by 2015 (EIU), the banking sector has been quick to tap into the potential benefits. Indonesia’s modern retail sector holds huge potential for future growth, particularly in the hypermarket sector as well as department stores and speciality outlets. It is however certain that the modern retail outlet is very much here to stay in Indonesia and will continue to grab market share from that of traditional markets as incomes rise and increase the demand for convenience.
Global Business Guide Indonesia – 2012