Indonesia Retail Business 2017 and Market Forecast

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Trend Drivers New Retail: Online Going Offline New Retail, the term coined by Alibaba Founder Jack Ma, is the integration of online, offline, logistics and data across a single value chain. The pursuit of New Retail strategies has seen retailers such as Alibaba and JD.com in China move from being online-only Indonesia companies to establishing physical retail footprints, and analogously, in the US, Amazon has moved offline by opening bookstores, pop-ups and, with the acquisition of Whole Foods, into the grocery space.

New Retail is emerging as a dominant retail strategy in key markets around the world and this is changing how retailers look at their physical retail footprint: New Retail companies view their physical stores as a lot more than just a distribution channel. In 2017, import to Indonesia experienced a recovery of retail sales, with more emphasis on new shopping experiences.

In 2017, Indonesia has experienced a recovery of retail sales, with more emphasis on new shopping experiences. Retail sales rose 4.1% year over year in the third quarter of 2017, which is the highest rate of growth in over three years.

The New Retail

The Tenant of the Future– A Global View The expectations of today’s shoppers are constantly evolving, calling for different retail experiences and for retailers and shopping centers to reinvent themselves. While technology is impacting consumer behavior and retail business models, the drivers behind the evolution of tenants occupying shopping centers and high streets are certainly more complex. Below, we examine two major drivers of the change: the blurring between online and offline and the segmentation of the shopping experience between convenience and experience.

Indonesia retail business

The changing shopping behaviors of the now highly connected consumers are driving innovation in customer engagement. SHKP Malls and YOHO Mall developed by Sun Hung Kai Real Estate and MTR Malls developed by the MTR Corporation are apps that bring the shopping mall experience to the mobile devices of consumers, while brands such as Neutrogena, Shiseido and Adidas have begun to use artificial intelligence (AI)-based chatbots for their e-commerce businesses.

The fact that New Retail is emerging as a dominant retail strategy in key markets around the world outlines one clear shift when it comes to the physical retail footprint of retailers and brands: New Retail companies view their physical stores as a lot more than just a distribution channel. These companies are leveraging the store to its full potential, which means they see it as a powerful and unique source of consumer data, a testing ground for new products and services, a driver of community and brand loyalty, and a fulfilment center for digital purchases. On the one hand, retail is becoming more experiential, with flagship stores that offer products, services and entertainment.

Where do old companies should go?

1) Is There a Case for Online Brands to Go Offline in Indonesia The panel kicked off with a discussion on the trend of digitally-native brands going offline. Quinn Lai of EONIQ, which is one such brand, commented that pure e-commerce does not work in Indonesia, rather an online presence combined with communication allows brands to drive traffic to stores. Instead, the holistic brand perception that consumers have about a brand or retailer is what drives traffic, awareness and sales.

2) The Pop-up Trend in Indonesia Benjamin Liang of Magusta Group commented extensively on the trend of more pop-up space in the market, sharing that pop-ups are a new attempt for Magusta. As new concepts, pop-ups generate higher traffic for properties and create more awareness for the location. In terms of leasing, however, they follow a different model compared to traditional retail space.