0 Indonesian Retailers May Take Sales Hit on Electricity, Wage Costs

Retailers operating in Indonesia may see slightly slower sales growth this year as prices rise due to higher costs for manufacturers, brought on by minimum wage increases and larger electricity bills. “If they can book 10 percent growth in retail turnover, it would be good enough,” said Satria Hamid Ahmadi, a deputy chairman at the Indonesian Retail Merchants Association (Aprindo). Last year’s sales turnover was recorded at Rp 135 trillion ($14 billion), with growth estimated at 10 to 15 percent. Satria said the rise in electricity prices and minimum wages would lead producers to increase prices for the goods they make. 

Aprindo represents 150 modern retailers in Indonesia that account for 30 to 35 percent of the national retail market. Aprindo members operate more than 15,000 outlets all over Indonesia. Inflation picked up last year, and the trend is likely to continue in 2013 on the back of the higher minimum wages and energy-related costs. The consumer price index — a basket of goods and services prices used for measuring price increases — rose 4.3 percent last year, up from a 3.8 percent gain in 2011, the Central Statistics Agency (BPS) said. 

The Jakarta administration raised the monthly minimum wage by 44 percent to Rp 2.2 million this year. The move was followed by other regions, bringing an average 30 percent minimum wage rise nationally. The government will implement a 15 percent electricity tariff increase gradually this year, in increments over the course of four quarters. “We are just retailers; prices depend on producers,” Satria explained. Another executive at Aprindo, Tutum Rahanta, said he knew of five retailers that had decided to make sizeable layoffs, given the cost pressures brought on by the minimum wage increase. 

“I can’t inform how many are laid off. The sure thing is these companies are cutting down on laborers because of higher operational costs,” Tutum said. Indonesian consumers are less optimistic about the economy as they worry about possible inflationary pressure in the coming months and are unsure about the government’s progress in improving the investment climate, a survey from the central bank has found. The survey, which was published on Jan. 7, showed the consumer confidence index fell 3.7 points to 116.4 points in December. In November, the CCI stood at 120.1 points, up slightly from 119.5 points in October. The Bank Indonesia report was based on surveys of 4,600 households in 18 cities across the country.

source : the jakarta globe