Retail Trends & Challenges Retail Trends .. The market Huge and Changing The shoppers Socially Shopaholics The challenges Raising competition and raising cost of doing business Retail Trends .. The market Huge and Changing The shoppers Socially Shopaholics The challenges Raising competition and cost GD Growth Indonesia has it all .. ! Acce|eranng rea| GD growth ! 4.3 ln 2009, 6 ln 2010, 6.2 ln 2011
Grow|ng M|dd|e C|ass opu|anon ! 4 th |argest popu|anon |n the wor|d w|th 23S m |nhab|tants ! Grow|ng urban|zanon ! M|dd|e c|ass (1) now represents over 40 of the popu|anon vs. 2S 10 years ago ! S|ze of m|dd|e c|ass has been grow|ng strong|y at a 7.S CAGk over the |ast 10 years to reach 23 m househo|ds ! GD per cap|ta to reach USD3,000 by 2012, a||ow|ng for greater d|sposab|e |ncome and faster modern reta|| growth !"#$%&' )#$"*"+,-"$. /01. 23""*4&$5. !-6787%8 /+9"+&8,6. !:!);<!. <8,6+ =&>&3"?*&+- 26+@ ABC =&D+&9 68 ?"?#367"+ E,-F 96,3G 8?&+9,+5 "H :!=IJIK Iood keta|| Industry ! 1ota| food reta|| |ndustry - USDS38 ! 1rad|nona| reta|| represents 89 of tota| ! Modern food reta|| (hypermarkets, supermarkets and conven|ence stores) represents on|y 11 of tota| ! Cne of the |owest modern food reta|| penetranon |eve|s |n As|a ! nypermarket has |ncreased at a 1S.1 CAGk over 2004-2009 3 Asia Pacific Landscape In the most developed countries in Asia the modern trade is dominant accounting for 80 to 90% of sales...compared to developing countries 35-55% 75 80 73 61 27 33 38 40 20 90 87 89 82 57 51 48 45 36 Singapore Hongkong Taiwan Korea China Malaysia Thailand Philipines Indonesia 1999 2007 Developing Asian Countries Developed Asian Countries Source : nlelsen Before (Till Early 1990's) Now - Owner Management - Professional Management - Buy & Sell Relationship based on : - Business Building Relationship based on : - Personal Preferrence & sometimes KKN - Customer's preference supported by research data - Advertising Power - Combination of Above & Below The Line activity (Holistic approach) - No Clear Positioning & Price was considered as the main driving - Implementation of Category Management whereby each category force in retailing. is assigned to a role whether it's Destination, Routine, Occasional or Fill In. - Traffic in Modern Trade was about 1,000 - 1,500 trxn/day - Traffic in Modern Trade varies from < 500 to >10,000 trxn/day - Chain with 50+ outlets was only Hero - C4, Giant & HPM combined is almost 150 outlets Alfamart & Indomaret combined is almost 8000 outlets - Clear channel definition - Blurring channel (hypermarket, gourmet + f&b store) - Operating hour : 10 to 10 - Operating hour varied but mostly are still 10 to 10 - Less brand conscious - Very brand conscious Indonesia retail scene Trade Sector Classification & Example of Stores
PypermarkeLs : - Pave 20 or more checkouL counLers - Sell more varled producLs, such as grocerles, elecLronlcs, cloLhs, shoes SupermarkeLs : - Pave 3 Lo 20 checkouL counLers - Sell almosL all caLegory of grocerles MlnlmarkeLs : - Pave 1 Lo 2 checkouL counLers - Sell some caLegory of grocerles uepL. SLores : - Pave 3 Lo 20 checkouL counLers - Sell some caLegorles such as fashlon apparel, elecLronlcs, household producLs Source : nlelsen Retail Trends .. The market Huge and Changing The shoppers Socially Shopaholics The challenges Raising competition and cost Shopplng ls recreauon Asia-Pacic boats the worlds largest percentage of Recreational Shoppers 74% of worlds consumer admit to shopping as entertainment
Source : nlelsen Consumer mosLly shop wlLh famlly/ relauves/ frlends. 21 19 28 17 27 29 24 22 18 79 81 72 83 73 71 76 78 82 Total Jadetabek Bandung Surabaya Makassar Medan SES A SES B SES C1 Shop Together Shop Separately Base: A33 LG?&$M !#?&$M 0,+,*6$@&-N O&H' PBIB ln <>&$65& 8y Clues 8y SLS Source : nlelsen 1oLal !aboLabek 8andung Surabaya Makasar Medan SLS A SLS 8 SLS C Shopping Mode
