Magazines Archives - 2007 January

Indonesian retailers enjoyed buoyant 2006
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RETAIL sales in Indonesia would reach Rp50 trillion (US$5.55 billion) in 2006, a 20% increase over 2005’s Rp42 trillion, projected Handaka Santosa, chairman of the Indonesian Retailers Association (APRINDO).

Handaka said the buoyant growth could be attributed to comparatively better macro-economic conditions, which also contributed to business expansion at major department stores.

Local and foreign franchising outlets have also seen increases in the year gone by. According to a report from the Indonesian Franchising and Licensing Society, the number of foreign franchising outlets increased by about 8%last year, compared with a stagnant growth the year before. Local franchise outlets, too, expanded by about 13%.

The country also welcomed new brands in the past year, including Topman, Topshop and Debenhams, brought in by retailer PT Mitra Adiperkasa (MAP).

Retailers have reported spikes in sales, in keeping with the Indonesians’ rising purchasing power. Matahari, Indonesia’s largest retailer, saw sales increase Rp5.7 trillion in the first nine months of 2006, 25.1% higher than in the same period in 2005, driven by the company’s supermarket and hyper-market divisions.

Comparatively, sales for the period at MAP grew by 17% to Rp2.37 trillion. It now operates 448 stores with a total of more than 200,000sqm selling space in the country’s major cities.

Indonesian consumer confidence also surged in November to a 17-month high, revealed data from Bank Indonesia. The survey, which polled respondents in 16 cities, said the consumer-confidence index rose to 101.6 last November, the highest since June 2005. (A reading above 100 indicates optimists outweigh pessimists.)

The bank has projected that lower borrowing costs and higher investment will encourage customers to spend, eventually contributing to a projected 6.1% growth in the economy this year. The economy grew 5.5% in the three months to last September 30, the fastest pace in five quarters.

A Stevanus Ridwan, director of property developer PT Pakuwon Jati, pointed out that Indonesia’s retail industry has room to grow, with a positive outlook for the year ahead.

Speaking at a seminar on mall and shopping-centre development in Jakarta, Stevanus called on the Indonesian government to fix the nation’s chaotic transportation and develop infrastructure to boost the retail scene to make it more competitive.

Hailing Singapore for continuing to be a very cost-effective place for Indonesian consumers to shop because of its services to tax refund, he said the Indonesian government could further help the industry in Indonesia by reviewing local tax laws and government charges on retail sales and services to make these more attractive for shoppers.

According to an estimate by the Indonesian Shopping Centre Developers Association (APPBI), Indonesian shoppers could have spent up to Rp8 trillion (US$884 million) last year in Singapore, up from the Rp6 trillion recorded in 2003.

Furthermore, much can be done to revive Indonesia’s tourism campaign, which, in Stevanus opinion, lacks focus, despite its slogan, “Indonesia, Ultimate in Diversity”. He compared the situation to that in Singapore and Malaysia, noting that the two neighboring countries are very serious about promoting their land.

The retail industry in Indonesia has the potential to grow. According to Stevanus, 50 of the 90 modern shopping centres in the country are located in Jakarta. This works out to a ratio of one mall to every 372,000 inhabitants. This stands in contrast to Bangkok’s ratio of one to every 171,000 inhabitants.

Stevanus recommends that the Indonesian government provide legal certainty, reduce the cost of electricity, gas and water, and eliminate unnecessary charges to lure more investors to the nation’s retail sector.