Indonesians spend more regardless of financial crisis

 Wednesday, 17 June 2009

The Jakarta Post

The Indonesian retail market, in the first four months of the year, remains on a positive trajectory as consumers in both modern and traditional markets continue to spend more - regardless of the impact of the financial crisis on the economy.

A survey conducted in seven cities by the Nielsen Company revealed that consumer spending grew by 7.4 percent as of the end of April and is expected to accelerate with the easing of the liquidity crisis.

"The Indonesian retail market is still doing quite well despite the economic crisis," Nielsen executive director for retail, Teguh Yunanto, told reporters in Jakarta on Tuesday.

The survey reveals the retail market, both in modern and traditional sectors, grew consistently from January to April with modern retailing growing by 13.4 percent, while traditional retailing increased by 4.1 percent.

The impact of the crisis in the first four months, however, was clearly present, Teguh said.

The same period last year saw consumers spending grow by 21.9 percent and finish at 20 percent by the end of the year.

"Our country's situation is much better than other countries in Asia," he said.

By the end of this year, he said, consumer goods sales could grow up to 15 percent due to lowering inflation, modern retail expansion and product innovations.

Teguh said urban consumers still managed to purchase slightly more units in their shopping, in rural areas, the overall level of purchasing dropped while the frequency of shopping rose - reflecting new spending patterns.

"At least the growth is still positive and we predict it will improve in the second semester due to seasonal and school holidays," he said.

In addition to the change of consumer behaviour, the survey also found that sales of goods such as shampoo, powdered detergent, baby diapers and skin care products grew significantly in the modern trade sector.

Sales of powdered milk grew by 34.8 percent, while sales of instant noodles grew by 53.4 percent in supermarkets and hypermarkets.

Only branded cooking oil showed signs of a slowdown across the board.

Teguh suspected the movement from branded to non-branded products was a reflection of shifting spending patterns rather than a true contraction in consumption levels.

"Non-branded cooking oil, locally known as minyak curah, continued to be purchased at high rates," Teguh said.

Traditional markets, which make up 80 percent of the market share, benefitted from consumers shifting to cheaper shopping destinations and avoiding unnecessary spending.

The increase in consumer spending, Nielsen said, occurred despite modern retailers making significant cuts to their advertising budgets. January to April, Teguh said, saw retailers's spending on advertising drop by 20 percent to Rp 32 billion (US$3.14 million).

The survey analysed samples of advertisements for seven daily products: Powdered milk, shampoo, instant noodles, detergent, diapers, skin care products and cooking oil.

The duration of advertisement for cooking oil, powdered milk, shampoo and diapers decreased, while those for powdered detergent and skin care remained stable.

"The duration of cooking oil advertisements, for example, decreased to four weeks from 13 weeks last year," Teguh said.

Only the duration of promotions for instant noodles increased to eight weeks from seven weeks last year, he added.