Base: A33 Q*+,4#8 O&8?"+9&+-8 A+RSBTN;RU.VKS.KKKCN O&H' PBIW MosL of Lhe Shopper use moLorcycle, and usually wlLh company Hypermarkets Supermarkets Minimarkets Traditional Stores Wet Markets Mode of Transportation Motorcycle 47 65 51 10 34 Other public transport 31 18 13 2 17 Car 14 12 1 - 1 Walk 13 11 37 89 47 Accompany by Child 45 54 39 28 21 Spouse 34 50 32 7 19 Friend 22 7 9 1 5 Family (other than spouse and child) 21 21 17 2 7 Alone 14 9 26 67 68 Source : nlelsen Base: A33 Q*+,4#8 O&8?"+9&+-8 A+RSBTN;RU.VKS.KKKCN O&H' PBIW PypermarkeLs or SupermarkeLs packed on SaLurday and Sunday, compare Lo oLher channel sLores Hypermarkets Supermarkets Minimarkets Traditional Stores Wet Markets Time 05.00 08.59 0 0 3 41 72 09.00 11.59 12 15 17 23 13 12.00 14.59 17 12 6 4 2 15.00 17.59 38 42 24 20 10 18.00 19.59 30 26 43 7 3 20.00 22.00 1 4 8 4 1 Length (Hour) 1.5 1.4 0.7 0.5 0.9 Day of Shopping 49% Uncertain, Sat/ Sun 34% 48% Uncertain, Sat/Sun 45% 61% Uncertain, Workdays 19% 63% Uncertain, Workdays 36% 49% Uncertain, Workdays 44% Source : nlelsen Retail Trends .. The market Huge and Changing The shoppers Socially Shopaholics The challenges Raising competition and cost The Challenges Raising competition (direct & indirect) Less margin Higher advertising & promotion cost Cannibalization More demanding & less loyal customers Higher cost of doing business Raising operating cost Yearly increase of minimum wages " 2-5% of revenue depending on the format Raising electricity cost " 1-2% of revenue depending on the format The Challenges Lack of authority control of mall development Unhealthy competition Inadequate supporting facilities like parking & waste management Deteriorating environment Lack of commitment from the tenants on grand opening Sometimes resulted from weak planning of the developers Lack of loyalty program from the mall 9 33 36 113 31 43 6 30 1 1 13 2 10 8aLam SumaLera !abar !abodeLabek !aLeng !aum 8all kallmanLan n18 n11 Sulawesl Maluku apua Shopplng CenLres ln lndonesla (by lsland) Shopplng CenLres ln lndonesla (by lsland) Shopplng CenLres ln !akarLa 13 10 9 24 13 22 3 9 6 !akarLa usaL !akarLa 8araL [akarLa 1lmur !akarLa SelaLan !akarLa uLara 1angerang/8anLen uepok 8ekasl 8ogor
MasLerCard Worldwlde lndex of Consumer urchaslng rlorlues P2 2011 lndonesla
MasLerCard Survey on Consumer urchaslng rlorlues-ulnlng & LnLerLalnmenL
# lndoneslans vlslL elLher qulck serve resLauranLs (80) or food courLs (70) for dlnlng, wlLh a very small proporuon paLronlslng ne-dlnlng resLauranLs and pubs/bars. Powever, Lhe 2 of lndoneslans vlslung pubs/bars do so frequenLly wlLh an average of 6 Lrlps per monLh. # AmusemenL parks are Lhe prlmary enLerLalnmenL ouLleL ln lndonesla, wlLh 63 of lndoneslans vlslung Lhese. 1hls ls followed by 36 of respondenLs who en[oy golng Lo Lhe movles. MasLerCard Survey on Consumer urchaslng rlorlues- 1ravel
# 1he vasL ma[orlLy of lndoneslan respondenLs have noL made an lnLernauonal Lrlp elLher for buslness or lelsure ln Lhe pasL 12 monLhs, compared wlLh a ma[orlLy of respondenLs havlng Lravelled domesucally. # ln Lerms of domesuc Lravel, 73 of respondenLs Look a lelsure Lrlp wlLhln Lhe counLry and only 18 Lravelled for buslness. MasLerCard Survey on Consumer urchaslng rlorlues-Luxury
# 1he luxury goods markeL ls small, wlLh a heavy skew Lowards ownlng [ewelry. Women Lend Lo be much blgger spenders Lhan men ln Lhls area. # 1hree-quarLers of all luxury purchases by lndoneslans are planned ln advance. 18 of respondenLs Lend Lo make lmpulse buys on Lhe spoL, whlle 74 dellberaLe purchases for up Lo 6 monLhs before acLually buylng lLems. # AlmosL all luxury shopplng ls done locally, wlLh 42 of purchases made aL full prlce and 36 done when lLems are on sale. 1hree- quarLers of luxury purchases are noL mouvaLed by any speclal reason, wlLh only 24 buylng Lo celebraLe speclal occaslons. # lndoneslan Consumer Spendlng on LlecLronlcs up More 1han 20 # Sales of elecLronlc goods ln Lhe rsL elghL monLhs rose more Lhan 20 percenL on Lhe back of sLrong consumer spendlng, accordlng Lo an lndusLry group. # Sales from !anuary Lo AugusL were up 22 percenL Lo 8p 16.1 Lrllllon ($1.8 bllllon) from Lhe same perlod lasL year, and Lhe full-year gures could be a 28 percenL lncrease Lo 8p 23 Lrllllon. # LCu/LLu and plasma 1vs led sales, followed by alr-condluoners, refrlgeraLors and washlng machlnes, # Cn a monLhly basls, sales ln AugusL were down 8.7 percenL Lo 8p 2.1 Lrllllon from !uly, as many consumers refralned from spendlng on durable goods durlng 8amadan.
