Retail in Indonesia

ASOSIASI PENGELOLA PUSAT BELANJA INDONESIA (INDONESIAN SHOPPING CENTRES ASSOCIATION)

Retail Trends & Challenges

Retail Trends …..

•  The market –  Huge and Changing

•  The shoppers –  Socially Shopaholics

•  The challenges –  Raising competition and raising cost of doing

business

Retail Trends …..



•  The challenges –  Raising competition and cost

GDP Growth

Indonesia has it all …..

l  Accelera>ng real GDP growth ►  4.5% in 2009, 6% in 2010, 6.2% in 2011

Growing Middle Class Popula>on

l  4th largest popula>on in the world with 235 m inhabitants l  Growing urbaniza>on l  Middle class(1) now represents over 40% of the popula>on vs. 25% 10 years ago l  Size of middle class has been growing strongly at a 7.5% CAGR over the last 10 years to reach

23 m households l  GDP per capita to reach USD3,000 by 2012, allowing for greater disposable income and faster

modern retail growth

Source: Euromonitor, IMF, Bloomberg, Sta7s7cs Indonesia, SUSENAS, Asian Development Bank (1) Defined as popula7on with daily spending of USD2-‐20

Food Retail Industry

l  Total food retail industry – USD53B l  Tradi>onal retail represents 89% of total l  Modern food retail (hypermarkets, supermarkets and convenience stores) represents only

11% of total l  One of the lowest modern food retail penetra>on levels in Asia l  Hypermarket has increased at a 15.1% CAGR over 2004-‐2009

5

Asia Pacific Landscape

In the most developed countries in Asia the modern trade is dominant accounting for 80 to 90% of sales...compared to

developing countries 35-55%

75 80

73

61

27 33

38 40

20

90 87 89 82

57 51 48 45

36

Singapore Hongkong Taiwan Korea China Malaysia Thailand Philipines Indonesia

1999 2007

Developing Asian Countries Developed Asian Countries

Source : Nielsen

Before (Till Early 1990's) Now- Owner Management - Professional Management

- Buy & Sell Relationship based on : - Business Building Relationship based on : - Personal Preferrence & sometimes KKN - Customer's preference supported by research data - Advertising Power - Combination of Above & Below The Line activity

(Holistic approach)

- No Clear Positioning & Price was considered as the main driving - Implementation of Category Management whereby each category force in retailing. is assigned to a role whether it's Destination, Routine, Occasional or

Fill In.

- Traffic in Modern Trade was about 1,000 - 1,500 trxn/day - Traffic in Modern Trade varies from < 500 to >10,000 trxn/day

- Chain with 50+ outlets was only Hero - C4, Giant & HPM combined is almost 150 outlets Alfamart & Indomaret combined is almost 8000 outlets

- Clear channel definition - Blurring channel (hypermarket, gourmet + f&b store)

- Operating hour : 10 to 10 - Operating hour varied but mostly are still 10 to 10

- Less brand conscious - Very brand conscious

Indonesia retail scene

Trade Sector Classification & Example of Stores

•  Carrefour •  Giant •  Hypermart •  LoCemart

•  Alfamart •  Indomaret •  Starmart •  Yomart •  Circle K •  7-‐11

•  Borma •  Carrefour Express •  Diamond •  Gelael •  Giant Supermarket •  Griya •  Hari Hari •  Hero •  Foodmart •  Naga •  Ramayana •  Sinar •  Sogo •  Superindo •  Tip Top •  Yogya

•  Matahari •  Ramayana •  Sogo •  Yogya

TradiTonal Store

Minimarket/ CVS Wet Market Hypermarket

(Large Format) Grocery Cart Department Store Supermarket

DefiniTon : Hypermarkets : -‐ Have 20 or more checkout counters

-‐ Sell more varied products, such as groceries, electronics, cloths, shoes

Supermarkets : -‐ Have 3 to 20 checkout counters -‐ Sell almost all category of groceries

Minimarkets : -‐ Have 1 to 2 checkout counters -‐ Sell some category of groceries

Dept. Stores : -‐ Have 3 to 20 checkout counters -‐ Sell some categories such as fashion apparel, electronics, household products

Source : Nielsen

Retail Trends …..




