Interview: Henri Honoris
How can retailers capitalise on changing consumer preferences and increasing brand awareness?
HENRI HONORIS: As GDP continues to grow, Indonesian consumers have experienced a change driven by an urban middle-income segment that is gaining traction and influence. Approximately 50% of the population of Jakarta is between the ages of 13 and 30. This is a very influential segment of the population with particular tastes; they use Facebook and Twitter, go to shopping malls, and enjoy new concepts that are convenient, sophisticated and innovative. They are adopting a global lifestyle like the youth of any Western country.
As such, retailers must be ready to make changes to meet the segment’s needs. We must accept new ideas, integrate foreign influence and blend it with Indonesian tradition, adopt social media as part of our business strategy, and understand and communicate with customers. Indonesia is very diverse, and not just from one island to another. Even in Jakarta, from one neighbourhood to another, consumer patterns change significantly. We cannot close ourselves and focus only on previous experiences. It is a time to be dynamic, and this is where retailers and consumption-driven companies should direct their energy.
What is the optimal balance between modern and traditional markets, and how can it be reached?
HONORIS: Indonesia is a large country demographically and geographically, and as such we should have more than just one business model. I believe there is room for both traditional and modern markets. I often think people have a misperception of what modern markets are by thinking that a modern food market, for instance, is synonymous with imported food. This is not true and impossible to accept. First, because prices of imported food are high, and second, because the supply is not stable. In most cases, modern markets are contributing to additional wealth creation in the country by working together with small and medium-sized businesses and local suppliers. Regarding the optimal equilibrium, this is a pure demand-supply game and depends on the area that we are talking about.
In Jakarta, for instance, as the landscape of the city changes and larger buildings create an increased population density, the role of modern markets becomes crucial as sophisticated supply chains allow retailers to cope with growing demand. For traditional markets in urban areas, however, the key is entrepreneurship and ability to adjust to the new circumstances.
How can government regulations support the expansion of the modern retail sector?
HONORIS: The retail business is highly dynamic and adjusts to changes in consumers’ lifestyle. Entrepreneurs should therefore consult with the government to meet all requirements needed to develop a budding business. In our business plan, we will launch an active franchise system that will support small and medium-sized enterprises. Active franchising promotes entrepreneurship skills and opportunities for the franchisees, as they learn to operate the business. We believe that this type of franchising should be encouraged by the government, as it will provide more sustainable business models for both parties and for the country.
In what ways have supply chain difficulties influenced the current retail sector?
HONORIS: Overall, supply chains in Indonesia are less developed than international levels, even when compared to regional peers. In fact, at this time we should call it a demand chain rather than a supply chain. We are still in a demand-driven model, as the Indonesian supply chain is far from other more developed economies. But we are already at the stage of building up; the private sector is investing in logistics, warehouses, distribution centres, packaging machinery, etc. That is the general trend, and almost every firm is heading in that direction. Now is the time to invest in supply chain infrastructure, and those able to build a strong supply chain will win the race that has just started.
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