Retail Sector Outlook

Expecting demand recovery in 2016

Indonesia Retailers Association’s expected retail sales growth in 2015 is less than 10%, from the initial target of 12% - 15%. We do expect for a better outlook for retail industry in 2016 as demand is expected to pick up in the latter part of 2016, although still at a slower pace, backed by a more favorable macro situations.

A look beyond Java

While retailers are expanding more aggressively to outside Java regions for the past few years, in attempt to capture growth in those untapped areas, outside Java regions tend to be the main drag on the national growth in this last quarters, as these areas are heavily reliant on extractive industries and commodities processing. With the commodity downturns happening mostly in outside Java regions, we have seen weaker demands on consumer goods, particularly discretionary items. We believe that this situation will continue in 2016, as commodity prices are still expected to only have a slight rebound and consumers are still cautious regarding the continuous Rupiah deprecation.

A bright long term outlook for retail industry

With Indonesia’s favorable demographics and stable economic growth, we believe that retail industry will have bright prospects in the long-term. Being supported by its position as the most populated and largest economy in Southeast Asia, Indonesia’s economic growth is expected to accelerate even further. Despite the recent sluggish economic growth that has hampered Indonesian retail’s growth in short term period, Indonesia is expected to remain as the world’s 15^th strong retail market.

Indonesia is still the most under-penetrated modern retail market

We believe that modern retail industry in Indonesia is still underserved. This is also supported by the fact that modern retail sales has only contributed around 16% to total retail sales in Indonesia, much lower than its neighbors (vs. China 60%, Singapore 70%).