Retail business becomes stiff

Senin, 03 Oktober 2016 / 09:44 WIB

Retail business becomes stiff

JAKARTA. Retail business competition becomes tight after foreign investors launched expansion to domestic market. The subsidiary of Uni Arab Emirates based Lulu Group, PT Lulu Group Ritel has recently has invested US$9 million to build a hypermarket in Cakung, East Java. Lulu has committed to invested US$300 million to establish 10 hypermarkets, logistic centers, and warehouse facilities by the end of 2017.

Previously, Head of Investmetn Coordinating Board (BKPM) said that retail investors from Australia, Canada, and the United States of America (the US).

However, domestic retailers are optimistic that the current expansions will not generate negative impact to their business. Director and Corporate Secretary of PT Matahari Putra Prima Tbk (MPPA) Danny Kojongian said that the poor infrastructure, mainly in outside Java, will be a major challenge for the new investors in expanding their business. “MPPA has solid outlet and distribution networks to reach potential markets in outside Java, mainly in eastern part of Indonesia”, Danny said.

During January-September 2016, MPPA has operated three new outlets of Hypermart in Kuala Kapuas, Jambi, and Tanjung Pinang. To date, MPPA has operated 115 of Hypermart outlets in all over Indonesia.

Another local retailer PT Hero Supermarket Tbk (HERO) has recently operated a new Giant Esktra Gegutu outlet in Mataram, Lombok. In 2017, HERO plans to operate five Giant outlets in Central Java and East Java. General Manager Corporate Communication of HERO Natalia Lusnita said that the issuer will strengthen its existing brands Giant and Hero Supermarket.

Analyst at Daewoo Securites Christine Natasya estimated that foreign retailers will be struggling to compete with local retailers. Aside of strong brand image, local retailers already have solid networks in many regions in Indonesia. Therefore, the foreign retailers need to set competitive price in order to seize potential local market.

However, analyst at NH Korindo Muhammad Ikhsan estimated that Lulu Group will stiffen the competition in domestic retail business. He suggested MPPA and HERO to be innovative, as well as sustain their top line growth in order to maintain, or even increase their market shares.  

(Muhammad Farid/Translator)


Reporter: Ghina Ghaliya Quddus
Editor: Barratut Taqiyyah Rafie

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