Indonesia’s Retail Sector Taking a Leap on Global Retail Development Index

As per the AT Kearney’s 2016 edition of index, Indonesia has jumped up seven positions to rank no. 5^th in the world in the Global Retail Development Index in 2016 from 12^th in 2015, indicating the rapid transformation that the country’s retail sector is currently undergoing. The Global Retail Development Index measures the attractiveness of the retail sector in 30 developing economies as well as identifying investment opportunities in these markets. Of these developing economies, China remains on the top followed by India, Malaysia and Kazakhstan.

Indonesia has a large population of 255 million, coupled with a growing internet presence and rapid urbanisation. These factors make Indonesia a lucrative investment destination for retailers all around the world. Indonesia’s growing middle class population is expected to contribute to 10% of the retail sector’s annual growth. Currently, Indonesia’s retail sector is estimated to be USD $324 billion. According to the Indonesian E-Commerce Association, e-commerce transactions worth $24.6 billion are expected to take place in 2016, from $8.2 billion in 2013.

Also, as per the Indonesia Retailers Association, the turnover of this industry in the country is expected to grow 14% year-on-year in 2016 to over $15 billion from $13.2 billion in 2015.

The government opened up the e-commerce industry to foreign ownership if the business value is over $7.49 million. E-commerce is expected to give a boost to the retail sector, given Indonesia’s large smartphone user base. Additionally, the retail sector is expected to be a beneficiary of the government’s plans to improve infrastructure, especially its roads and ports. Owing to these lucrative future prospects, a number of businesses have already planned their foray/expansion in Indonesia.

A brief snapshot of some of the recent actions taken by leading retail companies in Indonesia: