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Thailand's Central to try its luck in Indonesia's tight retail market
Publication Date : 30-07-2012
Central Retail Corporation (CRC), part of Thailand-based Central Group of Companies, recently announced its plan to launch its first branch of Central Department Store in Jakarta 2014 to take advantage of Indonesia's big and growing retail market.
The store, scheduled to open in 2014, will be located at Grand Indonesia shopping mall in Jl. Thamrin, Central Jakarta, and will become the second department store chain from Southeast Asia to try their luck in Indonesia after Malaysian retailer Parkson Retail Group.
CRC chief executive officer Tos Chirathivat said the Thai company would invest up to US$19.5 million in the Jakarta store. "The regional expansion conforms to the company's main strategy by tapping into opportunities from the Asean Economic Community coming into effect in 2015," he said.
Chirathivat also said the company, which recorded total sales revenue of more than $3.8 billion last year, believed Indonesia was a potential market in the Southeast Asia region, citing its large population and huge economy.
The Indonesian outlet will bring the total number of Central Department Store outlets to 18 - with 14 in Thailand, two in China and one in Europe.
Besides Central Department Store, CRC manages 12 other brands of department stores, specialty stores and supermarkets, and operates about 549 stores in Thailand and overseas, the statement says.
Some of the brands under CRC are ZEN, la Rinascente, Office Depot, Central Food Hall, Power Buy and Page One.
According to Grand Indonesia public relations manager Agus Rahman, Central will cater to the mall's middle and upper-level customers, whose number reaches 1.3 million per month.
"The new department store will offer a combination of local and Thai products, ranging from clothes to F&B [food and beverages]," Rahman said. Central will be the third department store operating at the mall, following Seibu and Harvey Nichols, which have opened there since 2007 and 2008, respectively.
It will occupy four floors, or 21,000 square metres, at the mall's east wing, including the area where Harvey Nichols, "Level One" boutiques and a part of Gramedia bookstore used to be.
Central's expansion came a month after Malaysian retailer Parkson Retail Group announced it would invest $15 million to open five new stores in Indonesia next year.
In September 2013, Parkson will open its first store at The St. Moritz within the Puri central business district in West Jakarta. The three-floor Parkson store, with an area of 17,101 square metres, has an approximate value of $2.5 million.
The Indonesian Retailers Association deputy secretary-general Satria Hamid attributed Indonesia's positive economy to the increasing number of foreign branded department stores in the country.
"It's not a surprise to see more of them [foreign branded department stores] in Indonesia in the future. Our middle and upper-class retail market is promising. It grows between 10 and 20 per cent every year," he said.
The country has seen a number of foreign branded department stores competing to lure members of the Indonesian middle and upper-class society over the years.
Some of the current major brands are Japan's Sogo, Japan's Seibu, United Kingdom's Debenhams and Singapore's Metro.
In the first quarter of 2012, PT Mitra Adiperkasa (MAP) — which runs Sogo, Seibu, Debenhams and Lotus department stores, recorded a net income of 1.63 trillion rupiah ($171.85 million), of which 23 per cent came from the department stores. It expects total net revenue to reach 7.37 trillion rupiah by the end of this year, up 25 per cent from 2011.
MAP corporate secretary Fetty Kwartati said the company had 18 department store outlets across Indonesia and planned to open another one this year.
"Some of our customers choose to shop at Sogo or Seibu, while some prefer visiting Debenhams. It's because each department store has its own exclusive goods, which make up for 25 per cent of the products offered at the store," she said.
Welliam Lauw, marketing communications officer of PT Metropolitan Retailmart, the company behind Metro Department Store, said the company realised that competition was becoming tougher.
However, he said Metropolitan had no plans to open a new outlet in the near future as it just launched its eighth store in Surabaya last December.
"We rely on our promotional and customer loyalty programmes to increase sales at the moment," Lauw said, declining to disclose Metro's sales figures.
Hamid said even though Indonesian economy was growing, retailers still had to have a full comprehension of the market and target the right segment to gain success in the country.
Harvey Nichols, a premier UK-based department store, which was brought to Indonesia by MAP, only lasted for two years.
Kwartati said the company had initially targeted ultrahigh segment, but the existing market wasn't ready back then.
"It's better to target the middle and upper-class Indonesians because members of ultrahigh society actually prefer shopping overseas to buying goods in Indonesia," she said.