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2012-12-18
Supermarkets Under Siege
Supermarkets Under Siege
Indonesia's mini-markets are eating up market share.
The shift of dominance between mini-markets and rival supermarkets has been tremendous throughout the Indonesia market. The number of supermarkets has fallen 17% over the past 3 years, while mini-markets have risen by 63%.
This shift has been causing larger format retailers to rethink their strategies and eye global partnerships to attack the $42 billion dollar sector.
“Our worst enemy is the mini-market We are under siege in the greater Jakarta area as well as in Surabaya (Indonesia’s second-biggest city). Some of their products are even cheaper than ours,” said Setyadi Surya, a director at the supermarket retailer Ramayana.
Annual economic growth has been rising steadily above 6%, meaning the middle class has more money to spend on retail. Since minimarkets have embedded themselves into nearly every neighborhood, they’re a logical choice.
“Middle class consumers in Southeast Asia’s largest economy are choosing the convenience of minimarkets for grocery shopping over their larger rivals.” says Reuters.
Younger Indonesians in their 20’s and 30’s tend to prefer the convenience of minimarkets, as they now carry basic grocery staples, quick meals, and other basic essentials. They have also become a gathering spot for young people, who tend to hang out with friends, eat snacks, and use the Internet.
“I rarely go to supermarkets or hypermarkets now, perhaps once every few months,” said Vivi Itovia, a 26-year-old front desk clerk at the Kempinski Hotel in central Jakarta.
“I get all my needs from minimarkets or 7-Eleven, which has become a must-go place for young people,” she said in a view echoed by other consumers.
Our Thoughts
Reasons for minimarket success in Indonesia largely go to the fact that distribution to the archipelago is a costly part of the grocery business. The smaller, more nimble CVS and minimarkets seemed to have mastered logistics better than their larger cousins. Supermarkets were clearly disadvantaged by shifting consumer behavior, but where does that leave them now?
We think it means smarter partnerships and investments are needed to stay competitive. Target segments must be clearly identified and mapped in order to capture potential effectively. Supermarkets and hypermarkets have a tough road ahead, but surely smart strategies can help them regain a stronger foothold, and grow their network in Indonesia.
  | By Joshua Roberts Creative Director |
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