Large retailers see strong growth ahead

Large retailers see strong growth ahead

Viva Goldner, The Jakarta Post, Jakarta

Three of Jakarta's largest retailers have expressed confidence in
Indonesia's economic future, backing the government's prediction
of strong consumer spending in 2002.

Makro president Simon Collins said the company increased its
market share last year, through higher sales of food products in
particular.

"When you look at the GDP per capita in Indonesia, it's quite
low. But sales here last year continued to be strong. They were
strong the previous year as well - we certainly got double digit
growth in real terms," Collins said in an interview on Wednesday.

Carrefour asset and development director Agus Alwie said the
company's eight stores were observing a trend of increased sales
across most product lines, while The Club Store general manager
Rudy Suwandi said growth in 2002 would be primarily driven by
middle to upper-class consumers.

"We hope to gain an increase in sales this year, but it
depends on the political and economic situation of Indonesia,"
Rudy said.

The government aims to reduce inflation to nine percent from
last year's high of 12.55 percent, with domestic conditions
central to its forecast of 4 percent economic growth.

Collins said the current pace of reform bodes well for the
country's retail sector, despite concerns over the impact of
regional autonomy on Makro, a company with half its 12 stores
located outside of Jakarta.

"Makro are very confident in the long-term future of
Indonesia, although that confidence is shaken every so often,"
Collins said.

"With power going to the regions, it gives the possibility
that we have six different tax regimes, and that is obviously
difficult to cope with."

All three retailers stressed the importance of creating a
favorable legal environment through regulation and accountable
institutions.

Agus said the government needed to provide incentives for
investment in the country's retail sector in order to facilitate
future consumption.

"Although exports are still very important, spending by the
customer will contribute to creating more production, and
ultimately the wheel of the economy will turn faster and faster,"
he said.

Agus acknowledged that recent hikes in fuel and electricity
costs would most affect those in lower- to middle-income
consumers, who represented a significant proportion of
Carrefour's clientele.

"We have already seen in the first month of 2002, spending
habits are down due to the impact of higher prices for basic
commodities," he said.

With Bank Indonesia forecasting weak consumption and higher
inflation, Collins conceded Makro would need to absorb costs in
order to achieve 15 to 20 per cent growth in like-to-like sales
this year.

"The companies that will win are those that get more and more
efficient in their operations - you have to be a low-cost
operator in Indonesia. We will be making further savings on our
operational costs this year, which will enable us to lower our
margins, and to sell things cheaper," Collins said.

He said the country's manufacturing sector also had to improve
production and curb hoarding practices.

"One of the problems throughout the year has been supply,
rather than demand. Supply and logistics are still quite
difficult, and I think a lot of the manufacturers are certainly
not meeting our requirements in terms of supply," Collins said.

While the country faced considerable challenges, Rudy said
prospects for Indonesia's retail sector were bright.

"The Indonesian retail market is very big - we have over 200
million people here. So, if political and economic security is
restored, there is going to be a lot of retail activity coming
in," he said.

Makro plans to open three or four new stores this year, while
Carrefour will open two, and The Club Store will add another
outlet to its existing two in 2003.