Shopping is recreaTon

Asia-Pacific boats the world’s largest percentage of “Recreational Shoppers”�74% of world’s consumer admit to shopping as entertainment �

�

Source : Nielsen

Consumer mostly shop with family/ relaTves/ friends.

21 1928

1727 29 24 22 18

79 8172

8373 71 76 78 82

Total Jadetabek Bandung Surabaya Makassar Medan SES A SES B SES C1

Shop TogetherShop Separately

Base: All Hyper/ Super/ Minimarket; Ref: Q121

In%

Average

By CiTes By SES

Source : Nielsen

Total Jabotabek Bandung Surabaya Makasar Medan SES A SES B SES C

Shopping Mode

Base: All Omnibus Respondents (n=719;N=4,807,000); Ref: Q123

Most of the Shopper use motorcycle, and usually with company

Hypermarkets Supermarkets Minimarkets Traditional Stores Wet Markets

Mode of Transportation

Motorcycle 47 65 51 10 34

Other public transport 31 18 13 2 17

Car 14 12 1 - 1

Walk 13 11 37 89 47

Accompany by

Child 45 54 39 28 21

Spouse 34 50 32 7 19

Friend 22 7 9 1 5

Family (other than spouse and child) 21 21 17 2 7

Alone 14 9 26 67 68

Source : Nielsen

Base: All Omnibus Respondents (n=719;N=4,807,000); Ref: Q123

Hypermarkets or Supermarkets packed on Saturday and Sunday, compare to other channel stores

Hypermarkets Supermarkets Minimarkets Traditional Stores Wet Markets

Time

05.00 – 08.59 0 0 3 41 72

09.00 – 11.59 12 15 17 23 13

12.00 – 14.59 17 12 6 4 2

15.00 – 17.59 38 42 24 20 10

18.00 – 19.59 30 26 43 7 3

20.00 – 22.00 1 4 8 4 1

Length (Hour) 1.5 1.4 0.7 0.5 0.9

Day of Shopping 49% Uncertain, Sat/Sun 34%

48% Uncertain, Sat/Sun 45%

61% Uncertain, Workdays 19%



Source : Nielsen

Retail Trends …..




The Challenges

•  Raising competition (direct & indirect) –  Less margin –  Higher advertising & promotion cost –  Cannibalization

•  More demanding & less loyal customers –  Higher cost of doing business

•  Raising operating cost –  Yearly increase of minimum wages

à 2-5% of revenue depending on the format

–  Raising electricity cost à 1-2% of revenue depending on the format

The Challenges

•  Lack of authority control of mall development –  Unhealthy competition –  Inadequate supporting facilities like parking &

waste management –  Deteriorating environment

•  Lack of commitment from the tenants on grand opening –  Sometimes resulted from weak planning of the

developers

•  Lack of loyalty program from the mall

9 53

36

113

31

43

6 30

1 1 15

2

10

Batam

Sumatera

Jabar

Jabodetabek

Jateng

JaTm

Bali

Kalimantan

NTB

NTT

Sulawesi

Maluku

Papua

Shopping Centres in Indonesia (by island)

Shopping Centres in Indonesia (by island)

Shopping Centres in Jakarta

15

10

9

24 13

22

5

9 6

Jakarta Pusat

Jakarta Barat

jakarta Timur

Jakarta Selatan

Jakarta Utara

Tangerang/Banten

Depok

Bekasi

Bogor

MasterCard Worldwide Index of Consumer Purchasing PrioriTes H2 2011

Indonesia MasterCard Survey on Consumer Purchasing PrioriTes-‐Dining & Entertainment u  Indonesians visit either quick serve restaurants (80%) or food

courts (70%) for dining, with a very small proporTon patronising fine-‐dining restaurants and pubs/bars. However, the 2% of Indonesians visiTng pubs/bars do so frequently with an average of 6 trips per month.

u  Amusement parks are the primary entertainment outlet in Indonesia, with 65% of Indonesians visiTng these. This is followed by 36% of respondents who enjoy going to the movies.

