Indonesia Posts 3rd-Largest Modern Retail Sales Growth in Asia
In 2016 Indonesia was the third-largest Asian country in terms of modern retail sales growth after India and China. Last year Indonesia's modern retail sales expanded 10 percent to IDR 200 trillion (approx. USD $15 billion). Roy Nicholas Mandey, Chairman of the Indonesian Retailers Association (Aprindo), said Indonesia remains an attractive country for retailers due to the enormous size of the population. Moreover, due to economic growth this population constitutes a strengthening consumer force. Lastly, Indonesians are known as people who are eager to try and buy new products.
Mandey is optimistic about the retail sector of Indonesia and sees further growth in the years ahead. In 2017 he expects to see a 12 percent growth pace in the nation's retail sales to IDR 220 trillion as Indonesia's gross domestic product (GDP) is expected to continue its recent acceleration, while inflation should remain under control. After five years of economic slowdown, Indonesia finally managed to record accelerating economic growth in 2016 (at 5.02 percent y/y). This accelerating trend is expected to continue in the years ahead and should boost people's purchasing power.
Meanwhile, although there exist some inflationary pressures due to looming administered price adjustments, inflation is expected to rise to 4 percent (y/y) at the year-end. For Indonesian standards this is an acceptable pace of inflation.
The retail sector is also a very stable sector because people simply need items such as food, drinks, clothes and other household goods, Mandey said. This explains why the retail sector is a key sector within any economy (including Indonesia).
According to Mandey, the strategy of many Indonesian retailers in 2017 (in a bid to to boost revenue) will be to expand their stores into the eastern part of Indonesia. This region is much less developed compared to the western part, which also implies the existence of several infrastructure challenges that cause high logistics costs.
Meanwhile, Indonesia is expected to record the largest growth in department store sales - among Asian countries - by 2020. This growth is supported by robust economic growth and the rising number of retailers who are opening new stores across the Indonesian Archipelago.
Research released by Verdict Retail says department store sales in Indonesia will grow strongly in the years ahead, specifically sales of clothes and shoes. Last year the Indonesian government announced it allows foreign investors to own a maximum stake of 67 percent in a department store that has a floor size of at least 400 m2. Reportedly, retailers LC Waikiki from Turkey and Central from Thailand are eager to expand into Indonesia this year.