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Starting a Convenience Store in Indonesia

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Starting a Convenience Store in Indonesia

2020-05-14T23:24:18+08:00February 20th, 2020|0 Comments

The convenience store industry of Indonesia is one of the country’s most profitable. Many business owners enter the industry through the use of franchising, but some choose to enter it after starting a convenience store from the very beginning.

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Convenience Store in Indonesia

The convenience store industry is one of the fastest-growing industries in Indonesia. This is because the presence of international convenience stores is somewhat diminished as most locals have a preference for domestic convenience stores. The most popular of these stores are Indomaret and Alfamart. These two stores are widespread all over Indonesia. Both have thousands of outlets located all over the country. Their popularity is primarily attributed to their fair pricing and convenience. These stores also provide free Wi-Fi and air conditioning. However, Indomaret and Alfamart are not the only convenience stores which exist within Indonesia’s lucrative convenience store industry. The remainder of the convenience stores in the country are smaller convenience stores which have accepted several franchise agreements allowing them to operate such stores.

 

Advantages Possessed by Convenience Stores in Indonesia

Convenience stores are mainly preferred by most locals in Indonesia because of the fair prices of on their products. Unlike other stores, convenience stores offer sitting spaces for ready-to-eat meals. This is a concept which has led to the attraction of many customers who eat while using the Internet with the free Wi-Fi offered. These stores also stock groceries which customers might be seeking.

Convenience stores take into consideration the changes in consumer needs and preferences. They closely monitor consumers’ responses to the products they stock and make changes when necessary. Such stores also observe high standards of hygiene and are fairly conscious of food safety. Unlike other stores, convenience stores ample space for customers in order to allow for free and rapid selection of desired goods; thus, much time can be saved. The presence of many cashiers also helps in accelerating the transaction process. Many convenience stores in Indonesia also offer financial convenience as many banksabanks have put up their automated teller machines (ATMs) in convenience stores. This easy access to cash has made it easier for consumers when shopping.

Another advantage of convenience stores is that they have positive customer relations. Customers’ interests are put first at all times. This has enabled them to retain a large number of customers thus enhancing their credibility in the market. Their 24-hour operational routine also makes it possible for consumers to enter at any given time to shop. This fact is highly appreciated by many long-distance travelers and motorists.

 

Why One Should Start a Convenience Store in Indonesia

Convenience stores are in high demand all over Indonesia. As is implied by their name, they are very convenient for consumers. This is primarily because they offer one-stop shopping options in order to appeal to the needs of consumers. The steady growth of Indonesia’s economy also makes it favorable for either companies or individuals to set up convenience stores. Favorable monetary policies have also eased the cost of living and thus increased the purchasing power of consumers.

The country’s favorable tax regime has also reduced the cost of conducting business activities in Indonesia. This has made it possible for the convenience store industry to grow very quickly during recent years. Since most convenience stores are located strategically in urban centers, they have mass market access; this makes it easy for them to gain returns on investments within a relatively short period of time. In addition, due to their stable income and revenue, it is easy for owners to achieve a desired level of economic stability. Therefore, any entrepreneur planning to set up a business in Indonesia will find that starting a convenience store is a viable option.

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Cost of Starting a Convenience Store in Indonesia

Starting a convenience store in Indonesia can be done in either of two ways. One can either start a convenience store from the beginning or use franchising as a method to enter the industry. Whichever method is selected, several factors have to be taken into consideration such as effective planning and finance sourcing.

If you are interested in starting a convenience store or a business of any other sort in Indonesia, allow us at Paul Hype Page & Co to be of assistance. We have helped many a client incorporate a company in Indonesia. Regardless of the industry you plan to enter or the business entity you plan to select, we will work with you until your new Indonesia-based company is completely and officially established and fully operational.

For many people, franchising is a more suitable option because it does not take up much capital with regard to setup, advertising, and marketing. To effectively start a franchise, initial franchise fees must be paid. A franchisee is required to pay a one-off initial fee which is usually decided upon by the franchisor. Marketing fees will also be incurred. At some point, a franchisee will be required to actively participate in funding a marketing and advertising campaign established by the franchisor. Royalties must also be paid; depending on the franchise, royalty percentage amounts vary. The average percentage in Indonesia, however, is between 5% and 6%. Regardless of the total revenue collected, some franchisors set the revenue at a fixed periodic amount. The fee is often expressed as a percentage of the total gross revenue collected. In some cases, a franchisee may even be obligated to purchase specific products or services from the franchisor or affiliates of the franchising company. However, the franchisee must be cautious as the prices may prove to be uncompetitive in some cases and therefore lead to severe financial losses. Apart from all the franchising costs incurred, the cost of acquiring the required operational licenses must also be considered.

