Retail Business in the Era of Budget Cuts
Monday, May 19, 2025
Many modern retail businesses are experiencing difficulties due to changing consumer behavior. They must be strategic in targeting their market.
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EFFICIENCY and adaptation are key in the modern retail business in Indonesia. Failure to satisfy consumer demand could end in bankruptcy. This is what happened to GS The Fresh, a supermarket originally from South Korea, which had eight branches in and around Jakarta. There is a similar story to Lulu Hypermarket. This huge supermarket from the United Arab Emirates, with its first branch in Cakung, East Jakarta, opened in 2016 by President Joko Widodo, has streamlined its operations into smaller business units.
Many accuse e-commerce of killing the modern retail business. This view is not entirely mistaken, given that the digital market has a wider reach, faster transactions, lower prices, and more flexibility in transactions. But all these benefits are now being enjoyed by modern retailers, which have also begun to offer online shopping.
The decline in the modern retail business is more the result of changes in consumer behavior. In the 1990s and 2000s, hypermarkets were a symbol of Indonesia’s modern economy. Many families routinely spent two or three hours strolling from aisle to aisle with huge trollies doing their household shopping after payday.
But now this shopping habit has almost died out. Some claim that shopping malls are quiet because of the Covid-19 pandemic. But the fact is that long after the pandemic ended, many families choose to do their household shopping more frequently. This is to save money, to reduce the risk of waste, and because of limited storage space. After all, everything is now available in minimarts, only a stone’s throw from home. This way of shopping is clearly more efficient.
The need to save money is because of a fall in people’s purchasing power as a result of a drop in incomes, a wave of layoffs, and the impact of the government’s budget cuts. One indication is the two consecutive months of deflation at the start of 2025. This is the first annual deflation in a quarter of a century.
Even Ramadan and Idul Fitri, when shopping is always at its highest level, did not lift household consumption. After Idul Fitri, it was the same. According to the latest Bank Indonesia Retail Sales Survey, expectations of retail sales fell for a number of products, from food and beverages to clothes and household appliances.
But this does not mean the end of the modern retail industry, because at the same time, a number of supermarkets, both local and foreign, are expanding and are still crowded with shoppers. Their strength is that they have a clear target market. There are supermarkets targeting higher-income customers. They compensate for their high prices with premium quality goods and a comfortable shopping experience. Supermarkets specializing in imported goods are included in this segment.
On the other hand, there are retailers that focus on daily needs at competitive prices. These supermarkets are still flooded with buyers even though they are rather cramped. Customers are not looking for comfort when they shop. They just want to buy goods at lower prices than they find in the minimarts near their homes.