96,250 2,185,901 Total Stock (sqm) 1,481,022 29,626 Quarterly Net Absorption (sqm) 18,345 148,687 YTD Net Absorption (sqm) 94,535 88.1 Occupancy Rate (%) 66.1 260,130 Direct Vacancy (sqm) 501,927 415,484 Base Rent (IDR/sqm/mo) N/A 67,374 Service Charge (IDR/sqm/mo) N/A 482,858 Gross Rent 2 (IDR/sqm/mo) N/A Up to 2013: 438,664 Proposed Stock (sqm) Up to 2013: 4,908
1 Year-To-Date: additional stock from January to September 2011 2 Estimated achieved (effective) gross rent (including service charge) for typical specialty stores located in a prime area
Retail Glossary
Rental shopping malls are shopping centres that are offered for lease by the landlord on a monthly basis. The typical lease term for a specialty store is between one and three years. Strata-titled trade centres are shopping centres that are offered for sale by the developer. A trade centre mostly consists of small kiosks that typically range from 4-20 sqm. The net absorption (take-up) rate refers to the net cumulative increase in space occupied in a particular period. Prime retail space refers to space in a mall that is located in prime areas (i.e. lobby level up to the first three floors). Vacancy rate is the ratio of vacant space to the total stock (leasable area) available. Gross rent refers to the total rent payable by tenants. This is equivalent to the sum of net rent plus outgoings. Base rent is the minimum rent for a retail space without taking into account any add-ons, such as service charges and after-hours utility costs, that make up the total lease package. Service charge is the collective name for the cost of air-conditioning and other services, and management charges passed on to the tenant.
DISCLOSURE APPENDIX CONTAINS ANALYST CERTIFICATIONS AND THE STATUS OF NON-US ANALYSTS. FOR OTHER IMPORTANT DISCLOSURES, visit www.credit-suisse.com/ researchdisclosures or call +1 (877) 291-2683. U.S. Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.
17 January 2011 Asia Pacific/Indonesia Equity Research Strategy
Indonesia Consumer Survey 2011
Mapping the rising consumer spending
Global Equities Research .
Credit Suisse Research Institute
Thought leadership from Credit Suisse Research and the worlds foremost experts
DISCLOSURE APPENDIX CONTAINS ANALYST CERTIFICATIONS AND THE STATUS OF NON-US ANALYSTS. FOR OTHER IMPORTANT DISCLOSURES, visit www.credit-suisse.com/ researchdisclosures or call +1 (877) 291-2683. U.S. Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.
17 January 2011 Asia Pacific/Indonesia Equity Research Strategy
Indonesia Consumer Survey 2011
Mapping the rising consumer spending
Global Equities Research .
