Shirley Christie – From the $770 million takeover of Indonesia's largest home-grown department store to the $300 million local tycoon Chairul Tanjung paid for a 40 percent stake in Carrefour Indonesia, 2010 has been quite a year for the country's retail sector.
By the looks of it, the new year will see this trend continue. There is a bidding war underway for control of Matahari Prima Putra, the country's second-largest hypermarket operator, by four international retail giants. The price being bandied about is an estimated $1 billion.
"When a business is profitable, I do not see why it should not be put up for sale," Tutum Rahanta, chairman of the Indonesian Retail Merchants Association (Aprindo), told the Jakarta Globe.
Another emerging retail player is Lotte Shopping of South Korea, which in 2008 acquired 75 percent of Makro Indonesia for $223 million. The company changed its name to Lotte Wholesale in May and opened two megastores in Gandaria City and Ratu Plaza in Jakarta.
Lotte is one of the bidders for Matahari Putra Prima. If it is successful, it could emerge as the largest retail player in the country in 2011.
Matahari Putra Prima, founded in 1958, operates 92 department stores in more than 50 cities across Indonesia. It also has 51 hypermarkets, 25 supermarkets, 53 drug stores, 90 family entertainment centers and 18 bookstores. It plans to open at least 13 hypermarkets next year and 80 outlets in the next five years.
A rising middle class, a booming stock market and political stability have provided a platform for the economy to expand and the retail sector to ride the wave. A recent survey conducted by Nielsen Indonesia predicted the middle-class market will double within the next five years.
Yongky Susilo, director of retail services of Nielsen Indonesia, said recently that Indonesia achieved a milestone when it hit a per capita income of $3,000 this year. "There is an increase of consumption, especially in secondary needs," Yongky said.
Since private consumption accounts for around two-thirds of Indonesia's $550 billion economy, local and multinational retailers are trying to capitalize on increasing consumer demand in this brisk market of 240 billion, mostly young people.
Also in May, Para Group owner Chairul Tanjung added to his long list of businesses by acquiring 40 percent of Carrefour Indonesia. The acquisition apparently whetted his appetite for the retail sector as he now plans to launch 10,000 minimarkets across the country under the banner Trans Mart.
Not to be outdone, the Modern Group went big with its 7-Eleven convenience stores this year as it seeks to rebuild its retail presence in the country. The group plans to convert its Fuji Film stores into 7-Eleven stores to keep pace with changing consumer tastes.
While convenience stores have had a presence in Indonesia for years, 7-Eleven has transformed this segment of the retail sector by providing a space for customers to sit and chat inside the store, offering hot food and other services such as photo booths, ATMs and delivery service through a partnership with DHL Express.
By the end of 2010, Modern Putra Indonesia had managed to open 16 7-Eleven stores across Jakarta. Henri Honoris, president director of Modern Putra Indonesia, told the Jakarta Globe that the company plans to keep expanding during 2011, at least in Greater Jakarta.
As the retail race intensifies, the main battles are likely to be waged in the mini-market segment, Tutum said.
"Mini-markets grew between 15 to 20 percent this year, and the growth pace is following the growth of the Indonesian population," he said, adding that supermarket growth was slower than mini-markets in 2010.
A Nielsen regional retail report said the fastest-growing area in Indonesia was mini-markets, led by local giants Indomaret and Alfamart. Store numbers increased from more than 2,000 to more than 11,500 within 10 years.
"It is now difficult in many cities to stand on a corner and not see at least two of these stores," the report said.
Tutum said since the experience and price point in traditional trade and mini-markets are about the same, people would choose the nearest mini-market to buy their groceries.
Satria Hamid Ahmadi, public affairs senior manager of Carrefour Indonesia and deputy chairman of the Indonesian Chamber of Commerce and Industry, expects the sector to grow between 13 percent and 15 percent in 2011.
"This growth is driven by daily consumption," he said, adding that the retail industry is the second-largest employer after agriculture.