Write a report about the macro environment of
the retail industry in Indonesia.
The political factors influence the retail jeans sector in Indonesia. The political factors include tax systems in the business sector with several reforms and an increased tax rate (Auerbach et al. 2013). The Indonesian government is encouraging the development of entrepreneurship in the medium and small scale enterprises. The political systems comprise of the increase in the export of Indonesia, an increase in the processed commodities and the increase in the manufacturing exports(Auerbach et al. 2013).
The economic factors of Indonesia include the significant GDP growth of Indonesia in the last five years. The country is expected to enjoy a GDP of $1.8 trillion within the year 2017 (Euromonitor.com 2016). The GDP of Indonesia is ranked at 16th position all over the world (Euromonitor.com 2016). The country is expected to witness significant income growth, which implies that there would be a higher purchasing power of the people. There would also be an increase in the household incomes and there would be an increase in the entrepreneurship in the informal market (Euromonitor.com 2016). There is an increase in the e-commerce transactions, which implies that a number of people would engage in social media purchases
The social factors of Indonesia indicate several factors. The total population of the country is expected to increase in the coming years (Novianto Gao and Kuroki 2015). There would be a rise in the middle class, which implies that the there would be strong domestic consumption and strong purchasing capability of the people (Novianto Gao and Kuroki 2015). The Indonesians prefer local brand and show greater trust in the local brands. The men population in Indonesia is expected to wear the product (jeans) at regular basis, which implies a booming market for the jeans retailers.
The technological factors of Indonesia show interesting trends. There is a growth in the smartphone penetration and expansion of the demand for online options. This would make communications faster in the retail industry. There will be massive growth in the E-commerce sector and increase in the online transactions (Setyawan et al. 2014). There would be the vast majority of the internet users who would use mobile devices to perform online activities.
The legal factor of Indonesia also impacts the retail industry of Indonesia (Rahayu and Day 2015). There are strikes, demonstrations and the trade unions often create chaos in the country. There are rigid legislations for the recruitment and termination of employees. The environmental factors include the natural disasters, which are caused due to geographical locations and topography. There is an integration of the sustainable development into policies and programs (Rahayu and Day 2015). The other environmental factors that should be considered are deforestation, strong environmental infrastructures, water pollution from sewage and industrial wastes.
The trends in the retail jeans sector demonstrate that the merchants would continue to implement the in store mobile devices like in store tablets (Rosenau and Wilson 2014). The number of retailers would implement the cloud based solutions and prefer the single view retail management systems. The use of technology would improve the customer experience and help the managers in their day to day operations.
The yoga pants like Athleisure would drive growth because the consumers are looking for comfortable clothing and the clothing that are stretchable (Opiri 2015). The denims demonstrated an increasing demand as the consumers are opting for comfort based garments, which are also stylish. The “stretch” jeans also gained enormous popularity and the jeans that need not be washed frequently was loved by all. The latest trends in this industry show the affinity towards the stretch technology embedded in the jeans, for the purpose of maximum comfort (Hirakubo 2015). The denim has a growing demand of comfort based garments that are fashionable enough for the regular use.
The current value of the jeans increased by 13% in the financial year of 2015 (Euromonitor.com 2016). The product- Jeans was not affected, as it is one of the most common apparels in Indonesia. The product was highly fragmented in the year 2015 (Euromonitor.com 2016). Jeans are the most popular clothing among the people of Indonesia. The volume growth of jeans of male and females is expected to grow phenomenally over the period of the forecast. The present growth value of the men’s jeans is 11% and that of the women’s jeans is 14% (Euromonitor.com 2016). The super premium brands as well as the premium brands are likely to enjoy high degrees of brand recognition. This is due to the fact that they are of premium quality and are comfortable to wear. The premium as well as super premium brands are considered to be status symbols, especially by the elite consumers.
