#GUEST POST, #INDONESIA, #INSIGHTS

[Snapcart] The Rise of

Minimarkets: Indonesia’s
Shift Away From Super And
Hypermarkets

WRITTEN BY: CYNTHIA LUO ON NOVEMBER 23, 2016

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Minimarkets, a store that sells food and

sometimes other goods, in Indonesia have
been hailed as the “killer” of supermarkets
since 2012. Its rapid growth has been largely
driven by the increasing numbers of
Indonesia’s middle class, where the demands
for products and convenience have steadily
grow hand-in-hand.

Despite the slight slowing down of the

country’s economy in 2015, minimarkets’
growth didn’t show any signs of the same
nature. According to the latest report by Fitch
Ratings, about 1,200 additional new stores—
from Indonesia’s two largest minimarket
operators; Alfamart and Indomaret—opened
their doors in 2015 for business throughout
the archipelago, and the rating agency also
expects an additional 1,000 stores to be open
this year.

Such significant growth and performance for

the retail format are not at all surprising
given that the high demands are matched
with the low operational capital commitment
that the minimarket format has. They can
penetrate areas that are of lower traffic with
more ease than its hyper and supermarket
counterparts.

Moreover, the substantial rise in the number

of minimarkets might also hint at a change in
customer shopping behavior within the field
of modern retail formats.

“ Looking at the current

trend, is it possible that
Indonesians are shifting
their grocery shopping
habits from the bulk-
purchase at hyper and
supermarkets to smaller
but more frequent buys
at minimarkets?

To answer this, we pulled information from

our single-source panel and receipts data to
see if a shift in Indonesians’ shopping
behavior is really happening. To provide a
more current and up-to-date information, all
data are based on real-time receipt figures
taken from January 2016 to August 2016.

Mini is Big!

To look at purchase patterns across the

different retail formats, we decided to look at
the customers’ share of wallet where it shows
which portion of their spending goes. The
graph below is the total Indonesian share of
wallet starting from January 2016 to August
2016.

It shows that not only do minimarkets

dominate the shoppers’ spending, its size is
also growing from below 50% to hitting the
60% mark in August. So, as minimarket’s
percentage rises, supermarkets and
hypermarkets have steadily been losing its
share when it comes to their fraction
within Indonesian shoppers’ wallets.
Hypermarkets and supermarkets lost over
10% total market share in just 8 months.

From the data above, it can be concluded that

there is a shift in purchase behavior in
Indonesia. Has the shift in shopping habits of
Indonesians spread throughout the country?
Or is it only focused in just one part of the
archipelago?

Looking at the number of minimarket chains

in and outside Java as recorded in our data,
Java has more chains. This number also
corresponds with the fact that Java is home
to about 140 million Indonesians, which is
significantly more than half of the entire
population of the country.

With this fact at hand, we look at the same

data sets while adding Java and ‘outside Java’
lists as new variables. Shown on the graphs
below, share of minimart wallets in Java has
risen from 45% in January to just below 60%
in May, then falling to 55% in June but rising
again to 59% in August. It’s surprising that
the share of wallet of minimarket outside
Java is in fact higher than the ones in Java,
despite having a lower number of
minimarkets.

Looking at the share of wallet outside Java, it

shows that people outside Java are spending
more at minimarkets than Java residents, as
its share of wallet never falls under the 50%
mark. In fact, minimarkets’ share of wallet
outside Java has significantly risen to around
66% in August.

What drives the shift?

There is a shift in consumer spending from

the supermarkets and hypermarkets to
minimarkets, but why? Is the shift of
purchase to minimarkets driven by
convenience? Or do other factors play a role
in the rise of minimarket share? We look into
the discount rates and the price perception of
minimarkets.

“ Among all the modern

market formats,
minimarkets claim the
deepest discount rate.

Taken from the receipt data, the graph below

shows that the discount rates in minimarkets
never falls under the 20% mark throughout
January to August 2016.

At the same time, hypermarkets have the

lowest rates with discounts reaching the 20%
mark for their products only around
February, March, and June, and supermarkets
reaching above 20% average discount rate
only around the first three months of 2016.

When looking at the percentage of promoted

products to total basket size, Value on Deal
(graph below), it shows that a good amount
of items within the hypermarket and
supermarkets shoppers’ baskets (above 10%
of the total number of items) are filled with
discounted products.

About 10% or less of the minimarket

shoppers’ baskets are filled with promotional
items. This could mean shoppers buy in
minimarkets because of a cheaper price
perception due to the depth of discount rate
but once they have made a purchase, they
actually buy products that aren’t discounted
due to either product affinity or impulsive
purchases.

With these facts in mind, could price

perception really drive the rise of minimarket
shopping? To find out, we conducted a survey
comparing 14 different product categories for
each retail format on the price perception of
each category.

The 14 product categories we are looking at

include; baby care, baby food, beverage,
breads and pastries, cereals and grains,
confectionary, cooking needs/condiments,
dairy, health, household care, personal care,
preserved food, snacks, and spread.

We asked over 3,000 respondents about the

average price of each category in
minimarkets in comparison to super and
hypermarkets. The results showed that
respondents agreed that the prices in
minimarkets for most categories are identical
with super and hypermarkets, with the
exception for baby care and baby food
categories.

To Conclude

The main driver for the shift of Indonesian

shoppers from hyper and supermarkets to
minimarkets may simply be due to the
convenience factor. Minimarkets’ low capital
requirements allow it to penetrate and exist
in rural areas, making it the only viable
choice for customers in such environments.

While price perception might not play an

important role in the behavioral shift,
minimarkets’ deep discount rates may be
important bait for shoppers to make
purchases at their stores. Furthermore, when
looking at the percentage of promoted
products to total basket size, only 10% are
discounted while the other 90% of the
content within the minimarket baskets are
filled with products that are not discounted.

This proves that minimarkets could be a more

effective outlet for your brands’ product
categories, whether to include it as a key
channel or to continue with this strategy.

THIS ARTICLE ORIGINALLY APPEARED ON

SNAPCART.ASIA’S BLOG ON 4 NOVEMBER. FIND IT
HERE.

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