Credit Suisse Research Institute
Thought leadership from Credit Suisse Research and the worlds foremost experts 17 January 2011 Indonesia Consumer Survey 2011 13 We believe that companies operating in non-Java areas (or have a nation-wide distribution network) should do better than those focusing on Java areas such as Astra International, Indofood, BBRI, SMGR, and GGRM. Regarding the use of US dollar or 2010 PPP-implied conversion rate (published by IMF) as conversion exchange rates, we found that income distribution among the seven emerging countries varies significantly. Saudi Arabia is much wealthier than others, followed by Russia, China and Brazil. China and Russia look particularly good if we calculate their income on a PPP-adjusted basis. Indonesia and Egypt are the poorest countries, irrespective of the conversion exchange rate. Figure 4: Huge divergence among emerging markets
Source: Credit Suisse Emerging Consumer Survey 2011, AC Nielsen Indonesias low income profile is also suggested by the type of its monthly spending, especially given 29% of Indonesias monthly spending on food and only 10% on saving (Figure 10). Another finding from our respondents is also with regard to the saving method, given 29% of the total respondents say that they did not have any extra money to save. Figure 5: Indonesia monthly spending by category (%) Figure 6: Indonesia method of saving 0% 5% 10% 15% 20% 25% 30% 35% H o u s i n g F o o d E n t e r t a i n m e n t A u t o s H e a l t h c a r e E d u c a t i o n H P C S a v i n g s M o b i l e
p h o n e O t h e r
Source: Credit Suisse Emerging Consumer Survey 2011, AC Nielsen Source: Credit Suisse Emerging Consumer Survey 2011, AC Nielsen Indonesia is among the poorest countries in the seven emerging countries Saudi Arabias household income is 2.2x that of China and 8.9x that of Indonesia Low spending power is reflected in the high proportion of food as a percentage of total income and saving pattern Cur analysls lndlcaLes LhaL $ non-!ava resldenLs exhlblL lower lncllnauon Lo spend $ non-!ava respondenLs exhlblL hlgher aer-Lax lncome per monLh per person Lhan !ava respondenLs (8p2.84 mn per monLh for non- !ava versus 8p2.46 mn per monLh for !ava) $ non-!ava respondenLs exhlblL hlgher savlng (8p0.32 mn for non- !ava and 8p0.24 mn for !ava) per monLh as well as hlgher savlng raLe (18 of aer Lax lncome per monLh for non-!ava versus 10 for !ava). $ 1hus, our analysls lndlcaLes LhaL ouLslde !ava resldenLs, Lhough Lhey earn more, Lhey also save more. We belleve LhaL non-!ava resldenLs exhlblL hlgher purchaslng power. Powever, Lhey are less consumpuve Lhan !ava respondenLs. 1hls lndlcaLes LhaL a sLronger focus on markeung and adveruslng ln ouLslde !ava reglons Lo enuce resldenLs Lo consume more may lead Lo slgnlcanLly hlgher consumpuon growLh of ouLslde !ava reglons, glven Lhe hlgher purchaslng power exhlblLed by Lhls segmenL. !"#$%& ( )*+,&$%*$- !"#$%& ( )*+,&$%*$- !"#$%& ( )*+,&$%*$- !"#$%& ( )*+,&$%*$- Confidential & Proprietary Copyright 2008 The Nielsen Company Shopper Trend Mall 2008 Page 66 r.-,.-.., .. -.... .. .... ...a .-... 0 4 10 14 27 30 15 r..-. .|| .-...a-... s....-. .c.-|.-. r-....| o.|..- o...s.., ..-.s-. zaa. V..- .|.. ...- . a., r.-., a., ,- ...-. . --| o..- .. ...- . --| z, ...-. . ....| o..- . ....| .. |-.. -.-. i.a..-... 1 4 9 20 28 26 12 .... r...... i. ..-..- i.a..-.... -.. ... ...- .|.. ..-..- .r.c Confidential & Proprietary Copyright 2008 The Nielsen Company Shopper Trend Mall 2008 Page 76 12% 15% 17% 24% 38% 11% 13% 29% 28% 21% 25% 34% 33% 26% 28% 17% 14% 21% 16% 16% 22% 12% 8% 12% 30% 32% 41% 44% 51% 57% 58% 63% 64% 68% 76% 78% 22% 7% 12% 10% 4% 4% 13% 18% 42% 23% 5% 13% 18% 13% 11% 12% 11% 13% 3% 59% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% INDI JAP NZ KOR AU HK SING MAL INDO PH TW THA VN CHN Most often Second most often Third most often Base: All respondents Most often eaten take-away restaurant - KFC Confidential & Proprietary Copyright 2008 The Nielsen Company Shopper Trend Mall 2008 Page 77 27% 36% 41% 46% 46% 14% 21% 18% 23% 38% 21% 22% 20% 23% 22% 10% 13% 16% 14% 8% 14% 7% 8% 0% 43% 47% 51% 57% 59% 66% 70% 71% 73% 76% 76% 84% 23% 23% 20% 18% 12% 23% 27% 53% 18% 19% 20% 12% 15% 16% 10% 10% 57% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% VN KOR NZ INDI AU INDO THA MAL CHN PH SING JAP HK TW Most often Second most often Third most often Base: All respondents Most often eaten take-away restaurant - McDonalds Confidential & Proprietary Copyright 2008 The Nielsen Company Shopper Trend Mall 2008 Page 78 2% 4% 9% 14% 11% 3% 3% 9% 11% 5% 12% 16% 17% 17% 20% 8% 10% 9% 14% 20% 19% 20% 13% 0% 6% 13% 13% 16% 18% 25% 26% 28% 35% 39% 48% 55% 2% 4% 2% 3% 1% 0% 1% 6% 22% 6% 0% 2% 4% 3% 8% 9% 18% 14% 0% 48% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% VN JAP SING TW PH AU HK NZ CHN MAL KOR INDO THA INDI Most often Second most often Third most often Base: All respondents Most often eaten take-away restaurant - Pizza Hut