To keep up with the boom in online shopping, Indonesian brick-and-mortar retailers, including department stores, supermarkets and hypermarkets, are making inroads into e-commerce.

Association of Indonesian Retailers (Aprindo) chairman Roy Nicholas Mandey said 75 percent of its members had already jumped into the online business. The business group has 600 members that run around 3,500 stores across the country.

“We will push the remaining 25 percent to go online within two years. Most of them are regional retailers that only operate in particular cities,” he said during the Internet Retailing Expo Asia 2017 on Wednesday.

Publicly listed convenience store giant Sumber Alfaria Trijaya, the operator of mini market chain Alfamart, last year launched its own e-commerce platform, Alfacart.com, which utilizes the physical stores as delivery and pick-up points.

Similarly, lifestyle retail giant Mitra Adiperkasa (MAP) launched MAP E-Mall, which functions as an “omni-channel” for 150 brands, such as Zara, Sogo, Debenhams and Lotus, with around Rp 100 billion (US$7.49 million) in investment.

MAP Ecom Adiperkasa director Ravi Kumar said the marketplace was created to anticipate changing shopping habits.

“In the past, we had linear purchases: A customer walks into a store and makes a purchase. Now it is nonlinear: Customers search for an item online, look at it and try it at the store, then buy it online,” he said.

For MAP, physical stores are still necessary for some types of goods, such as fashion, food and beverages, with the online stores being complementary rather than competing.

“You need to check if the clothes fit and the food is not expired. It is not like electronics, which are standardized and durable,” he said.

With the “omni channel” concept, customers buying an item online can return it to one of the physical stores and get a replacement there.

Despite having an electronic channel, the major retailer will still expand its physical presence. Last year, MAP opened around 200 outlets across the country.

Kumar added that the e-commerce presence served as an extension to the physical stores to reach rural areas.

Despite having 2,000 stores nationwide, MAP still cannot reach second and third-tier cities due to high logistics and operational costs caused by poor infrastructure.

Accenture digital managing director Mohammed Sirajuddeen said retailers had two options to set up their online business, namely by joining existing marketplaces, such as Blibli, Amazon and Alibaba, or by creating their own, as demonstrated by MAP.

“Premium brands can create their own e-commerce sites, but it’s better for common products to join existing marketplaces, as they have a lower [profit] margin,” he said.

Across Asia, common products and daily goods only represent 30 percent of the purchases made online, while premium products account for 70 percent.

The Trade Ministry’s domestic trade director general, Oke Nurwan, said that in 2016, online transactions still accounted for only 1 percent of a total $250 billion in retail sales. However, the growth was tremendous, as online sales accounted for just 0.6 percent in 2015.

That figure leaves enormous room for growth as Indonesia is expected to see an additional 20 million online customers until 2020, according to an estimate by Trade Ministry.
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— Prima Wirayani contributed to this article.

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