Wednesday, 17 July 2019 | 18:07 WIB

Declining Purchasing Power or Digitization which Causes the Closing of Retail Stores

Illustration: Retail Industry.

JAKARTA, NETRALNEWS.COM - A number of retailers began to fall or close their outlets. This started from PT Modern International which closed all 7 Eleven stores in July, then followed by the fall of Pasaraya Blok M and Manggarai, a number of outlets of Ramayana, and the latest Lotus.

In addition, later this year, Debenhams outlets in Senayan City will be closed.

A number of parties attributed the phenomenon of falling out of modern retail outlets with the weakening of purchasing power, as revealed by BCA President Director Jahja Setiaatmadja.

"So people's purchasing power is dropping, online sales are affecting offline retail stores, ranging from electronics stores, to fashion, shoes, cosmetics and certain industries are very disturbed, all are migrating to online because the cost can be cheaper," said Jahja, Friday (10/27/2017).

This is further reinforced by the fact of sluggish sales at a number of shopping centers such as Glodok Plaza, Taman Palem Mall, Mangga Dua Mall, Plaza Blok M, and Mall Blok M.

But, the opposite condition is shown by shopping centers that are relatively new, including Gandaria City, Kota Kasablanka, Central Park, and Grand Indonesia.

Those shopping centers are almost never empty of visitors. Not infrequently, the line of cars that go to the mall contributes to cause congestion, especially on weekends.

Economist from the Institute for Development of Economics and Finance (Indef) Bhima Yudistira Adhinegara explained that the retail sector has actually been experiencing lethargy since 2014. It can be seen how crowded modern retailers in a number of shopping centers.

"Retail has actually been in turmoil since 2014, we saw that the peak of sales during Lebaran [Eid holiday] was up to 38 percent, but last year Lebaran it was only five percent rising, because there is a contraction in purchasing power, especially in urban areas," said Bhima.

Approximately 40 percent of lower middle class people have lower income. Meanwhile 20 percent of high-income communities hold back spending because there is a shift in consumption and are afraid of tax policies.