As most countries in Asia, Indonesia’s retail also relied on traditional-oriented market. However, in the recent years, Indonesia had a visible growth in modern retailing. The growth and trend in modern retailing was fueled by the rising middle class, higher consumer confidence, rising personal income and with the majority of its population being more conscious and inclined to imported brands.
Traditional markets still continue to dominate the retail sales at 83.25% and modern retailing accounting for the other 16.25% (supermarkets, hypermarkets and convenience stores) on 2015 according to the latest data by Euronomonitor. However, growth on the number of outlets for traditional market is comparatively low to the growth posed by modern retailing outlets. The growth in traditional market by 2015 accounted only to .2% while the modern retail channels had significant growth – supermarkets at 2%, hypermarkets at 7.70%, and convenience stores at 15.3% also on the same year.
Convenience Stores hold the largest sales among modern retailers accounting to 104.6 trillion IDR followed by Supermarkets with 66.2 trillion IDR and Hypermarkets with 42.9 trillion IDR, all in 2015.The three store formats posed continuous growth within the past years indicating that modern retail in Indonesia is a trend accepted more and more every year.
Though traditional markets had been the center of retail activities in Indonesia for years, big malls, supermarkets and convenience stores are quick to replace this retail channel as they show convenience as well as entertainment.
Expansion of Indonesia’s modern retail started in 1999 when the government allowed Carrefour, a French retailer to expand its operations in the country. As of today, the company is locally owned and operated by Trans Retail under the name of Trans Mart with 92 branches nationwide. More modern retailers from different countries followed and made their entry in Indonesia – Lotte Mart from South Korea which has now 43 outlets, Hero from Hong Kong which has now 35 outlets and the latest entry is on 2015 with Aeon Supermarket from Japan. Local major retailers still prevail in the retail landscape. Most notable among the local major retailers are Alfa Midi with 1,022 outlets, Giant with 172 outlets, Lion Superindo with 136 outlets and Hypermart with 112 outlets. Some of the companies operate various store formats: hypermarkets, super markets and mini groceries.
Convenience Store are expanding rapidly in Indonesia every year. The introduction of 7/11 in 2009 paved way for more outlets to expand throughout the country. Indomaret is a local convenience store holding the most number of outlets nationwide. As of today, Indomaret operates13,099 stores. This is followed by Alfamart with 11,115 stores and the rapidly expanding Circle K which has now 500+ stores.
Supermarkets and convenience stores did not only grow but also developed. Top supermarket retailers have wide assortments of imported products that are readily available for locals and foreigners in Indonesia. One of the primary reason why foreign nationals won’t find it hard to shop in the country.
Besides the wide assortment, both local and imported products, supermarkets and hypermarkets also have in-house bakery and a food-to-go section, making every shopper’s need available in one roof.
As stated in the data above, convenience store shows the largest growth among all the retail channels in the country. Approximately, there are 25,278 convenience store/minimarket outlets constituting to a 15.3% growth rate on the number of outlets in Indonesia (Euromonitor, 2015). The growth of convenience stores is a trend observed in other Asian countries as well. In the Philippines for example, the growth rate in convenience store outlets is at 20%. However, the real store count falls far behind compared to that of Indonesia as it only has approximately 3,687 outlets according to the same source. The success of convenience stores in Indonesia could be attributed to the fact that there’s a higher population density among its major cities, notably in Jakarta. Higher population density poses higher demand for convenience as most people would prefer to shop on mini groceries or convenience stores in every street corner than spend more time in the usual traffic jam and extra budget to pay for fare going to supermarkets or shopping centers.
Moreover, it is also worth noting that convenience store channel in Indonesia doesn’t only increase in number but also innovate. More than just a place where people can complete their basic purchases, a standard convenience store in Indonesia also serves as a place where people can transact different services such as bills payment and money remittance center. Their convenience stores are also equipped with ATM Machines inside where people can easily withdraw cash from their cards. Taking a “one-stop-shop” to a new level, most stores have wider dining areas where a free wifi can be accessed.
Promising potential in Indonesia’s E-Commerce
E-Commerce also has a very promising potential in Indonesia as it is the country with the most mobile internet subscription among its neighboring Asian countries. It has a 172% growth rate far from 121% of Cambodia. Philippines falls far behind at 42%. More and more people are relying on online stores to make their purchases as a greater part of Indonesia’s population are in their 30s and busy with daily work.
Another great development in the retail landscape of Indonesia is that modern retailing is not only concentrated in its capital city. Malls, supermarkets and convenience stores are spreading significantly throughout the East Java, North Sumatra and North Sulawesi as well.
The evident growth in Indonesia’s retail sector is characterized not just by high rise buildings of retail stores and the growing numbers of convenience stores in every street. It can also be reflected upon the consumer spending, consumer behavior and trend which relates to the population being more inclined on imported brands. As retail sales figures continue to soar high, Indonesia is a promising place for foreign investors. The modern retail sector in the country holds huge potential for consistent growth. Competition among retail channels will also encourage further expansion among major retailers. However, it is certain that modern retail will continue to prevail and will soon dominate the market share in Indonesia as the income of people increases along with the demand for convenience.