Despite its high population and large economic size, Indonesia is among the least attractive countries for foreign retailers to invest in, according to a survey conducted recently by management consulting firm A.T. Kearney.
Speaking here Wednesday during a seminar on retailers' distribution, A.T. Kearney vice president John Kurtz said that Indonesia was not as attractive as India, Russia or China because of its tougher economic and political challenges.
"One of the key factors for modern retailers to decide whether to enter a new market or not is the consumers' readiness," he said. "This comprises the spending capability of young consumers, the willingness of the old generation to try a new retail format and the influence of Western culture on the people."
Indonesia ranks the 24th among 30 countries in Asia, Europe, America and the Middle East surveyed by the U.S.-based consultancy.
India ranks first in the survey, followed by Russia, China, Vietnam and Ukraine, while Columbia is in the lowest place after Argentina, Lithuania, Romania and Hungary.
The survey shows that Indonesia, despite its huge population, has only a small number of potential customers because the people still prefer to shop at traditional markets.
Traditional markets are still frequented because they are located around residential areas and offer cheaper prices on fresh food products.
Kurtz said that the unstable political situation and unclear regulations made Indonesia less favorable for foreign modern retailers to enter.
Like A.T. Kearney's survey, an AC Nielsen's study also indicated that traditional grocery stores still dominated Indonesia's retail sector.
Director for retailer service at AC Nielsen Indonesia Yongky Susilo told a seminar on consumers here on Tuesday that unlike trends in Asia's developed countries, traditional grocery stores still dominated 65 percent of the marketplace in Indonesia.
He said that in Asia's developed countries such as Singapore, Taiwan, and Japan, modern retailers, which were getting smaller in number but getting bigger in size, dominated more than 80 percent of the market, while in developing countries, modern retailers controlled a share of only less than 50 percent.
"Even though there is change in consumer shopping habits, from traditional to modern markets all over Asia, the number of traditional stores is still high," said Yongky.
According to data from AC Nielsen Indonesia, the total number of traditional stores in Asia is 12 million while the number of modern stores is 232,000.
The AC Nielsen survey shows that despite its dominance, the growth of the traditional store is slower than that of modern retailers.
The number of traditional grocery stores in Indonesia grew by 3 percent to 1.84 million in 2006 from 1.78 million in 2005. Meanwhile, the number of modern stores such as convenience stores, hypermarkets, warehouse clubs, minimarkets, and supermarkets by 14 percent to 8,918 stores from 7,839.
Yongky added that the growth of modern grocery stores in terms of number of goods being sold within the last 12 months was also higher than traditional stores. The sales of 51 categories of fast moving consumer goods, for example, grew by 23 percent in modern stores and only by 9.6 percent in traditional stores.
The growth of modern retailers in Indonesia, said Yongky, was triggered by the expansion of mini markets such as Alfa Mart and Indo Mart, and also by bullish advertisers, mainly in newspapers. behind in competition, said Yongky. (12/02)