Indonesia in Fifth Place on AT Kearney Global Retail Development Index


JUNE 06, 2016

Jakarta. Indonesia has risen seven places to fifth place on the A.T. Kearney 2016 Global Retail Development Index, an acknowledgement of the vast potential in country's retail sector.

The index, which analyses 25 macroeconomic variables to help retailers devise successful global strategies to identify emerging market investment opportunities, ranks the top 30 developing countries for retail investment potential worldwide.

Indonesia was ranked in 12th position on the index last year by the global management consulting firm, which has offices in 40 countries.

Indonesia's huge population of 256 million, rising middle class, growing Internet penetration as well as the government's recent move to open its market to foreign investment in nearly 50 sectors, including e-commerce and retail, are factors that made the country's prospects looks promising, especially in the retail sector, the global consulting firm said in a statement on Monday (06/06).

"Indonesia, as the world's fourth most populous country, is a perennial source of interest for retail investors, but this year's ranking shows that the country is finally perceived as the stable source of growth," A.T. Kearney Indonesia president director John Kurtz said in the statement.

Reasons for Optimism

"The future looks promising for the retail sector, currently [estimated to be] worth $324 billion, both because of the prospect of rapid per-capita growth in spending from a relatively small base and because there is finally a sense of optimism that the shaky physical infrastructure is being addressed," Kurtz said in the statement.

He noted that the administration of President Joko "Jokowi" Widodo has pledged to complete 30 infrastructure projects over the next four years, including roads and ports, which all are expected to help spur growth.

Meanwhile, the continued expansion of the country's middle class, in addition to an increase in the number of smartphone users, have boosted not only traditional retailers, but also e-commerce markets.

"We expect to see the e-commerce business driving the retail market in Indonesia. Investments by the Telkom Group in fiber infrastructure would also help," Kurtz said.

A.T. Kearney said Indonesia's move earlier this year to remove e-commerce from its negative investment list for foreign investors, and its five-year e-commerce road map are expected to encourage the emergence of more technology entrepreneurs in the future.

"The government's plans, the increasing number of smartphone users and Internet penetration have contributed to the continuation of the country's surging investment in e-commerce business," Kurtz said.

Retailers, including South Korea's Lotte Group and Indonesia's Salim Group are exploring e-commerce as an extension of their offline stores, with plans to set up online platforms and logistics services, the consultancy said in the statement.

International brands such as Lawson, H&M, Courts, Ikea and Lenovo have also been expanding their presence in the archipelago to capture a wider consumer base.

A.T. Kearney also noted that United Arab Emirates-based Lulu recently announced that it would invest $500 million in Indonesia over the next five years.