Indonesia’s Retail Sector Taking a Leap on Global Retail Development Index

July 5th, 2016

By - CEM Team

As per the AT Kearney’s 2016 edition of index, Indonesia has jumped up seven positions to rank no. 5th in the world in the Global Retail Development Index in 2016 from 12th in 2015, indicating the rapid transformation that the country’s retail sector is currently undergoing. The Global Retail Development Index measures the attractiveness of the retail sector in 30 developing economies as well as identifying investment opportunities in these markets. Of these developing economies, China remains on the top followed by India, Malaysia and Kazakhstan.

Indonesia has a large population of 255 million, coupled with a growing internet presence and rapid urbanisation. These factors make Indonesia a lucrative investment destination for retailers all around the world. Indonesia’s growing middle class population is expected to contribute to 10% of the retail sector’s annual growth. Currently, Indonesia’s retail sector is estimated to be USD $324 billion. According to the Indonesian E-Commerce Association, e-commerce transactions worth $24.6 billion are expected to take place in 2016, from $8.2 billion in 2013.

Also, as per the Indonesia Retailers Association, the turnover of this industry in the country is expected to grow 14% year-on-year in 2016 to over $15 billion from $13.2 billion in 2015.

The government opened up the e-commerce industry to foreign ownership if the business value is over $7.49 million. E-commerce is expected to give a boost to the retail sector, given Indonesia’s large smartphone user base. Additionally, the retail sector is expected to be a beneficiary of the government’s plans to improve infrastructure, especially its roads and ports. Owing to these lucrative future prospects, a number of businesses have already planned their foray/expansion in Indonesia.

A brief snapshot of some of the recent actions taken by leading retail companies in Indonesia:
  • Indomaret, a popular Indonesian convenience store chain, plans to open an additional 1600 branches across the country in 2016 to its existing 12,210 stores.
  • Lulu, a United Arab Emirates based hypermarket chain plans to invest $500 million in Indonesia over the next 5 years.
  • In June 2015, Matahari Putraprima launched premium supermarket Foodmart Primo
  • Transmart Carrefour expanded to restaurants, retail chains and entertainment.
  • Happy Fresh raised $12 million to invest into its e-commerce business.
  • Alfamart has now included third party products in their e-commerce website.
  • Kore and Japan based retailer Lotte and Indonesia’s Salim group have partnered to develop an e-commerce business with equal share of investment.
  • Courts Indonesia, whose sales have doubled since they began in 2014, plans to add 4 stores to the existing 5 in 2017.
  • Amazon plans to invest $600 million in Indonesia to build up its e-commerce infrastructure in the country. IKEA, H&M, Courts and Lenovo are among other global retail giants that are planning an expansion of their business in Indonesia. 

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