Click here

Global Retail News

Monthly, Paris

Inter Ikea signed a franchise agreement with PT Hero Supermarket to enter Indonesia

May 10, 2012
  • Print

This agreement, which will start in 2014 up to 2021, includes store openings whose number is not unveiled. Hero, leader of the Indonesian retail market, operates almost 500 units in the archipelago including Giant hypermarkets, Hero supermarkets, Starmart convenience stores and Guardian drugstores. In South-East Asia, Ikea is pre- sent in Malaysia and Singapore. In Indonesia, the retailer is attracted by a middle class whose consumer spending is important in all sectors. As private consumption accounts for more than half GDP, economic growth in 2012 is expected to exceed 6% and consumption per capita to double to more than $ 3,000 a year over 2015. Its population of more than 240 million inhabitants is the world’s 4th largest behind China, India and the U.S. Last year, Foreign Direct Investments reached the re- cord of $ 20 billion in this country.

Ikea is quite successful in emer- ging countries. For example, in China, its sales rose 20% in the past fi scal year ended August 31 to $ 775 million and are expected to still grow by 20% in 2012. This year, 2 new stores are expected to open and 3 more are already planned for 2013. The aim includes 3 new stores a year between 2012 and 2016. According to Ikea, to expand there is primordial as its stores have diffi culties in ma- naging the customer fl ow: 6 million visitors in 2011 in the Beijing unit and 5 million in the Shanghai one. Generally, on Saturdays, Ikea counts 28,000 visitors in Beijing or the equivalent number of the weekly visitors in a store of similar size in Western Europe.

Ikea will reinforce its presence in tier-one cities and expand in tier-2 ci- ties to balance its portfolio and enter Chongqing and Wuhan…. It plans to expand its partnership with Ikea Centre Group, owner and manager of shopping centers in foreign markets: presently, 3 are due to be completed over 2015 in the south area of Beijing in 2013, in Wuxi in June 2014 and in Wuhan in 2015. Ikea average customer is the 25 to 35-year old Chinese with incomes and education level relatively higher than the average and is generally more opened to the western lifestyle and, in most cases, is owner of his home. This living space is generally smaller than in the West: 70 to 90 sq.m in a high building and often several generations live together. As they spend more and more, they are encumbered and Ikea can help them to be organized.

As concern competition, it is increasingly fiercer led by local players who are not only quick to copy the Ikea model but also to launch their own business in the same sector. As concern India, where single-brand retailers were allowed in January to own 100% of the capital of local operations, Ikea is studying the standards in case it would decide to enter this country. As, the new policy forces retail investors to supply at 30% of their products from small Indian firms. In addition, a transparency lack in the real estate market is noticeable. The country is very attractive by a population whose average age is 26.2. It is the BRICs’ youngest one as almost one third (29.7%) is under 14-year old. Incomes per capita tripled from $ 423 in 2002-2003 to $ 1,219 in 2010-2011, growing by 14.4% on average. It is the world’s 9th largest country by the nominal GDP and the 4th by the purchasing power parity.