Retailers Brace for Gloomy Ramadan Amid Economic Slowdown
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Indonesian retailers are predicting sales to drop by 36 percent year-on-year during the Muslim holy month of Ramadan and Idul Fitri, the latest sign of the country’s weakening economy.
Sales are expected to reach Rp 15 trillion ($1.12 billion) during the fasting period, which runs from June 18 through July 17, compared to Rp 25 trillion in the same period last year, according to estimates from the Indonesia Retailers Association (Aprindo).
Members of the association range from convenience store chain operators such as Sumber Alfaria Trijaya to hyper market operators like Matahari Putra Prima.
Aprindo chairman Roy N. Mandey said consumers’ purchasing power has been under pressure this year due to rising inflation stemming from fluctuating oil prices, the weakening rupiah and slow government spending.
President Joko Widodo shifted government subsidies for fuel prices this year to back up his $21 billion infrastructure projects. However, only 8 percent of the funds were disbursed in the first six months 0f 2014 due to red tape, dragging further on the country’s economy, which is already struggling against low commodity prices and slowing investment.
Based on current conditions, Aprindo has revised its 2015 sales target to Rp 152 trillion from its initial total of Rp 184 trillion — a 10 percent contraction from last year’s sales of Rp 168 trillion.
“People are not as enthusiastic [as before]. They are refraining from buying anything now,” Roy said.
A recent consumer confidence survey from Bank Indonesia, the country’s central bank, showed that consumers have become less optimistic about their income and job availability, holding back on buying durable goods like electronics, motor vehicles and home appliances.
Still, Matahari Putra Prima, one of the largest retailers in Indonesia and a Jakarta Globe affiliate through the Lippo Group, remains confident it will see an 11 percent increase in sales during Ramadan to Rp 3 trillion from Rp 2.7 trillion last year, banking on its expansion in the eastern part of the country.
The company now operates 111 stores under the brands Hypermart, Foodmart and Boston Health & Beauty.
Questions & Answers
Q.What factors are contributing to the decline in consumer purchasing power this year?
What factors are contributing to the decline in consumer purchasing power this year?
Consumers' purchasing power has been under pressure due to rising inflation from fluctuating oil prices, a weakening rupiah, and slow government spending. This combination has made people less enthusiastic about buying goods.
Q.What is the revised sales target for Indonesian retailers for the whole of 2015?
What is the revised sales target for Indonesian retailers for the whole of 2015?
Aprindo has revised its 2015 sales target to Rp 152 trillion, down from an initial Rp 184 trillion. This represents a 10 percent contraction compared to last year's total sales of Rp 168 trillion.
Q.Which retail company expects to defy the general trend of falling sales during Ramadan?
Which retail company expects to defy the general trend of falling sales during Ramadan?
Matahari Putra Prima expects an 11 percent sales increase during Ramadan, aiming for Rp 3 trillion compared to Rp 2.7 trillion last year. They are banking on expansion in the eastern part of the country.
Q.Why has government spending been slow despite the shift in fuel subsidies?
Why has government spending been slow despite the shift in fuel subsidies?
Only 8 percent of the $21 billion allocated for infrastructure projects was disbursed in the first six months of 2014. This slow disbursement is attributed to red tape, further affecting the economy.
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