Department Stores in Indonesia

2020 IMPACT

Decreased sales as lockdown measures lead to temporary channel closures

Department stores will see a drastically poor performance in 2020, as lockdown measures and temporary channel closures cause sales to halve from last year. The large-scale social restrictions (PSBB) led to malls and shopping centres closing.

Sogo benefits from consumer loyalty as it maintains its exclusive reputation

Even during the pandemic, Sogo maintained its reputation as an exclusive upper-middle class department store without having to change its concept or lowering its positioning to gain sales traffic. The brand undertook three main strategies to achieve this.

Major retailers aim to boost sales by making operations more efficient and gaining attention through new outlets

Over the review period, several large modern retail outlets were closed in response to changing public spending trends. These closures occurred due to many players seeking to reduce their operational costs, with outlets underperforming or those that reached the end of their leasing contract, the most likely to go.

RECOVERY AND OPPORTUNITIES

Channel set to struggle against competition from speciality stores

The performance of department stores was already declining prior to the pandemic, due to strong competition from speciality stores. Consumers were already showing a preference to shopping in outlets with a smaller format; this trend was exacerbated by the COVID-19 pandemic as consumers generally avoided places that had the potential for large crowds.

Increased collaboration expected with third party e-commerce players

Alongside department stores developing their own e-commerce platforms, they are expected to increasingly collaborate with third party e-commerce players to achieve a more positive performance over the forecast period. For example, Matahari Dept Store, has collaborated with Shopee to launch the Matahari Official Store.

New outlets expected in non-metropolitan cities and players seek to get around PSBB restrictions

Although there was a decline in the number of outlets during the review period, several new department stores are set to be opened each year of the forecast period. In 2021 and 2022, it is particularly likely that outlets will be reopened or launched in non-PSBB areas to start generating sales.