Starting a Convenience Store in Indonesia

The convenience store industry is one of the fastest-growing industries in Indonesia. This is because most locals have a preference for domestic convenience stores, thus diminishing the presence of international 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 of 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:

• They closely monitor consumers’ responses to the products they stock and make changes when necessary
• They observe high standards of hygiene and are fairly conscious of food safety
• They have ample space for customers to allow for free and rapid selection of desired goods
• They have many cashiers who also help accelerate the transaction process.
• They also offer financial convenience as many banks have put up their automated teller machines (ATMs) in a convenience store

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, which many long-distance travellers and motorists appreciate.

Cost of Starting a Convenience Store in Indonesia

Starting a convenience store in Indonesia can be done in either of two ways.

1. Tap on an existing franchise
2. Start a new convenience store

Whichever factors are selected, several factors must be taken into consideration, such as effective planning and finance sourcing.

Tap on an existing franchise

For many people, franchising is a more suitable option because it does not take up much capital about setup, advertising, and marketing. Initial franchise fees must be paid to effectively start a franchise. A franchisee must pay a one-off initial fee which the franchisor usually decides on. Marketing fees are also incurred.

At some point, a franchisee must actively participate in funding a marketing and advertising campaign established by the franchisor. Royalties must also be paid, which varies depending on the franchise. 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.

Start a new convenience store

If one chooses to start a convenience store from nothing, several other costs are incurred.

1. The company has to register the business with the Ministry of Trade to acquire a business license.
2. 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.
3. A permit from the Ministry of Trade is also required to operate several other branches within the country.

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 to safeguard the country’s traditional markets and stores, many of which were at risk of going out of business.

Here are some of the licenses required to start a convenience store in Indonesia:

1. BPOM License
   This license permits convenience store owners to produce and also allows for the distribution of food and beverage products on a large scale. It indicates that the sold products fulfil the country’s health standards.
2. Household Industry License (PIRT)
   This license 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 must comply with certain regulations. Convenience stores must 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 is only possible through a franchise model.

This new regulation was 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. This revenue can be used for other business activities such as expanding the business. Thus, through the high level of profits generated, the management of daily operations is fairly simple.