Jakarta: A 'paradise' for shoppers
Indonesian retail is booming. Jakarta, with over twelve million people, is sprinkled with glittering new malls. World- class retail chains are rushing to set up outlets here to tap the spending power of the growing middle class. The Jakarta Post took a look at what is really happening. The following report and three related stories on Page 6 were prepared by Arief Suhardiman, I. Christianto, Dwi Atmanta, Johannes Simbolon, Meidyatama Suryodiningrat, Stevie Emilia and Yoko N. Sari.
JAKARTA (JP): Pasar Pagi Retail Center and the Jakarta International Trade Center in Mangga Dua area have undergone a phenomenal transformation.
From crummy and disorderly wholesale centers six years ago, they have become modern shopping centers.
Foreign tourists come on the weekends to buy clothes, electronics, and accessories. Many branded goods sold there are cheaper than in Singapore, the region's shopping paradise.
Even former president of the Philippines Corazon Aquino shopped there when she was here on an official visit several years ago.
Shopping in Indonesia? Some years ago, shoppers might have shaken their heads and gone overseas to buy international brands.
One of the first modern malls in Jakarta, Ratu Plaza, was built 15 years ago but international brands were barely visible until Japan's Sogo opened its department store in Plaza Indonesia in 1990.
Soon many major retailers were vying to serve the growing middle and upper class: Britain's Marks & Spencer, Japan's Seibu and Maruzen, Wal-Mart and J.C. Penney of the United States, French Carrefours, Singapore's Robinson & Co. and Metro.
Warner Bros from the United States, Printemps of France and Hanshin Department Store of Japan have committed to opening Indonesian outlets within the next two years.
Over a dozen world class fashion boutiques have also opened up here. They include Gucci, DKNY, Issey Miyake, Escada, Kenzo, Versace, Armani, Guess and Esprit.
The Presidential Decree No. 54/1993 bars foreign direct investment in the retail business. Foreign chains may only operate in Indonesia in the franchising system, where the Indonesian franchisees use the name and technical know-how of the foreign franchisers for a 1 percent fee.
Domestic retailers, like Matahari, Golden Truly, Ramayana, Pasaraya, and others have also developed but are facing an uphill struggle.
"Indonesia's retail business is the throes of revolution," said Kustarjono Prodjolalito, executive director of the Indonesian Retail Merchants Association.
In less than a decade, scores of modern supermarkets, malls, shopping centers, department stores, and super-malls were built.
According to PRoLEASE Property Consultants, Jakarta's shopping centers covered 1,490 000 square meters at the end of June 1996. By the year 2000, that is set to reach 3 million square meters.
International brands have gradually filled the domestic market. Some of them are sold for less than elsewhere in Asia because they are manufactured locally, while others are more expensive due to high import duties.
Great River Industries, for instance, holds the licenses for 50 international brands, including Triumph, Arrow, Kenzo, Choya, Cerrutti, Jockey, Hom, Mickey & Co. (Disney), Elle and Grand Slams. Approximately 70 percent of its products are sold in the domestic market.
Yet Indonesians continue to shop abroad.
The Singapore Tourist Promotion Board recently revealed that about a million tourists from Indonesia come to the island state every year, the second largest group after Japanese tourists. Indonesians make up the largest group of visitors during the Great Singapore Sale which takes place during the mid-year holiday.
Indonesians average 3.7 days in Singapore and spend S$746, above average.
Many branded goods sold in Singapore are cheaper than in Jakarta. But cheap prices don't seem to be the main reason for Indonesians to shop abroad. Indonesians are very import-minded, prefer famous foreign brands to local products and don't even trust the quality of foreign brands made in Indonesia.
Safioen, a director of Great River Industries, said they only sew "Made in Indonesia" into products to be exported to the U.S. and Japan. The ones to be sold in Indonesia don't get any labels.
"If we sewed in labels here, people might not want to buy the product," he said.
But many Indonesian businessmen are optimistic.
Ciputra, active commissioner of Jaya Group, which owns Cahaya department stores, says Jakarta will be able to compete with Singapore as the shopper's paradise in the region when the ASEAN Free Trade Area starts in 2003.
In the AFTA era, he said, the goods in Jakarta will be cheaper than in Singapore for several reasons: many are manufactured in Indonesia, import duties will decrease, rental fee for space and wages in Jakarta are cheaper than in Singapore.
Kustarjono said that low price are not everything for shoppers. Other factors are convenience, service and infrastructure.
"How will tourists want to shop in Indonesia if they know that they will first have to be cheated by taxi drivers at the airport. In Singapore, they don't face the same problem," he said.
The fact that the shopping centers are isolated, unlike in Singapore where they are clustered, also discourages people to shop here, he said.
"If people want to shop in Singapore they go to Orchard Road and find lots of shopping centers there. Here, they find a small number of shopping centers in Blok M, some in Mangga Dua, and some others in Lippo Karawaci. They have to move from one place to another," said Kustarjono.
Meanwhile, Anton Lukmanto, a director of the Hero Group, a supermarket chain, said that government and retailers should work hand in hand not only to improve professionalism in the retail business but also to prepare regulation.
"Better regulation is necessary. The regulator has to be able to define what the retail business is."
"In the meantime, the number of shopping centers is growing only in Jakarta and Surabaya. What about other cities?" he said. "We have to improve local retail management."
Destination
Minister of Tourism, Post and Telecommunications Joop Ave told The Jakarta Post that Jakarta is indeed a destination for shoppers.
"Jakarta will become one of the capitals of fashion and shopping," he said.
He said that the government and the association of retailers, shopping centers and hotels should coordinate and help each other.
"We don't have to wait until 2003. Jakarta is ready."
Other cities in Indonesia also have potential. "For instance, from Oct. 15 to Nov. 15, Surakarta in Central Java will host a great sale, a trade fair offering traditional and local products. Hotels will offer discounts of between 30 percent and 50 percent. If successful, the event will be held annually."
Meanwhile, chief of the Jakarta office of the Ministry of Tourism, Post and Telecommunications, Pudjo Basuki, told the Post that there should be more choice.
"For example, more shops offer traditional products such as wood carvings from Jepara (Central Java) or pearls from eastern Indonesia."
He said that service must also be improved.
"I understand that many electronics shops in West Jakarta lack qualified personnel to describe the computers they sell."
Pudjo said that packaging is also important. "Most overseas chocolates, for instance, are expensive and attractive because of the wrapping."
According to Pudjo, Jakarta at the moment is the only city ready to become a shopping destination.
The capital, which is holding an annual shopping festival between June and July, has a lot to offer.
"If you are looking for traditional products, go to Jakarta or where the goods are produced."
He said that the annual shopping festival in Jakarta needs improvement. "Shopkeepers must be more honest. They should not raise the prices before offering a 50 percent discount."
He also said it is also important to study changing trends.
"At present, the tourists mostly come from East Asia, not Europe. So we have to study the tastes of visitors from the area," he said.
Foreign tourist arrivals in Jakarta between January and August this year increased by 22 percent to some 1.5 million. In the same period last year the growth rate was just 8 percent, he said.