Department Store in Indonesia 2011

INDONESIAN COMMERCIAL NEWSLETTER

June 2011

SLUGGISH GROWTH RECORDED IN DEPARTMENT STORE BUSINESS

Backgrounds

Department store business has not grown as fast as other retail business such as hypermarket and mini-market selling food products, etc. Department store sells non food products such as fashions including clothes, bags, shoes, accessories, furniture with self service system of purchase. An outlet of department store varies from 600 square meters to 40,000 square meters such as Sarinah and Pasar Raya, but most department store outlets range in size from 1,000 to 4,000 square meters.

Department store business in Indonesia was first introduced in Jakarta in 1962 with the operation of Sarinah department store. The operation of Sarinah inspired the appearance of other stores as the embryos large department stores such as Matahari and Ramayana. Later came foreign department store like Sogo, Metro, Debenhams, etc.

The number of department stores grew in the following years but not as fast as hypermarkets, supermarkets let alone mini-markets. Currently department stores in the country have around 300 outlets, relatively small compared to the number of outlets of hypermarkets, supermarkets and mini-markets. Currently business in department store is dominated by old players Matahari, Ramayana, Sogo and Metro.

Number of outlets and locations

Department stores also have to compete in the retail market with hypermarkets especially as many or most consumers have to set aside fund more for daily needs and cut spending on non urgent requirement like fashions, shoes accessories and furniture.

According to Aprindo, by mid 2011, the number of department store outlets is around 300 units. The increase in the number of department store outlets is small - growing only by tens a year compared to hundreds outlets of hypermarkets and mini-markets.

Most outlets of department store are located in the Greater Jakarta area and other units are found in West Java, Central Java and East Java. The number of outlets of department store in Java is more than 50% of the total number in the country.

New outlets are opened with the opening of new shopping malls or centers. The new outlets are opened in potential cities with trend going to cities outside Java, which is considered already saturated. However, a number of department stores have been forced to close some of their outlets not considered profitable.

In Java new outlets are opened mainly outside Jakarta to avoid sharp competition in he capital city. More new outlets, therefore, have sprung up in cities like Yogyakarta, Semarang, Tegal, Purwokerto, Malang, etc targeting middle class consumers. They began to grab the market share of traditional markets in those cities. Urban people in the medium sized cities have also been attracted to modernity in shopping.

A player in department store business, PT. Mitra Adi Perkasa Tbk, closed its Sogo outlet in Plaza Indonesia in 2007, following the opening of Seibu outlet in nearby area in Grand Indonesia to avoid competition among affiliates.

Meanwhile, PT. Rimo Catur Lestari Tbk closed 2 outlets in Makassar, South Sulawesi and in Bogor, West Java for marketing problem.

Big players

PT. Matahari Department Store Tbk

Established in 1958 with first outlet in Pasar Baru, Jakarta by Hari Darmawan. The company expanded in him following years under PT. Matahari Putra Prima Tbk (PT. MPP). However, later PT MPP chose to focus more on hypermarket and supermarket business named Hypermart and Foodmart. In 2010, PT. MPP sold its department store division to CVC Capital Partners from Luxemburg, which renamed the department store PT. Pacific Tama Tbk, before it was changed again with PT. Matahari Department Store Tbk. (PT. MDS). CVC Capital Partners has long experience in running retail business as the operator of Debenhams, a department store in Britain.

Later CVC Capital and PT. MPP established a joint venture named Meadow Asia Co Ltd (MAC). The two partners were 80% and 20% shareholders respectively. In 2010, MAC and PT. MPP Tbk signed a sale and purchase agreement under which MAC was to acquire 90.76% stake of PT MDS Tbk from PT. MPP Tbk in at a price of US$ 770 million or around Rp 7 trillion.

In 2011, PT MDS was acquired by PT. Meadow Indonesia (PT. MI). PT. MI is controlled by Meadow Asia Co Ltd (MAC) through its subsidiary Asia Color Co Ltd. MAC acquired 98.23% of PT. MDS.

The acquisition was expected to boost the growth of Matahari Department Store as a retail company. Matahari planned to open 10-12 new outlets per year that in 10-15 years it hopes to open 150 new outlets. Currently Matahari has 99 outlets in various cities in Indonesia.

