Invasion of Mini-marts in Indonesia: What Does It Mean for eCommerce?

The growth of mini-marts in Indonesia has been exponential since 2012!

While supermarkets and hypermarkets are claiming larger wallet share in other parts of Southeast Asia, in Indonesia, mini-marts are definitely ruling the scene.

A study conducted by Snapcart in 2016 shows not only mini-mart wallet share is the largest, but it is constantly growing.

While in January 2016 the mini-mart wallet share was below 50%, by August 2016, it reached 60%.

Why mini-marts are growing at rapid pace in Indonesia?

Deeper rural and semi-urban penetration and higher discount rates are the major reasons why Indonesians are more prone to shop from mini-marts.

While effects of this mini-mart growth on supermarkets and hypermarkets have been direct, eCommerce has not remained unaffected too!

The mini-mart invasion has shaped and influenced Indonesian eCommerce market in many ways.

Deeper Discounts for Price Sensitive Market

Price sensitivity is one of the key features of Indonesian market. As per the recent data, the discount rates in mini-marts have always stayed above 20% during the study period, i.e. January to August 2016.

Whereas, in the case of hypermarkets the discounts rates reached 20% during February, March and June only.

In supermarkets too, the 20% mark in price discounts can be seen during the first three months of the year only.

This analysis shows the major reasons why Indonesians are shopping from mini-marts!

Deeper discounts or rather lower price perception (as buyers are seen to make repeat purchases for once discounted products, even when the price is not discounted at all) is the key to mini-mart success here.

So, how does this shape the eCommerce scenario in the country?

To compete with mini-marts, more and more eCommerce businesses are now forced to create lucrative discounts on product categories such as food, baby products, personal care, household care etc.

The good news is, although the market is highly sensitive to discounts and deals, it is the price perception rather than the actual price that the marketers need to worry about.

Keeping with the mini-mart trends, eCommerce customers too are more likely to make purchasing decision based more on product affinity, rather than discount rates!

Pro Tip for eCommerce Businesses: Temporary discounts can be offered on valued products which will in turn create brand loyalty and product affinity, resulting in repeat purchases even without discounts.

Last Mile Delivery is The Key to Success

While deep discount rate is definitely a deciding factor, deeper penetration of mini-marts is another major reason for their success.

By nature, mini-marts call for lower capital investment and smaller operation areas; and thus, they can be set up in low traffic areas as well as rural and semi-urban areas.

As per the 2016 reports of Fitch Ratings, Alfamart and Indomart, the two largest mini-mart operators in Indonesia has opened 1,200 new stores in 2015. The agency predicts opening of 1000 additional stores in next year.

This data displays the deep penetration level of mini-marts across the country!

In case of eCommerce, where battle for the last mile delivery is already raging, this data has a huge significance.

Delivery network being the back bone of any eCommerce business, more and more retailers are focusing on faster product delivery for capturing bigger market share.

On one hand, traditional delivery system is being constantly upgraded and localized to reach out to remote areas, high-tech delivery solutions are also being researched thoroughly for capturing the last miles.

For many semi urban and rural areas where road condition is not ideal for delivery vehicles, drone delivery and droid delivery is already being attempted.

Creating warehouses in urban, semi-urban and rural areas can also be a solution for enabling faster delivery services.

Pro Tip for eCommerce Businesses: Ensure deeper and faster delivery services to compete with mini-marts!

Last Words

Mini-marts are definitely coming out as BIG for Indonesian market!

This rapid growth of mini-marts is not only affecting the sales curve of hypermarkets and supermarkets, but also leaving its mark on eCommerce businesses.

However, there is a silver lining too!

With higher penetration in rural markets, mini-marts are perfect for brand promotions beyond the limits of urban and semi-urban localities. eCommerce businesses can leverage this fact to their advantage by tying up with these small format stores as their product warehouses and pick up locations.

With omnichannel commerce becoming more and more commonplace in Southeast Asia, eCommerce businesses can leverage the deeper penetration of mini-marts by using them as their product pick-up location as well as localized warehouses.