RI retailers trying to modernize, branch out

The Jakarta Post, Jakarta

Major retailers in the country are planning big expansions of their businesses to get a larger chunk of the country's expanding economy.

Alfamart, a minimarket operator since 1999, is leading the charge by planning to increase its outlets by 80 percent from 1,000 to 1,800 locations in the country.

"The momentum can't be stopped, we have to continue expanding," said Djoko Susanto, a director of PT Sumber Alfaria Trijaya, which owns Alfamart.

The company's ultimate goal is to establish between 5,000 and 10,000 minimarkets here.

The decision to expand, according to Alfamart managing director Pudjianto, "will eventually sideline traditional stores".

Competitor Indomaret, meanwhile, has also revealed its plans this year to open 600 more outlets, boosting its stores to 1,600.

The presence of the modern markets, however, often violate Bylaw No. 2/2002 issued by the Jakarta administration on private markets in the capital, which regulates pricing policies, a minimum distance from traditional markets and cooperation with informal businesses.

Supermarkets and hypermarkets are also planning to rapidly expand their presence, with one of the operators, Hypermart, looking to triple its outlets to 18 this year.

Industry analyst Yongky Surya Susilo of AC Nielsen said the retailers growth plans for this year were "realistic".

"The number of retail outlets in Indonesia, which is (estimated to be) 1.75 million, is the second-biggest in the Asia Pacific after China with 3.2 million," he said.

A study by MasterCard International in February said Indonesia was forecast to top the year-on-year retail sales growth for the first semester with 16.9 percent, compared to China's 12.75 percent.

Yongky explained that Indonesia's consumer spending on 47 major goods increased by 13.8 percent last year.

The Association of Indonesian Retailers (Aprindo) has estimated that total retail sales in 2004 reached about Rp 300 trillion (US$31.6 billion).

The recent fuel price hike, according to Yongky, will not affect retail spending as it was still predicted to grow by between 15 percent and 20 percent this year.

Aprindo data shows that sales in 2,720 modern stores nationwide experienced a 28 percent growth from Rp 35 trillion in 2003 to Rp 45 trillion in 2004.

Yongky said although spending increased at both traditional and modern retailers, the growth at modern retailers was 12 percent higher than at traditional markets.

At the current growth rates, the market share of traditional stores, currently at 70 percent, would drop by 2 percent per year, he said, adding that the strong growth in the modern retail sector was because customers obtained more "service and value" there.

The most recent data from AC Nielsen revealed that the share of consumer spending at modern markets has increased by 40 percent from 21.8 percent in 2000 to 30.4 percent in 2004. (002)