The financial year 2016 saw a moderate increase in the purchase of retail goods, from the point of view of value sales. An increasing number of retailers and manufacturers are increasing their entry to the internet retailing. The retail I industry is expected to show lower constant values of CAGR. Most of the companies felt the impact of a slowing economy, which was a result of the reduction in the consumer purchasing power as well as the Consumer Confidence Index (CCI) (Euromonitor.com 2016). The retail industry in Indonesia possesses great potential in the long term as well as medium term (Magruder 2013). This is because of the fact that the country occupies the 12th position in the field of retail investment (Euromonitor.com 2016). There is increasing shareholder arrangements in the retail sector because of the great support of the community and government support towards the local retail development. There are also factors such as a rising middle class society, lifestyle changes, entrepreneurship and demographics that lead to the development of the local retailers (Magruder 2013).
The retailers are expected to give more payment options to the consumers. The mobile technology would play a major role in the sales of jeans and other apparels (Magruder 2013). The retailers are also expected to gain from both the online as well as offline collections. The retailers would be adopted in-store mobile devices, loyalty programs, cloud based solutions and others.
The Indonesian men are looking for casual clothing like Tshirts, polo shirts, which would help them to sport classic looks (Raj 2015). They plan to purchase predetermined things and the things that are required by them. The shopping is considered as a means of social communication and entertainment for the single men in Indonesia. The men in Indonesia prefer fast services in shopping. The loyalty program is preferred by the married men as they feel privileged to receive discounts and special offers (Chan Kemp and Finsterwalder 2016). The men of Indonesia can be easily persued by the seller to make purchases.
The retail jeans industry in Indonesia faces the threat of new entrants. This is characterized by the low entry barriers, no particular government policies and a number of distribution channels (Taylor 2012). The retail industry also faces the threat of substitute products like the new fashion of atheleisure or the new style statement of jeggings. The high value and performance of the substitutes and the various climatic conditions also contribute to the threat of substitute products. The bargaining power of the suppliers is characterized by the new suppliers and the impact of the price fluctuation of cotton. The industry gets affected by the bargaining power of the buyers like increased use of standardized products, transparency of the information via social media and the low costs associated with switching of brands (Euromonitor.com 2016). The retail industry of jeans faces a high level of industry rivalry. This is due to the large number of competitors, new trends, improved innovations and the presence of disloyal customers.
The retail jeans market is expected to grow in the next five years. In the above chart, the volume of the sales of jeans is expected to grow from 86.5 in the financial year 2015 to 102 in the financial year 2020 (Euromonitor.com 2016). This presents significant opportunities in the jeans market of Indonesia (Memon 2014).
The second chart shows the sales volume of men’s jeans and the significant growth of the same throughout the years. In the financial year the sales of men’s jeans were 37, while it jumped to 42.6 in the year of 2020 (Euromonitor.com 2016). This presents good market opportunities for the retail market of jeans.
The third chart shows the sales forecast of jeans, in the different categories. The different categories include economy jeans, standard jeans, premium jeans and super premium jeans. The economy jeans sales in the year 2015 was 15.9, which increased to 17.7 in the year 2020 (Euromonitor.com 2016). The sales of standard jeans saw a significant increase from the year 2015 to the year 2020. The sales volume of standard jeans in the year 2015 was 68, which increased to 80.4 in the year 2020 (Euromonitor.com 2016). The premium jeans category witnessed an increase from 1.7 in the year 2015 to 2.5 in the year 2020 (Euromonitor.com 2016). There was also an increase in the sales of the super premium jeans category from 0.8 to 1.2 from the year 2015 to the year 2020 (Euromonitor.com 2016). The total jeans sales were 86.5 in the year 2015, which increased to 101.8 in the year 2020 (Euromonitor.com 2016).
The fourth chart shows an increase in the sales of men’s jeans. The men’s jeans sales increased from 37 to 42.6 in the next five years (Euromonitor.com 2016). The sales of the economy jeans increased from 6.5 to 7.1. There was a significant increase in the standard jeans from 29.1 to 33.5 (Euromonitor.com 2016). There was also a significant increase in the premium jeans and the super premium jeans (Euromonitor.com 2016).
