Interview: Irwan Danny Mussry
How would you describe the current regulatory environment for the retail sector?
IRWAN DANNY MUSSRY: I believe the most important thing is to have people in the regulatory bodies, at every level, who truly understand the importance and impact of this sector. The efforts to protect the domestic industries and boost local manufacturing are praiseworthy; however, these should be looked at more carefully when dealing with international brand retailing.
Jakarta is an international destination with the potential to develop a remarkable competitive edge, given its location. However, issues like the luxury tax are having a negative impact on the expansion of international retailing, and the government’s regulation – under which any brand should have 80% of its products produced in Indonesia – is also in need of revision. There are many international brands that are not large enough to have a manufacturing operation in Indonesia. They can, however, bring retail jobs to this economy and also revenues in the form of sales tax. Should Indonesia continue on its current path, its retail prices will remain higher than those in neighbouring Singapore, for example. We have a huge market that continues to grow, and are on the map in terms of international retailing. International brands arrived in Indonesia long ago, but we are still far from reaching the sector’s full potential.
How important is the relationship between retail and tourism in Indonesia?
MUSSRY: International retailing should be regarded as a support to the economy and to other sectors, especially tourism, as the relationship between the two is very tight in this country. This is true not only for mass tourism, but also for the top-tier tourists who have an unlimited budget. Typically, tourists are attracted to Indonesia by its natural beauty, then decide to spend on local retail outlets. Particularly in the luxury retail segment, we are seeing the opposite happening too. In many cases, high-income tourists come to Indonesia for a special opening or launch of a product, and then take advantage of the location to explore. This is the potential of Indonesia, and this is how international luxury retailing can help develop the tourism sector.
With little growth projected in terms of retail space in Jakarta, what opportunities are there for retail expansion in other cities across the country?
MUSSRY: It is not about having access to retail space, but about the quality and environment of such space for higher-level retailing. Training of the people behind the brand, product or store is much more important at this point. With the exception of the three or four main malls in Jakarta, the service quality in malls needs to improve. This is particularly true in suburban cities and other cities like Surabaya, where retail outlets are more in the form of traditional markets. While these cater to an important segment of the population, there is an opportunity to grow by developing higher-end retailing service too. The private sector has a responsibility to assist in this, draw more investments and add value to the local economy. We need to provide more training to improve services for mall goers in emerging cities.
Does e-commerce have potential in Indonesia, and what factors are influencing its development?
MUSSRY: E-commerce is still small in Indonesia for several reasons. The primary ones are the lack of IT infrastructure, the need for better payment methods and protections, and the lack of a clear and supporting regulatory environment. Today it is still less than 2% of the population that choose to purchase products online in Indonesia, which represents a great opportunity for expansion. E-commerce will grow, and retail businesses should prepare to accommodate this change in trend. The high-end segment, however, is slightly different. The experience is fully realised when a customer enters the store. The key then is to use e-commerce as a tool to become friendlier and cater to the interest of the consumer. We don’t see online retailing as an alternative to offline, but rather as a supporting instrument.
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