The future of retail in Indonesia: a blend of tradition and modernity

Indonesia's retail sector is undergoing a remarkable transformation, combining traditional models with modern conveniences. According to data from Indonesia's central bank, retail sales increased by 4.9% in December 2023 from a year earlier, driven by holiday promotions, the largest increase in eight months. Indonesia's retail sector has traditionally been dominated by community markets and grocery stores, but in recent years, government policies and an influx of foreign investment have contributed to the modernization of the industry. McKinsey 2021 research shows that 77% of retail transactions in Indonesia are conducted through traditional channels, while modern channels such as supermarkets and hypermarkets account for only 23%.

In order to unleash the potential of domestic consumption, the Indonesian government has encouraged the transformation of the retail sector and attracted international retail giants to the market. Local banks are also actively promoting electronic payments and offering promotional and credit services. Convenience stores and street stalls have been digitized to provide a variety of convenient services catering to consumers in tourist hotspots.

The Indonesian Retailers Association, as the leading organization in the industry, promotes the modernization of the retail industry through events, seminars and training programs. These initiatives aim to improve store management, sales and customer service capabilities. Meanwhile, Indonesia's online retail sector is booming. The government has developed an e-commerce roadmap to address key issues such as logistics, financing and consumer protection. The Indonesian government also regulates e-commerce and encourages investment in international platforms and localized operations, while providing incentives for local companies.

Offline retailers have begun to expand their online presence with the launch of mobile apps and shopping sites. Indonesia is a major player in Southeast Asia's digital economy, which is expected to reach $82 billion in 2023, according to the data. E-commerce transactions are expected to be $34 billion, up 12% year-on-year.Indonesia's trade minister said e-commerce's contribution to the economy is becoming increasingly significant and that the sector has promising growth prospects.

Sources of information:People's Daily (PRC newspaper)