|Title:||Indonesia annual retail sales in rupiah and percent change for 2007 to 2011|
|Source:||Indonesian Commercial Newsletter|
Start of full article - but without data
Total retail sales, 2007-2011 *
Year Sales (Rp trillion) Growth (%)
2007 XX.X -- 2008 XX.X XX.X 2009 XX.X XX.X 2010 XXX.X XX.X 2011 * XXX.X XX.X Average growth XX.X
Sources : Aprindo, ICN processed
Note: * estimate
In 2009, another foreign retail company, the Lotte Group, from South Korea began operation in Indonesia after acquiring Makro from SHV Holding of the Netherlands at a price of US$ XXX million. The name of Makro was changed with Lotte Mart. The Lotte Group, which started retail business in 1979, operates more than XX outlets in various countries such as China, Russia, Vietnam, and India.
Competition in retail business is getting sharp after XX% of the shares of Carrefour Indonesia, the largest hypermarket in the country were acquired by CT Corporation, a subsidiary of the Para Group at a price of US$ XXX million in 2010. The Para Group, which is owned by Chairul Tanjung, an Indonesian business tycoon, already has big units in various business areas such as television, banking, insurance and financing sectors.
In the past five years , the assets of retail business in the country has increased rapidly to follow the growing number of the outlets to reach XX,XXX units in 2011 from XX,XXX units in 2007. The Indonesian Association of Retail Companies (Aprindo) said the retail business in the country grew XX%-XX% per year. Retail sales in 2006 were valued only at Rp XX trillion, but in 2010, the value shot up to Rp XXX trillion. In 2011 the value is forecast to rise further by XX%-XX% to Rp XXX trillion with the fairly strong purchasing power of the people. Hypermarkets lead in income followed by mini-markets and supermarkets.
Indonesia with a population of XXX million is a potential market for retail business. In the past ten years, business in modern retail in the forms of hypermarket, supermarket and mini-market has been mushrooming, marked with the construction and operation of new shopping malls in large cities. Big retailers such as hypermarkets and department stores have become anchor tenants attracting visitors and shoppers. Modern retailers especially supermarkets and mini-markets have even expanded to smaller cities in district areas. Currently modern retail business has grown in suburban areas with the growing number of residential complexes built in city's outskirts.
With the government policy allowing foreign investment in retail business as regulated under the presidential decree No. XXX/2000 foreign retailers began to enter the country. The interest shown by foreign retailers indicates that the business is highly profitable. The operation of foreign retailers, however, has brought a threat to the local retailers. Foreign retails have operated not only in Jakarta, but also in other large cities. Carrefour, for example, has in the pasty five years opened outlets in Yogyakarta, Surabaya, Palembang and Makassar. Now, however, license for mini-markets in Jakarta is no longer easy to come.
The condition has encouraged local retailers, which already established their foothold in the market such as the Matahari Group, which was earlier strong in department store business, to expand heir business by opening their own hypermarket outlets. Hero, which was earlier a leader in supermarket business, has also opened its own hypermarket outlets. It even changed some of its supermarket outlets into hypermarkets.
Currently, modern markets have a XX% share of retail sales in the country with traditional markets accounting for XX%, indicating that modern retail business still have good opportunity for expansion Currently operations of modern retailers have expanded to areas out side Java including Sumatra, Sulawesi, Kalimantan and Maluku. Big retailers like Carrefour and Giant have wider market compared to their competitors as in addition to operating in hypermarket they also compete in supermarket business.
More foreign retailers are expected to venture in Indonesia in the coming years especially with the country's economic stability and improved business climate. Competition, therefore, is expected to be sharper forcing players to find an effective strategy to survive.
Structure of business in modern markets
Retail business has grown attracting global investors in Indonesia. They are superior financially, in management and networks. They have changed the map of retail business in the country in the past five years.
Modern retail business began to enter the country in early the 1980s drawing middle to high class customers. Leading traditional market centers like Pasar Cikini and Pasar Santa in Jakarta began to lose their rich customers.
Supermarkets grew aggressively in early the 1990s at the expense of traditional market centers. Supermarkets quickly mushroomed in the Greater Jakarta area and other larger cities in Java.
In the middle of the XXXs, supermarket began to face competition from hypermarket with the operation of Makro (now Lotte Mart). Modern market format of Makro is different from supermarket especially in the size of plot of land occupied, the varieties of goods offered. Hypermarkets could offer goods with cheaper prices as they buy goods from suppliers in lower prices. They are given higher price discount with larger purchases from suppliers.
At the same time small supermarket with the format of mini-market grew coming as new potential competitors for larger supermarkets. The two formats of modern market have wide and strong networks chains. Mini-markets offer competitive prices and conveniences. Mini-markets have the advantage of being closer to customers as they could operate in smaller housing complexes and residential areas.