MasterCard Survey on Consumer Purchasing PrioriTes-‐Travel u  The vast majority of Indonesian respondents have not

made an internaTonal trip either for business or leisure in the past 12 months, compared with a majority of respondents having travelled domesTcally.

u  In terms of domesTc travel, 75% of respondents took a leisure trip within the country and only 18% travelled for business.

MasterCard Survey on Consumer Purchasing PrioriTes-‐Luxury u The luxury goods market is small, with a heavy skew towards

owning jewelry. Women tend to be much bigger spenders than men in this area.

u Three-‐quarters of all luxury purchases by Indonesians are planned in advance. 18% of respondents tend to make impulse buys on the spot, while 74% deliberate purchases for up to 6 months before actually buying items.

u Almost all luxury shopping is done locally, with 42% of purchases made at full price and 56% done when items are on sale. Three-‐quarters of luxury purchases are not moTvated by any special reason, with only 24% buying to celebrate special occasions.

u Indonesian Consumer Spending on Electronics Up More Than 20%

u Sales of electronic goods in the first eight months rose more than 20 percent on the back of strong consumer spending, according to an industry group.

u Sales from January to August were up 22 percent to Rp 16.1 trillion ($1.8 billion) from the same period last year, and the full-‐year figures could be a 28 percent increase to Rp 25 trillion.

u LCD/LED and plasma TVs led sales, followed by air-‐condiToners, refrigerators and washing machines,

u On a monthly basis, sales in August were down 8.7 percent to Rp 2.1 trillion from July, as many consumers refrained from spending on durable goods during Ramadan.

.

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13

!!!! Market Statistics – Retail 3Q11

Shopping Malls - Lease Trade Centres - Strata Title

0 Quarterly Completions (sqm) 0

25,700 YTD Completions1 (sqm) 96,250

2,185,901 Total Stock (sqm) 1,481,022

29,626 Quarterly Net Absorption (sqm) 18,345

148,687 YTD Net Absorption (sqm) 94,535

88.1 Occupancy Rate (%) 66.1

260,130 Direct Vacancy (sqm) 501,927

415,484 Base Rent (IDR/sqm/mo) N/A

67,374 Service Charge (IDR/sqm/mo) N/A

482,858 Gross Rent2 (IDR/sqm/mo) N/A

Up to 2013:

438,664 Proposed Stock (sqm)

Up to 2013:

4,908

1 Year-To-Date: additional stock from January to September 2011

2 Estimated achieved (effective) gross rent (including service charge) for typical specialty stores located in a prime area

Retail Glossary

• Rental shopping malls are shopping centres that are offered for lease by the landlord on a monthly basis. The typical lease term for a specialty store is between one and three years.

• Strata-titled trade centres are shopping centres that are offered for sale by the developer. A trade centre mostly consists of small kiosks that typically range from 4-20 sqm.

• The net absorption (take-up) rate refers to the net cumulative increase in space occupied in a particular period.

• Prime retail space refers to space in a mall that is located in prime areas (i.e. lobby level up to the first three floors).

• Vacancy rate is the ratio of vacant space to the total stock (leasable area) available.

• Gross rent refers to the total rent payable by tenants. This is equivalent to the sum of net rent plus outgoings.

• Base rent is the minimum rent for a retail space without taking into account any add-ons, such as service charges and after-hours utility costs, that make up the total lease package.

• Service charge is the collective name for the cost of air-conditioning and other services, and management charges passed on to the tenant.

