Retail Performance in Q2 2024 Projected to Decline, Aprindo Reveals the Cause

May 09, 2024, 05.25 AM | Reporter: Sabrina Rhamadanty

ILUSTRASI. Consumers shop for footwear at Bata outlets, Jakarta, Sunday (5/5/2024). As a result of continuing losses due to declining demand, PT Shoes Bata Tbk (BATA) has stopped operating its factory in Purwakarta, West Java. BATA posted net sales of IDR 609.61 billion in 2023 or 5.26% lower than the previous year (YoY). BATA also experienced a jump in net loss of up to 79.65% YoY to IDR 190.29 billion in 2023, from IDR 105.92 billion the previous year. (KONTAN/Cheppy A. Muchlis)

RETAIL INDUSTRY - JAKARTA. The Indonesian Retail Entrepreneurs Association (Aprindo) projects a decline in retail performance in the second quarter of this year compared to the first quarter.

Aprindo's Chairman, Roy Nicholas Mandey, pointed out several reasons for this anticipated decline. The first is the typical decrease in spending following a surge supported by the Lebaran holiday period.

“It's bound to drop because after Lebaran, every year people tighten their belts, curb their spending. Why? They are preparing for the months of June-July, especially those with children, focusing on school expenses,” Mandey explained.

For context, retail growth in the first quarter of 2024 reached 5%-7% YoY. This growth was partly due to the contribution from the general elections. Government consumption increased by 6.25% throughout the 2024 election period.

"Consumption growth in the second quarter will decline, which will automatically lead to a decrease in retail performance to around 4%-5%, thus narrowing the margin,” he added.

The second reason for the decline in retail growth is due to fluctuations in banking interest rates or the increase in Bank Indonesia's benchmark interest rate to 6.25%. He stated that this would also increase people's expenditure on loan repayments due to the increased interest rate.

“Because of the interest rate hike, the installments have to be paid higher, so rather than losing their house, car, or motorcycle, it's better to reduce consumption,” Mandey said.

Nevertheless, Mandey remains optimistic that household consumption in the second quarter of 2024 will still grow in the range of 3.8%-4% YoY as the peak of public consumption passes. This is coupled with the consumer confidence index (IKK) which is expected to remain moderate as long as inflation is under control.

“This is evident from the achievement of household consumption growth in the first quarter of 2024, which reached 4.91% YoY or the highest post-Covid-19 pandemic,” he concluded.