Among leading mini-market chains are Indomaret and Alfa. They are dominant in this sector. In relatively short time they quickly mushroomed into giant chains in number of outlets.
The most difficult time for supermarket probably came when Carrefour hypermarket from France started operation in the country. Carrefour opened large outlets offering goods in cheaper prices. Carrefour opened outlets in strategic areas and attracted mainly middle to high class customers at the expense of supermarket.
With the sharp competition from hypermarkets and mini-markets, Hero, which was the supermarket leader, began to change its positions. It opened its own hypermarket outlet in joint venture with Giant Retail Sdn Bhd of Malaysia. Aware that Jakarta has been too crowded where Carrefour has dominated the market in strategic areas, Giant chose to establish its foothold first in Surabaya and Tangerang, which had no hypermarket yet. Hero also established its mini-market chain called Starmart.
Not all supermarkets survived the growing competition Supermarket Tops of Aholds from Belgium, which operated mainly in West Java, almost collapsed and was finally acquired by Hero.
Modern retailers are growing to meet the market demand. The format of modern market may change any time. There has been no standard set for retail business in Indonesia.
The main formats of modern retail business in the country are hypermarket, supermarket, mini-market or convenience store, department store, and specialty store.
Hypermarket, supermarket, and mini-market are generally the off springs of wholesalers and traditional markets. Therefore, hey are called modern markets. The main differences between modern and traditional markets are in the size of plot of land occupied, range of products and convenience in services. .
Modern markets referred to in this reports are limited only to hypermarket, Supermarket and Mini-market.
Hypermarket was the form of big modern market. Hypermarkets are housed in more spacious buildings and offer greater varieties of goods. The hypermarket concept was first introduced in the country by Carrefour from France. Wholesaler Makro is included in the category of hypermarket as Marko has format almost the same as hypermarket. Makro, however, has different market targets as it offers goods to big buyers such as restaurants, hotels and catering. It would not offer goods to individual customers.
A hypermarket has more than cashiers and sells at least XX,XXX items of daily necessities like electronic products, and furniture. Carrefour even sells XX,XXX types of goods in each of its outlets, Giant XX,XXX-XX,XXX types. Makro, however, offers only around XX,XXX types. Macro's prices are lower as its offer goods only to large buyers. For example, it offers toothpaste at a cheaper per unit but a buyer is required to buy at least a dozen. Its customers, therefore, are owners of small shops, stores, hotels or restaurants.
Supermarket has started operation in the country before hypermarket was introduced. Supermarkets offer self service for its customers.
Mini-markets also known as convenience stores are an off spring of notions stores and offer convenience and similar services as offered by supermarkets but in smaller scale.
Number of outlets
In the past five years, the number of retailer outlets in Indonesia has increased XX.XX% a year on the average. In 2007, the number of retail business in Indonesia was recorded only at XX,XXX units, but in 2011, the number has shot up to XX,XXX units in various cities in Indonesia.
The outlets of hypermarket grew in number from XX units in 2007 to XXX units in 2010. By the end of 2011, the number is expected to grow further to XXX units.
On the contrary, the number of supermarket outlets has tended to decline from X,XXX units in 2007 to X,XXX units in 2010. Some of the outlets have been closed because of sharp competition from mini-market. In addition, some of the supermarket outlets have been converted into hypermarket outlets.
The increase in the number of retail outlets is attributable mainly to strong growth recorded in the number of mini-market outlets. In 2007, mini-market outlets totaled X,XXX units--up to XX,XXX units in 2010. The number is expected to increase further to XX,XXX units in 2011. Indomaret and Alfamart are the largest chains of mini-markets which offer franchise system.
The largest in Jakarta
Most modern markets including local and foreign companies are in Java, which is home to most of Indonesians and the largest business center in the country
In 2010, the number of modern market outlets in Jakarta and satellite cities (Bogor, Tangerang, Bekasi, Depok) make up XX.X% (X,XXX outlets) of the total number, West Java XX.XX% (outlets), East Java XX.XX% (X,XXX outlets), Central Java XX.X% (X,XXX outlets). Sumatra has the second largest number making up around X.X% (X,XXX outlets) of the total number.
Jakarta has the largest number of modern market outlets for all formats in 2010, the country had XXX hypermarket outlets and XX units of them were in Jakarta. Jakarta had XX% of the number of supermarket outlets and XX% of mini-market outlets.
The number of hypermarket outlets have been considered too many in Jakarta, therefore, in June 2006, the city administrations revised the regional regulation No X/2002 on private modern markets.