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Ramadan fails to goose Indonesian retailers' sales

Nikkei Asia Review - June 28, 2017

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Jun Suzuki, Jakarta – In Indonesia, Ramadan is the most important time of year for retailers as many consumers descend on shopping malls and other locations with bonuses that are paid during the Islamic holy month.

The period of dawn-to-sunset fasting came to an end on Saturday. This summer, however, retailers seemed to have had difficulty luring customers into their shops and getting those who did wander in to open their wallets. Most of Indonesia's more than 250 million inhabitants are Muslims.

At midnight on June 10, a large shopping mall in southern Jakarta hosted its annual Midnite Sale to coincide with Ramadan. The center, which is usually only allowed to open until 10 p.m. by law, kept the lights on until 12 a.m. Stores tried to pull in customers with discounts of up to 70%.

A retail store representative, however, said "traffic is slower than usual." While long lines formed outside some luxury boutiques, many other shops had few customers.

According to a spokesperson for Jakarta Great Sale – an annual event that spans parts of June and July and involves shopping malls and traditional markets in the metro area – this summer's sales target for the event is more than 16 trillion rupiah ($1.2 billion), up 5.1% from last year.

Although new hotels took part in this year's event in addition to 81 malls and 40 markets, sales are expected to grow at a rate below last summer's 8%.

Consumer spending is failing to grow as strongly as it used to because Indonesia's economy can't seem to find its way into recovery mode.

According to a survey by Indonesia's central bank, the offline retail industry has maintained single-digit monthly sales growth this year, compared to almost double-digit growth through last year.

A business executive also blamed Indonesia's tax amnesty program, designed to encourage people to declare hidden assets. The program ended in March, and 960,000 mostly wealthy people took advantage of it.

They were assessed a tax of 2% to 5% of the value of the assets they reported and received prosecutorial immunity. A senior representative of an industry group said the 2% to 5% levy kept money from making its way into the economy and spurring growth.

A spike in the number of online merchants is also giving their offline brethren a hard time. Indonesia's smartphone penetration rate is 50%, which helps to explain why so many Indonesians now shop online.

MatahariMall.com, operated by the Lippo Group conglomerate, and Lazada.co.id, operated by China's Alibaba Group, both held massive Ramadan sales.

Every summer, retailers wage a fierce sales war, hoping to get some of Indonesians' Ramadan bonuses. They also benefit from a custom in which people buy new clothes and other products once the fasting period has ended.

Source: http://asia.nikkei.com/Business/Trends/Ramadan-fails-to-goose-Indonesian-retailers-sales.