DISCLOSURE APPENDIX CONTAINS ANALYST CERTIFICATIONS AND THE STATUS OF NON-US ANALYSTS. FOR OTHER IMPORTANT DISCLOSURES, visit www.credit-suisse.com/ researchdisclosures or call +1 (877) 291-2683. U.S. Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

17 January 2011 Asia Pacific/Indonesia

Equity Research Strategy

Indonesia Consumer Survey 2011

Mapping the rising consumer spending

Global Equities Research .

Credit Suisse Research Institute Thought leadership from Credit Suisse Research and the world’s foremost experts

DISCLOSURE APPENDIX CONTAINS ANALYST CERTIFICATIONS AND THE STATUS OF NON-US ANALYSTS. FOR OTHER IMPORTANT DISCLOSURES, visit www.credit-suisse.com/ researchdisclosures or call +1 (877) 291-2683. U.S. Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

17 January 2011 Asia Pacific/Indonesia

Equity Research Strategy

Indonesia Consumer Survey 2011

Mapping the rising consumer spending

Global Equities Research .

Credit Suisse Research Institute Thought leadership from Credit Suisse Research and the world’s foremost experts

17 January 2011

Indonesia Consumer Survey 2011 13

We believe that companies operating in non-Java areas (or have a nation-wide distribution network) should do better than those focusing on Java areas such as Astra International, Indofood, BBRI, SMGR, and GGRM.

Regarding the use of US dollar or 2010 PPP-implied conversion rate (published by IMF) as conversion exchange rates, we found that income distribution among the seven emerging countries varies significantly. Saudi Arabia is much wealthier than others, followed by Russia, China and Brazil. China and Russia look particularly good if we calculate their income on a PPP-adjusted basis. Indonesia and Egypt are the poorest countries, irrespective of the conversion exchange rate.

Figure 4: Huge divergence among emerging markets

Source: Credit Suisse Emerging Consumer Survey 2011, AC Nielsen

Indonesia’s low income profile is also suggested by the type of its monthly spending, especially given 29% of Indonesia’s monthly spending on food and only 10% on saving (Figure 10). Another finding from our respondents is also with regard to the saving method, given 29% of the total respondents say that they did not have any extra money to save.

Figure 5: Indonesia – monthly spending by category (%) Figure 6: Indonesia – method of saving

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Source: Credit Suisse Emerging Consumer Survey 2011, AC Nielsen Source: Credit Suisse Emerging Consumer Survey 2011, AC Nielsen

Indonesia is among the poorest countries in the seven emerging countries

Saudi Arabia’s household income is 2.2x that of China and 8.9x that of Indonesia

Low spending power is reflected in the high proportion of food as a percentage of total income and saving pattern

Our analysis indicates that §  non-‐Java residents exhibit lower inclinaTon to spend §  non-‐Java respondents exhibit higher ajer-‐tax income per month

per person than Java respondents (Rp2.84 mn per month for non-‐Java versus Rp2.46 mn per month for Java)

§  non-‐Java respondents exhibit higher saving (Rp0.52 mn for non-‐Java and Rp0.24 mn for Java) per month as well as higher saving rate (18% of ajer tax income per month for non-‐Java versus 10% for Java).

§  Thus, our analysis indicates that outside Java residents, though they earn more, they also save more.

We believe that non-‐Java residents exhibit higher purchasing power. However, they are less consumpTve than Java respondents. This indicates that a stronger focus on markeTng and adverTsing in outside Java regions to enTce residents to consume more may lead to significantly higher consumpTon growth of outside Java regions, given the higher purchasing power exhibited by this segment.

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Confidential & Proprietary Copyright © 2008 The Nielsen Company

Shopper Trend Mall 2008 Page 66

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INDI JAP NZ KOR AU HK SING MAL INDO PH TW THA VN CHN

Most often Second most often Third most often

Base: All respondents

Most often eaten take-away restaurant- KFC



27%36% 41% 46% 46%14%

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VN KOR NZ INDI AU INDO THA MAL CHN PH SING JAP HK TW



Most often eaten take-away restaurant- McDonalds



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Most often eaten take-away restaurant- Pizza Hut

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Retail in Indonesia

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