Retail
Indonesia
Overview
USD Millions 2004 2005 2006 (estimated)
Total Retail Sales 3,500 4,565 5,435
Generated by Local Retailers 2,100 2,739 3,261
Generated by Foreign Retailers 1,400 1,826 2,174
Generated by U.S. Retailers 18 23 28
Note: The above statistics are unofficial estimates, based on annual revenues of 72 APRINDO members
The Indonesian government opened the retail industry to foreign investment in 1998 following the letter of intent, which the Indonesian government signed with the International Monetary Fund (IMF) to revive the Indonesia’s ailing economy. Soon after the 1998 liberalization, many big foreign retailers began to invest in Indonesia. Foreign retailers have been particularly active in the hypermarket sector.
While many business sectors are slowly recovering from the economic crisis, the retail sector is on a rebound. The rapid recovery of the retail industry has been driven mostly by strong domestic consumption, serving as a primary factor to improve Indonesia’s economy. In 2006, total sales of Indonesia’s retail industry were expected to reach $5.44 billion, mainly generated by approximately 5,000 large retail outlets throughout the country.
Competition in the Indonesian retail industry has been very sharp, especially after the entrance of foreign retailers. While some foreign retailers failed and closed down their outlets, many are successful and expanding their business. In Indonesia, there is no regulation governing where a retailer can establish outlets. As a result, many large retailers are strategically located in the heart of Indonesia’s big cities and compete directly with smaller retailers.
Best Products/Services
Hypermarkets
In Indonesia, most hypermarkets are located strategically in heavily populated areas in many big cities. Consequently, hypermarkets attract many customers every day and compete directly with supermarkets and mini-markets. In the near future, the hypermarket business is expected to expand significantly as many major players are planning to open more outlets all over Indonesia.
Mini-Market/Convenience Stores
In terms of total sales turnover, mini-markets do not contribute significantly to the Indonesian retail industry. However, franchised mini-markets have enjoyed substantial growth in recent years. With a comfortable shopping ambience, a complete range of products, competitive prices, and easy accessibility, the mini-markets have been gaining popularity and establishing a solid presence in residential and business areas.
Specialty Shops
Specialty shops have also been gaining popularity in Indonesia as they provide opportunities for customers to compare products from many different suppliers prior to making a purchase. They usually attract serious customers, display their products in an attractive fashion and maintain reasonable prices. Most specialty shops also employ an ample, knowledgeable sales promotion staff that is ready to assist customers. With the proliferation of malls into Indonesia’s secondary markets, specialty shops are expected to expand rapidly and gain market share from other retail competitors. In Indonesia, specialty shops are available in many product lines. Examples are Electronic City (electronic products), Toys R Us (toys), Guardian (pharmaceutical products), and many others.
Opportunities
The presence of U.S. retailers in Indonesia has been significant in the areas of specialty shops and mini markets. Specialty shops like Ace Hardware, Toys R Us, and Athlete’s Foot now have strong presence in Indonesia. In the mini market business, Circle K and AM/PM are the leading foreign companies in Indonesia and have been competing against local companies.
Resources
The Association of Indonesian Retail Business (APRINDO)
E-Trade Building, 1st Floor
Jl. K.H. Wahid Hasyim No.55
Jakarta 10350
Tel (62-21) 315-4241, 391-8545
Fax (62-21) 3192-3267
Email aprindo@cbn.net.id
Contact: Mr. Satria Hamid Ahmadi