If one chooses to start a convenience store from nothing, several other costs are incurred. For example, the company has to register the business with the Ministry of Trade in order to acquire a business license. After the acquisition of this license, several other licenses must follow. These include a household industry license (PIRT), a Badan Pengawas Obat dan Makanan (BPOM) license, a certificate of insurance, an environmental compliance certificate, and many other relevant documents. A permit from the Ministry of Trade is also required in order to operate several other branches within the country. For one to fully decide on which option is to be selected, both options have to be weighed accordingly. Market trends such as the cost of conducting business activities have to be fully analyzed. Consumer preferences, choices, and market expectations also have to be taken into consideration.

Managing all necessary costs is an important part of a company’s financial planning. If you need any assistance in this area, we at Paul Hype Page & Co are always ready to work with you. We will help you create a financial plan which will allow your company to maximize its profits. In this way, you can be assured that your company will never face any major financial troubles.

 

Licenses and Regulations Related to Indonesian Convenience Stores

The Indonesian government has established regulations which provide guidelines for the operation and management of convenience stores in the country. This is a move which was aimed at safeguarding the country’s traditional markets and stores of which many were at risk of going out of business. The regulations required the ownership of several licenses to allow for effective operation of the convenience stores.

A BPOM license permits convenience store owners to produce and also allows for the distribution of food and beverage products on a large scale. It is a clear indicator that the products being sold fulfill the country’s health standards. This license is obtained from the National Drug and Food Control Agency. A household industry license (PIRT) grants permission to convenience stores to conduct small-scale business activities such as the sale of groceries.

Other than the possession of licenses, convenience stores in Indonesia have to comply with certain regulations. Convenience stores are required to set aside a particular section within their premises for stocking of beverages and other products procured from small-scale retailers and traditional entrepreneurs. This requirement is intended to promote fair competition with the declining traditional retail outlets. The Indonesian Ministry of Trade also restricted the expansion of convenience stores by limiting the total number of existing outlets to a maximum of 250. However, if a company intends to exceed the limit of 250, it must connect with a third-party entity in order to do so. This can only be made possible through the utilization of the franchise model.

This new regulation proved to be unfavorable to companies which owned convenience store outlets as they were forced to shut down operations in many outlets across the country. The Ministry of Trade then decided to review the regulation and made amendments to it. The new regulation granted permission to companies which had originally owned over 250 outlets to resume operations. However, the companies were legally required to ensure that at least 80% of their ingredients and equipment were produced locally.

 

Conclusion

Despite the challenges involved, the convenience store industry is one of the most profitable in Indonesia. The large amount of return on investment makes it easy for owners to generate much revenue. The revenue can also be channeled to other business activities such as expansionSo long as profits are maximizedexpansion. Thus, through the high level of profits generated, the management of daily operations is fairly simple.

 

Paul Hype Page & Co – OSS service provider and Asean Chartered Accountant.

Paul Hype Page & Co. have 3 physical offices in Singapore, Malaysia and Indonesia

Our Firm Goal is to assist Foreigner and Foreign Companies to set up business in Asean.

 

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Starting a Convenience Store in Indonesia FAQs

Other than Indomare and Alfamart, what are Indonesia’s leading convenience store chains?2020-04-02T17:05:26+08:00

Despite their dominance within the local market, Indomaret and Alfamart are not Indonesia’s only convenience store chains. Alfamidi, Circle K, and Lawson are some of the other convenience store chains which have many outlets all over the country.

What hygiene issues do convenience stores in Indonesia face?2020-04-02T17:04:42+08:00

Due to the many customers, it can be difficult to keep a convenience store clean at all times. This has made it necessary for the stores to outsource cleaning services from cleaning companies which handle the cleaning at stipulated intervals. However, this may sometimes prove to be rather expensive.

What security issues do convenience stores in Indonesia face?2020-04-02T17:03:56+08:00

While convenience stores have proven to be effective to consumers, they also face various security challenges such as shoplifting and gang-based crimes. Despite the installation of highly effective security systems, criminal acts nevertheless take place in convenience stores. They are prone to attacks by criminals who break in and leave with large sums of money. These acts often turn away customers who might not feel safe enough to shop in such stores again.

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