Potential for retail in Indonesia is growing quickly.

Potential for retail in Indonesia is growing quickly. Source: Shutterstock

What gave retail a new lease of life in Indonesia?

INDONESIA has a population of 261.1 million people and US$926 billion in GDP. The country has a rising middle class which the World Bank believes will be vital for the country’s growth.

Euromonitor, who believes that the middle class will continue to expand robustly sees a long-term increase in disposable income levels which has fuelled spending in the discretionary categories and allowed the people to look beyond price in the purchases of goods and services.

“Communications is forecast to be the fastest-growing category over 2017-2030, due to rising penetration rates of internet services and digital devices like laptops, smartphones, and tablets amongst the expanding middle class,” said Euromonitor Analyst Roshni Wani Thapa.

According to IDC, the recent launch of JD.ID Virtual has introduced new growth opportunities for the retail market in Indonesia.

Investment in technologies used in the new JD.ID store like facial recognition, NFC tags, and mobile commerce platforms, it seems as though local consumers enjoy a new type of retail experience.

In support of this new experience, IDC estimates that IT Spending supporting the retail industry in Indonesia will grow at a CAGR 17 percent (2017-2021), which is one of the fastest growing industries for IT spending in Indonesia.

As a result of the implementation of new retail technologies in the country, the retail industry is expected to become more competitive and agile to adapt to changing customer shopping behaviors and expectations.

The growth of IT spending will not only improve the shopping experience for consumers but will allow retailers to realize the full potential of digital transformation of their business.

IDC foresees retailers prioritizing digital transformation to improve business operations, increase customer engagement and gain a better understanding of consumer shopping preferences.

“We see retailers in Indonesia are still leveraging traditional approaches to engage with their customers while planning for innovative solutions to enhance the customer experience. Technologies, such as augmented/virtual reality, artificial intelligence, and big data and analytics are gaining traction in the local retail market,” said IDC Indonesia Senior Consulting and Head of Operations Mevira Munindra.

The large consumer base in Indonesia has transformed the retail market over the past few years as the country has a young population with increasing disposable income and growing purchasing power.

Hence, with the rise of digital retail players in Indonesia, consumers now prefer services that offer convenience, speed, and user-friendliness.

Current business concerns for Indonesia’s retail players include the lack of innovation, increasing external costs, and retaining existing customers.

To address these concerns, IDC expects that the innovation from new ventures will set a benchmark for the traditional retail businesses to reorient their thinking to place greater focus on the total retail experience to differentiate themselves from competitors.

Local retailers should be confident in implementing the right digital transformation strategies that will enable new digital experiences to improve the customer’s experience and loyalty.





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