Many retailers opt for closure as purchasing power plummets

JAKARTA (JP): An increasing number of retailers affected by the recent riots are expected to close their outlets as people's buying power continues to weaken.

Bayu Utomo, the head of research at property consultancy PT Procon Indah/Jones Lang Wootton, said that due to declining consumer spending, more and more retailers are preferring to close outlets while waiting for the economic situation to improve.

"Many retailers selling imported goods, especially fashion goods, are likely to terminate operations in Indonesia," Bayu said.

The retail sector weakened significantly during the first 10 months of the monetary crisis and then deteriorated further in the wake of the recent political and social unrest, Bayu said.

Damage to buildings during the May riots in Greater Jakarta has reduced retail space by approximately 280,000 square meters (sq.m.), according to the consultancy.

Bayu said a recent survey by his company showed that seven retail centers in Jakarta, covering 122,000 sq.m. or approximately 10 percent of the city's total retail center space, were looted, damaged or burnt and have been closed.

The affected centers are Menteng Prada in Central Jakarta, Plaza Central Klender and Plaza Jatinegara in East Jakarta, Plaza Kebayoran in South Jakarta, Mal Daan Mogot, Plaza Glodok and Plaza Slipi Jaya in West Jakarta.

The company said that rioters also destroyed five shopping centers with a total space of 158,000 sq.m. outside Jakarta. The worst damage was in Tanggerang, where only Plaza Bumi Serpong Damai and Plaza Tanggerang were unaffected.

Shopping centers affected in Tanggerang include the Lippo Supermall, Mal Permata Cimone, Toserba Sabar Subur, Mal Diamond and Kota Belanja Cimone Indah.

Greater Jakarta was paralyzed on May 13 and May 14 as thousands of people damaged and burned thousands of buildings and vehicles and looted the contents of the destroyed properties, mostly malls.

The Indonesian Retail Merchants Association (Aprindo) has estimated that Indonesian retail stores in and around the capital may lose about Rp 600 billion (US$40 million) from the two days of looting, rioting and arson. However, this tentative estimate does not include business lost from subsequent closures.

Utomo said that of the centers in Jakarta which were damaged by the riots, only Menteng Prada has confirmed it is reopening, in the third quarter of this year.

"Those gutted by fire will require six to 12 months for reconstruction, although many are unlikely to commence repairs in the short term given the weak economic situation, unless full insurance payouts are forthcoming," Bayu said.

Procon Indah's surveys show that some electronic retailers, particularly former occupants of Jakarta's electronics center in Glodok Plaza, plan to reopen in neighboring shopping centers such as Mal Mangga Dua, Dusit Arcade and Plaza Gajah Mada.

Some are already fitting out new premises and are expected to commence trading within the next three months. (gis)