Local retail chain Indomaret expects its total sales to surge by 30 percent to Rp 23.4 trillion (US$2.62 billion) this year on the back of surging public purchasing power in the country, a company executive says. "We have a population of more than 200 million people, while there are only around 12,000 existing minimarkets. We see a big potential for growth," Wiwiek Yusuf, the marketing director of PT Indomarco Prismatama which runs Indomaret, said during a press briefing on Monday in Jakarta. He said that with such potential, the company expected a 30 percent growth in total sales.
To support that goal, Wiwiek said, the company would open around 1,000 outlets this year throughout the country, including at the subdistrict level, adding to its 6,003 existing outlets at present. In line with its outlet expansion, it would also build three new distribution centers in Pekanbaru, Riau; Denpasar, Bali; and Samarinda, East Kalimantan, to augment its current 16 distribution centers, he said. The opening of an outlet costs Rp 350 million, while the establishment of a distribution center, which serves as a logistical hub for between 200 and 400 outlets, is estimated to cost Rp 150 billion.
Wiwiek said that in the future, his firm would also try to push up the contribution of franchisees to the outlet operation to 40 percent from 36 percent at present. A franchisee is required to spend Rp 350 million to purchase the franchise, which covers a five-year franchise fee, staff training, operational standards, goods and goods delivery, but excludes the provision of land and building. Indonesia, the world's fourth-largest nation by population, with around 240 million people, half of whom belong to a rising middle class, has become a new magnet for retail business expansion, including foreign businesses.
The Indonesian Retailers Association (Aprindo) earlier this year estimated that retail revenue would likely rise by 15 percent to Rp 138 trillion this year despite potential spillover from the global economic downturn. Following the success of global retail brands, including Japanese convenience store giants 7-Eleven and Circle-K, a number of other chains, such as Japanese chains Lawson and FamilyMart, seek to tap into the huge market in Indonesia, which is Southeast Asia's largest economy.
To cope with tighter competition and keep up with the changing landscape of retail business, both from local and foreign retailers, his firm plans to develop various business sectors, including convenient stores, Wiwiek said. "We will need to have diversity, which includes convenient stores under the brand name Indomart Point and we plan to develop up to 100 stores this year," he said, adding that currently the firm operated 57 convenient stores.
According to Wiwiek, his firm is also diversifying its services, including selling train tickets of state owned railway operator PT KAI, CDs and tickets for music concerts, and electronics items, such as mobile phones and other gadgets. Apart from strengthening its base in the domestic market, Wiwiek said, his firm was looking into the possibility of expanding its business to other Asian countries, such as Vietnam and India. (Linda Yulisman, The Jakarta Post, Jakarta, 01/31/2012)