Indonesian retail history

Like other markets in South-East Asia, Indonesia is a transitional market where modern retail structures are on the rise while traditional distribution networks are still the dominant channels, catering to the majority of people. The take-off of modern retail in Indonesia in the 1990s primarily involved domestic chains. The current leading chain, Matahari, is indicative.

Matahari started as a small shop in 1958, grew into a chain of department stores, and then was purchased by a giant banking and real estate conglomerate In Indonesia, even after several years of the emergence of supermarkets, 90 per cent of fresh food and 70 per cent of all food is still controlled by traditional retailers.

AC Nielsen (2007) undertook a survey of 1,300 consumers in the capital of Jakarta (capital) and in the second-tier cities of Bandung and Cirebon, focusing on consumers’ buying habits in supermarkets versus traditional markets. The survey revealed that penetration of grocery retailing has occurred much more rapidly in processed, dry, and packaged foods and in household and personal care products, for which supermarkets gain a cost advantage as a result of economies of scale from centralized procurement and distribution. Savings are passed on to consumers, drawing them to the channel. The supermarkets’ progress in gaining control of fresh food markets has been slower because of procurement challenges, price, cultural habits, and perspectives regarding freshness; moreover, shoppers still purchase fresh produce mainly at wet markets and small vegetable stalls, where they get low prices, credit, and personal service.

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