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 of setting up Convenience Stores in Indonesia
Convenience stores in Indonesia are mainly preferred by most locals because of the fair prices 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. This means:
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 travellers and motorists.
Cost of Starting a Convenience Store in Indonesia
Starting a convenience store in Indonesia can be done in either of two ways.
Whichever method is selected, several factors have to be taken into consideration such as effective planning and finance sourcing.
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.
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.
Here are some of the licenses required to start a convenience store in Indonesia:
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.
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 channelled to other business activities such as expansion So long as profits are maximised expansion. Thus, through the high level of profits generated, the management of daily operations is fairly simple.
Starting a Convenience Store in Indonesia FAQs
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.
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.
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.