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The changing retail landscape in Jakarta
Some 30 years ago, Jakarta was introduced to modern shopping centers
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ome 30 years ago, Jakarta was introduced to modern shopping centers. Initially, they were built to cater for the needs of Jakarta’s affluent to shop for branded goods, particularly fashion products and accessories. All shopping centers in that period were dominated by fashion, apparel and accessories stores — and the department store was the most common anchor at that time.
Then came the Asian financial crisis, followed by the national crisis in 1998. The economic fundamental as well as socio-political settings were deeply shattered. People cut spending as they struggled to recover from the crisis. Yet, these conditions paved the way to new trend.
Triggered by the need for leisure and entertainment at affordable prices, tented cafés and restaurants (locally known as kafe tenda) began to mushroom. The concept, which combined dining with entertainment (e.g. music or live band) at a much lower price than regular cafés or restaurants, proved to be successful.
As this trend continued to spread over the following years, “café culture” gained a strong foothold in Jakarta and it increasingly became a lifestyle amongst diverse strata of population. In 2002, a new concept in retailing centers was introduced in Jakarta with the opening of Cilandak Town Square (Citos). The project, stuffed with cafés and restaurants, gained a positive response and soon became popular amongst Jakarta’s hip communities as well as retailers.
The success of Citos prompted other developers to build retail centers based on similar concepts. It also marked a new era of F&B domination in the market.
Since then, the F&B sector is regarded not only as a supporting component in a shopping center, but is now considered as an effective crowd puller. While many fashion and department stores have suffered slow growth over the past five years, a lot of F&B tenants have outperformed the market.
Furthermore, as the impact of the recent global financial crisis hit domestic consumption, the F&B sector — once again — came up as a savior for landlords in generating visitors to malls.
Simultaneously, more landlords continued to adopt lifestyle concepts in their centers.
Time goes by and shopping centers today are seen as more than a place to shop and buy things.
Instead, they have become a lifestyle destination, a crucial part of urban living and the center for various social activities.
We can practically find anything we want in the mall, from groceries shops, fashion stores, restaurants, cinemas, video arcades, lounges, health clinics to piano lessons and even church services.
During working hours, business meetings and luncheons are held in restaurants and cafes instead of offices or hotels. After office hours, malls are packed with people who visit gyms, eat and socialize.
On weekends, lifestyle elements are even more emphasized as mallers maximize their leisure activities by enjoying various types of entertainment such as family karaoke, cinema and clubbing spots.
Even the economic crisis has not stopped Jakartans from flocking to the mall. Visitor traffic in popular shopping centers across Jakarta remained high despite recent global financial crisis.
During economic hard times most consumers may cut spending on fashion, accessories, electronics and other tertiary goods, but it is difficult to change social habits and the need for leisure. Those habitually “eating out” opt for cheaper restaurants instead of stopping dining out. It is not surprising that while fashion retailers suffer falling sales, F&B and lifestyle tenants are starting outlets in almost every new mall.
These tenants have benefited landlords as they not only help in sustaining high visitor flow during tough times, but they also provide stable income. Multi-function retail centers are making F&B retailers and the like, the “must have” tenants in every new shopping center.
The growing lifestyle concept in Jakarta cannot be separated from the growth of the middle class and the shift in urban lifestyle.
These two factors are the main drivers generating market demand as consumerism and shopping habits change over time. Other factors supporting the growth of lifestyle centers are the pace of urbanization and globalization.
The exposure to the other parts of the world has raised foreign brand awareness thus changing consumer behavior and preferences. In addition, the spirit of consumerism which is more evident amongst young people today is also used to promote lifestyle trends in the city.
Lastly, the scarcity of outdoor recreational facilities (i.e. public parks and open space) and high pollution levels in Jakarta streets has made local residents choose malls for individual, group or family recreation. This has led the way to the birth of “mall culture” in the city. Like it or not, shopping centers are now part of the daily life of Jakarta residents.
Looking ahead, the retail sector will grow positively over the long term. Yet in the near term, the anticipated increase on prices of goods and utilities over the next few quarters, would normally affect purchasing power and spending patterns and thus consumer lifestyle.
This could potentially slow down the recovery of the retail sector including the expansion of lifestyle centers. If that happens, the next question would be “how to maintain the flow and quality of visitors?”
The answer is surely not simple and it will definitely take a lot of effort. Yet, unique concepts and good variety of tenant mix are crucial in every shopping center. F&B and entertainment-based retail is believe to be one of the most essential components to attract and hold shopper interest in the mall.
Furthermore, to help retailers boost their sales volume, special events and marketing programs must be considered part of the mall’s regular agenda. New initiatives such as strategic partnerships between tenants with banks or credit card providers to attract focus groups has proven to be a good marketing tool.
Last but not least, it is important for landlords to show good knowledge of market dynamics and to closely watch the most recent consumer trends. Should all of these requirements be met, a pleasant mall experience can be created, thus helping to maintain the shopping center’s attractiveness, which can potentially increase visitor volume successfully, so that quality becomes even better.
The writer is the head of research at the Jones Lang LaSalle Indonesia and can be reached at
anton.sitorus@ap.jll.com
