Fuelled by e-commerce, Indonesia and Malaysia in top 5 of retail index: Page 2 of 3
By Masyitha Baziad June 8, 2016
As South-East Asia’s largest country, Indonesia sits at No 5 in the GRDI this year, up a few notches from No 12 in last year.
This ascent was thanks to increases in its market size and pressure to enter the market, and slight declines in country and business risk.
“As the world’s fourth most populous country and with a growing middle class, Indonesia is a perennial source of interest to retail investors,” A.T. Kearney Indonesia president director John Kurtz said in an official statement.
“But this year’s jump in ranking shows that Indonesia is finally perceived to be a stable source of growth,” he added.
Kurtz said that Indonesia’s current retail sector is worth US$324 billion, the fifth biggest in terms of value in the GRDI list after China (US$3.046 trillion), India (US$1.009 trillion), Russia (US$448 billion), and Brazil (US$445 billion).
However, the country’s retail sales per capita is still low, at around US$1,270, compared with Malaysia’s US$3,000.
“We see that the spending per capita will grow rapidly in the future, mainly because there is finally a sense of optimism that the shaky infrastructure issue is being addressed,” Kurtz said, referring to the Indonesian Government’s commitment to complete 30 infrastructure projects (including roads and ports) over the next four years.
The increasing smartphone and Internet penetration may also lead to a surge of investments in Indonesia’s e-commerce sector, according to Kurtz.
“We expect to see e-commerce help drive the retail market in Indonesia. We see the investments by the Telkom Group and others in the country’s fibre infrastructure will help,” he added.
Kurtz’s positive outlook is also driven by the recent revision of the negative investment list (known as DNI) that allows for 100% foreign ownership in e-commerce companies with an investment value of Rp100 billion (US$7.6 million).
And although its implementation timeline has been delayed repeatedly, Indonesia’s national e-commerce roadmap also bodes well for the sector, he noted.
As Indonesia’s middle class expands and smartphone use increases, the e-commerce market will gain further traction with both online and traditional retailers.
The A.T. Kearney report also noted how traditional retailers such as Lotte Group and Salim Group are exploring e-commerce as extensions of their physical stores.
Recently, Alfa Group – the operator of 12,000 Alfamart mini-market outlets in the country – launched its e-commerce platform called Alfacart.
“International retailers such as Lotte, Lawson, H&M, Courts, Ikea and Lenovo have all made it clear they plan to enter and expand in the country,” said Kurtz.
“UAE-based Lulu Group recently announced that it would invest US$500 million over the next five years in its Indonesian operations,” he added.
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