PT. Ramayana Lestari Sentosa, Tbk

This company was established in 1978 by Paulus Tumewu and his wife Tan Lee Chuan both from business families in retail industry in South Sulawesi Together with Agus Makmur, who was then named the president of the company, they opened the first outlet at Jalan Sabang, Central Jakarta named Ramayana Fashion Store. In he beginning Ramayana sold only garments and clothes, but in 1985 it began to sell accessories including shoes and bags.

In 1989, Ramayana already grew controlling a chain of 13 outlets and its products grew in variety selling also household goods , toys, stationary, and dry traditional foods. Currently, Ramayana Department Store has 103 outlets spread in Java, Sumatra, Bali, Kalimantan, Sulawesi, and East Nusa Tenggara.

Ramayana launched initial public offering on the Jakarta Stock Exchange on July 24 in 1996. By January 31, 2007, its majority shareholder was PT. Ramayana Makmur Sentosa holding 58 percent of the shares with the rest held by investing public.

Currently Ramayana operates 103 outlets of department store all over Indonesia. Ramayana has two business units - department store and supermarket. The department store unit is still the largest contributor accounting for 73 percent of its income. Ramayana targets middle to lower class consumers spending around Rp 50,000 per visit. The customers are people with monthly income of Rp 1 million to Rp 2 million.

PT. Mitra Adiperkasa Tbk (MAP)

MAP was established in January 1995 with a capital of Rp 10 billion of which Rp 4 billion issued and paid up in 4,000 shares held by shareholders Sarkawi, Benny Gozali, Sintia Kolonas, Marissa Kolonas and Muljani Gozali each with a 20% share with portfolio capital of Rp 6 billion.

In 1996 - 1997 half of the shares owned by Benny Gozali and Sintia Kolonas were sold to Sarkawi and the other half to PT. Panen Lestari Internusa (PLI). There company, was therefore, owned by Sarkawi and PLI as 50% shareholders.

After being three times raised the capital of the company reached Rp 2 trillion and the shareholders changed several time over the years. By January 31 in 2007, the majority shareholder was PT. Satya Mulia Gema Gemilang (SMGG) with a 51.21 percent share.

SMGG was established on 30 June 1997 with business units in various sectors including construction, trade, transport, warehousing, agriculture, plantation, forestry, fishery, mining and consultancy service . SMGG is 99% owned by PT. Mitralestari Adiperkasa and 1% by FX. Boyke Gozali (a nephew of tycoon Syamsul Nursalim).

Meanwhile, PT. MAP Premier Indonesia, established on 15 October 2003, has business units in the trade, construction, mining, land transport, agriculture, printing and service sectors. It is 99.98% owned by SMGG and 0.02% by FX. Boyke Gozali.

MAP's retail business is supported by its garment business. Its business includes in department store (SOGO, Java/Lotus, Debenhams, and Seibu) and specialty shops selling : Sports equipment, Fashion & Lifestyle, Children Fashion and Toys, Food & Beverages, Others.

MAP sells premium goods currently the group holds the distribution, selling and franchise licenses for more than 50 world class brands of goods for middle to high ends . MAP also has garment factories to support its retail business having modern training center in Pondok Indah, Jakarta.

In February 2007, MAP closed its SOGO outlet under PT. Panen Lestari Internusa (PLI), a subsidiary at Plaza Indonesia, Jl. MH. Thamrin, Jakarta, in favor of Seibu, to be opened by PLI in the premium class retail space in Grand Indonesia, Jakarta.

In 2010, MAP expanded its outlets from 30,000 to 60,000 square meters for department store and specialty stores with an investment of Rp2 50 billion including a new Sogo outlet in Central Park which came on line in March, 2010.

The number of department store outlets of MAP including Sogo, and Seibu from Japan, Debenhams from Britain and Lotus continued to grow to reach 30 this year located in various big cities in Indonesia.

PT. MAP also operates outlets of Alun-Alun Indonesia which specially sell local products of antique, souvenirs, batik, SPA products, and fashions from local designers, fine arts, decorations and books. Currently PT. MAP operates five outlets of Alun Alun Indonesia located in Grand Indonesia, Sogo Bali Collection, Sogo Plaza Senayan, Sogo Central Park, and Soekarno Hatta airport....

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