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he Jakarta Post’s Rangga D. Fadillah talked with Laurensius Tirta Widjaja, marketing director of Indomaret, one of the largest retail chains in Indonesia, about opportunities and constraints the industry may face in 2011. Despite advantages retail businesses may gain from higher economic growth, several challenges remain. For a clearer overview, the following are excerpts from the interview.

Question: Forecasts say Indonesia’s economy may grow by more than 6 percent this year. For retailers, what does this positive prediction mean?

Answer: I actually hope that the country’s economy can exceed those forecasts, because we have all the potential and resources to make it happen.

For retailers, economic growth always brings positive signals because it means that people’s purchasing power will become stronger. We sell goods, daily need goods, so we are geared up to welcome a stronger appetite to shop this year.

This country has a huge population, more than 230 million, and for us, it means extensive market potential. We are ready to explore the market by expanding our store chain.

Many people still think that modern stores are a threat to traditional markets. How do you deal with people who resist the presence of modern retail stores?

We do not see our stores as threats to traditional markets. Many people misunderstand the presence of modern retail stores in their area. Both traditional markets and modern retail stores have their own market segments. Traditional markets serve lower-income customers, while our stores target customers with higher income.

We accommodate higher-income lifestyles. People want to shop in faster, easier and more comfortable places. They find this in modern retail stores, not in traditional markets. We also see teenagers and young adults as our potential target market, because they are used to comfort and prefer to go to our stores rather than traditional markets.

We try to make people understand the fact that modern retail stores do not kill traditional markets, we just provide more alternatives for people who want a different shopping atmosphere.

Do you see barriers that may hinder your business expansion plan this year?

Yes. We still deal with inconsistent regulatory implementation at the regional level. Regional administrations often have opinions that contradict the central government, so they apply different ground rules and become stumbling blocks for business expansion. We humbly hope the central government can ensure that local administrations understand and obey regulations issued by the central government.

Regional administrations have to understand that we do not come to rob their economic potentials. We offer business opportunities for local businessmen through our franchise programs. We also open new job fields to absorb the labor force in the regions. Our business should be supported, not resisted.

Other issues that may slow down our business expansion in off-Java areas are poor infrastructure, particularly electricity and roads, and difficulties in finding qualified human resources.

What are your strategies to introduce your stores in newly-developed areas?

We always conduct feasibility studies before opening stores in new areas. We try to research an overview of the area’s market potential. To introduce our brand, we also talk with local print and electronic media. In certain less-developed areas, before opening stores we usually conduct corporate social responsibility (CSR) programs first to understand what people really need in those areas.

Do you think that the presence of foreign retailers will threaten your business?

Not at all. Competition is good in business. It challenges us to become more productive, efficient and innovative. In the end, customers will choose the best.

How do you see your local competitors?

So far, we can survive. We surrender the decision to customers. The best stores will lead the competition. The stores that can best understand the market and customers will survive.

We always study the market closely before opening a store. We usually do not open two stores within a 500-meter radius, particularly if the existing store is managed by a franchisee. We respect our franchisees’ rights to good returns from their investments. They have trusted us and it is our responsibility to pay back their trust.

What are your targets in 2011?

We are committed to continuing our business expansion, not only in Greater Jakarta and Java, but also in other parts of the country, like Sumatra and Kalimantan. We opened between 700 and 800 new outlets across the country last year. We hope we can reach the same number this year.

Currently, we have 5,003 outlets nationwide. Our total revenue in 2010 was around Rp 13 trillion (US$1.43 billion). This year we aim for each store producing between Rp 10 million and Rp 15 million in sales revenue per day.

Do you plan to enter the hyper-market business?

To date, we do not have such a plan. We are comfortable with our business now because we have done it since 1988.