Retailers suffer as Indonesians choose travel over shopping

Source: https://asia.nikkei.com

JAKARTA — Clarks and Gap are among the fashion retailers counting their last days in Southeast Asia’s largest economy.

The U.K. and U.S. brands are both expected to close all of their stores in Indonesia within the coming weeks, following in the footsteps of Debenhams, the British department store chain which shut down by the beginning of this year.

“Sales were falling 50%, 60% from a year ago,” said Rubby Destrison, a spokesman for Anglo Distrindo Antara, the local distributor for U.K. footwear brand Clarks. “Meanwhile our operational costs were rising. So the company’s financials became very unhealthy.”

The company began closing its 25 Indonesian stores during the middle of 2017, and is now conducting a fire sale at its remaining 10 outlets before shutting completely. Its 170 employees will be laid off.

The string of closures has sparked concerns locally about Indonesia’s dwindling purchasing power.

The data suggest that household consumption has been growing at a slower pace compared to previous years. On Monday, the Central Statistics Agency said gross domestic product grew 5.07% in 2017, a slight pickup from the previous year. Household consumption, which accounts for more than half of the economy, grew 4.97% and weighed on overall growth.

But some economists point to a more fundamental reason driving the brands out of business — a change in consumer behavior. Indonesians are no longer spending on clothes; expenditure on clothes and shoes grew only 3.62% last year — making up the lowest segment of household consumption. Instead, they have been saving up and spending more on experiences such as traveling.



Categories: Brands, Business, United Kingdom, USA

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