The denim jeans industry is the most fragmented industry in the overall apparel industry. The Jeans industry has a latest trend of colored jeans (Khalil 2015). The jeans have become a bare necessity, especially for the younger audience. The sales of jeans are most prominent in the age groups of 13-17 and 25-34 (Mestres 2012). The denim jeans industry holds a significant position in the market as compared to the other categories of apparel. This may be attributed to the prolonged life span of jeans. The retailers of jeans in Indonesia handle the economic conditions quite well. The economic downturn is faced by the retailers as well as manufacturers by the reduction of the prices of their products. The jeans industry is highly competitive as there is a significant amount of brands entering the market (Mestres 2012). The basic attributes of the jeans are contemporary, honest, fashionable, comfortable, universal, approachable, style statement and others (Mestres 2012). The jeans manufacturers can utilize these attributes for the purpose of marketing of their products, which satisfies the needs of each consumer. For example, by focusing on the attributes such as comfortable, independent and stylish, the organization can precisely attract the female consumers (as their inherent characteristics are to be independent) (Mestres 2012).
The various market segmentation methods are behavioral segmentation and demographic segmentation (Wedel and Kamakura 2012). The potential group of consumers should be identified on the basis of various kinds of benefits that the customers are looking for at a particular jeans brand. There are different usage rates for the different group of customers.The organization can segment the market into medium, light and heavy jeans users. The potential market segments of the jeans industry are teens, men, women, high end consumers, old age consumers and others. The primary target audience of the jeans retail industry are men and women (Wedel and Kamakura 2012). The demographic segmentation is concerned with the shopping behavior, income group, attitudes and behaviors of the people. The organization should strive for giving proper attention to the needs and preferences of the consumer. The increasing demand of jeans helps the retail industry to segment their target audience. The organizations should identify the most profitable target audiences that would yield them the maximum revenue.
Auerbach, A.J., Chetty, R., Feldstein, M. and Saez, E. eds., 2013.Handbook of public economics (Vol. 5). Newnes.
Chan, M., Kemp, S. and Finsterwalder, J., 2016. The concept of near money in loyalty programmes. Journal of Retailing and Consumer Services, 31, pp.246-255.
Euromonitor.com. (2016). Global Consumer Market Research Products. [online] Available at: http://www.euromonitor.com [Accessed 18 Jun. 2016].
Hirakubo, N., 2015. Glocalization Challenge: A Small Apparel Company in New York City. Journal of Case Studies, 33(2), pp.78-86.
Khalil, E., 2015. Sustainable and Ecological Finishing Technology for Denim Jeans. AASCIT Communication, 2(5), pp.159-163.
Magruder, J.R., 2013. Can minimum wages cause a big push? Evidence from Indonesia. Journal of Development Economics, 100(1), pp.48-62.
Memon, N.A., 2014. Versatile denim fabrics enjoy unabated global popularity. Pakistan Textile Journal, 63(6).
Mestres, J., 2012. The junior apparel consumer: an ethnographic and case study approach examining the current junior wear client (Doctoral dissertation, University of Missouri--Columbia).
Novianto, D., Gao, W. and Kuroki, S., 2015. Review on People’s Lifestyle and Energy Consumption of Asian Communities: Case Study of Indonesia, Thailand, and China. Energy and Power Engineering, 7(10), p.465.
Opiri, J.A., 2015. The Influence of Self-image Congruity on Perceived Value and Brand Loyalty Concerning Sportswear (Doctoral dissertation, Kenyatta University).
Rahayu, R. and Day, J., 2015. Determinant Factors of E-commerce Adoption by SMEs in Developing Country: Evidence from Indonesia. Procedia-Social and Behavioral Sciences, 195, pp.142-150.
Raj, B., 2015. Pantaloons Fashion & Retail ltd-Optimum Development of Option Plan. NIFT.
Rosenau, J.A. and Wilson, D.L., 2014. Apparel merchandising: The line starts here. A&C Black.
Setyawan, A.A., Dharmmesta, B.S., Purwanto, B.M. and Susilo, S., 2014. Business Relationship Framework in Emerging Market: A Preliminary Study in Indonesia. International Journal of Economics & Business Administration (IJEBA), 2(1), pp.59-72.
Taylor, J.G., 2012. Global Indonesia (Vol. 57). Routledge.
Wedel, M. and Kamakura, W.A., 2012. Market segmentation: Conceptual and methodological foundations (Vol. 8). Springer Science & Business Media.
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