LIPPO-MAPLETREE - Lippo Malls Indonesia Retail Trust - Investor ...

Retail Market Overview2.3 Changing consumer behaviour and preferencesThe landscape of consumer purchasing patterns has altered dramatically following the 1998/99 economiccrisis. A December 2004 report by the USDA Foreign Agricultural Service noted the following changes inconsumer behaviour amongst Indonesian consumers:• Extremely price conscious in their purchases and exhibiting less store and brand loyalty;• Private label growing in acceptance;• Younger consumers looking for variety and are less cost conscious;• Consumer advertising growing rapidly and affecting decision making;• Shopping more frequently for food and buying smaller quantities per shopping trip;• Shifting purchases of some staple items to traditional outlets and shopping more frequently at discountvenues in modern centres;• Increased preference for shopping at the supermarket/modern outlet rather than at traditional wetmarkets due to more comfortable shopping space, a more complete range of goods, guaranteed qualityof products (food safety and cleanliness), competitive price, good service, and easier accessibility.Furthermore, the report also mentioned that the patterns of consumer behaviour described above areexpected to continue. Consumers are adjusting to the higher prices paid for imported and local foodproducts, but will remain very selective in their product purchases and will be looking for good qualityproducts at low prices. Promotion will be important as consumers will be more fickle and impressionable,and there will be opportunities to replace traditional brands. Value-for-money will remain important toconsumers, but they will also be looking for greater variety. Over time, brand names should again becomeimportant to consumers and new product introductions will increase.Offering additional in-store services, which is already a relatively common practice, will become even morewidespread. These services include acceptance of credit/debit cards, ATM services, flower departments,laundry counters, food courts, bakery corners and home delivery. Money-back or other guarantees arealso expected to become more common. Ready-to-eat and ready-to-cook meals are becoming verypopular, particularly for expatriates and middle to upper income consumers.2.4 Brand acceptanceSince the Indonesian government lifted the ban on direct foreign investment in the domestic retail industryin 1998, many foreign retailers have been aggressively expanding their presence in the local market. Priorto that, foreign retailers were required to form joint venture companies with a local partner. Since the newregulations came into force, foreign retailers have been allowed to set up a retail business entity with 100%foreign capital.Pioneers that expanded their presence in Indonesia were Continent and Carrefour, both operating ashypermarkets. These two retailers have since merged and now operate under the Carrefour brand. Thepositive reception to this format, which offers a more comfortable shopping experience combined with lowprice tags, has led to other hypermarkets expanding their presence in the country. In 2002, Gianthypermarket, a subsidiary of Dairy Farm, commenced operations, followed by Clubstore whichintroduced their own hypermarket in 2003.The expansion of hypermarkets had an impact on the way people shop in Indonesia. This is especiallyevident in major cities, where the hypermarket concept has matured. The expansion of hypermarkets andother modern formats has changed consumer shopping behaviour from purchasing their householdnecessities in traditional wet markets, to shopping in air-conditioned supermarkets or hypermarkets. Inaddition, the hypermarket format has been boosted by the aggressive promotion of a number of popularbrands.Success in other retail categories followed that of hypermarket. In the department store, Sogo and Metroare considered as leading foreign brands in this segment and are popular among the middle to upper classcommunities in major cities. This has attracted other brands to expand into Indonesia, such as DebenhamsF-25