With a penetration rate of 12%, the modern retail especially malls, has still much room to grow.
As an emerging market with the biggest population in Southeast Asia, Indonesia has much room to grow in its retail sector. Modern malls, traditional shops and e-commerce are far from saturation point with current sales very encouraging despite economic headwinds since 2015. The country’s favourable demographics comprising a young and middle class population of 170 million (70% of total population) has high purchasing power and high consumption habits making this country a much sought-after new market for retailers worldwide.
Prior to 2015, retail sales recorded double-digit growth rate. Growth fell to 8-9% in 2015, still an enviable figure compared to its neighbours. Foreign modern retailers continue to expand especially in large cities like Jakarta and Surabaya and even in secondary cities. However, profit margins in big cities are continually being squeezed by stiff competition, growing labour wages and high operating expenses.