In Indonesia, companies must do business with the country’s myriad of retailers, which operate a combined 4.1 million off-premise and on-premise stores
Indonesia’s retail landscape is undergoing profound change as modern outlets increasingly replace wet markets and independent small shops. Meanwhile a major geographic shift is taking place in Indonesia’s retail landscape, with the center of attention increasingly moving from Greater Jakarta and Bali’s main tourist areas to regional capital cities across the country. Not to mention the recent digital economy movement that change the landscape further into the 21st century.
Traditional trade: still a dominant force
A recent study shows that traditional trade will remain the primary force in the retail landscape and will do so for the next decade and a half. Traditional trade, encompassing wet markets and warung [small stall], drove 85.2 percent of the US$95 billion grocery retail value. In 2017, traditional markets are still estimated to contribute 82.3 percent to the $147 billion retail. Traditional trade is still very important today because a lot of Indonesia is rural or semi-rural.
Modern trade: Fast Growing Channel
Indonesia’s traditional markets are losing out to the convenience of modern retail outlets, especially mini-markets, which are allowed to set up their own distribution channels and sell directly to residential areas, thus competing with independent shops which source their goods from the traditional markets. Today mini-market franchises are becoming an important factor and are claiming an increasing market share in the grocery segment.
Omni-Channel Retail: The Next Frontier
As customers become more accustomed to interacting with businesses across traditional and digital channels, retailers will need to evolve so their own operational ecosystems meet these expectations. Omni-channel retail has enabled many businesses to capitalise on new opportunities without compromising their central value propositions. The question for many retailers is not when they will respond and adapt their value chains to support omni-channel retail, but rather how they will approach the challenge.