Global Business Guide Indonesia

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Erajaya Group | Mr Budiarto Halim
Mr Budiarto Halim

When you look at the Indonesian market, the low income market segment makes up the majority and new brands have been created to try to cater to this. Multinational brands such as Samsung and Nokia have begun to cut their prices to enter this market.

Mr Budiarto Halim, President Director

Erajaya Group was established in the early 1990s, with the incorporation of the company in 1996 as PT Erajaya Swasembada. The company is the leading end to end distributor for mobile and IT products in Indonesia for all the main international brands. What can you tell us about the current positioning and corporate strategy of the group?

Erajaya is the leading distributor and retailer of mobile phones in Indonesia. This sector has been growing tremendously over the past few years, particularly for Blackberry devices. Not having a Blackberry in Indonesia has become ‘social suicide’. It is predicted that there will be 75% growth in the use of smart phones in Indonesia with Blackberry dominating; Android is also becoming very popular. The new phones being offered using the Windows operating system have a lot of potential as does the Apple AOS. We are here to capture that potential as we believe everyone will be connected by mobile phones in the near future. Today, internet penetration in Indonesia is still very low and everyone is accessing the web through their mobile so this trend is set to increase.

Indonesia is an archipelago so mobility is of great importance. In distribution we must have good reach in all the scattered, outlying islands. We have 90 distribution centres and we invest in retail outlets as well as relationships with over 17,000 reseller partners.

Indonesia is a very large market for mobile products; not just phones but also tablets. Tablets are growing very fast; the Samsung Galaxy is dominating the market but Apple is showing steady growth as well.

We are the distributor for all the major brands such as Blackberry, Nokia, Apple, Motorola, Samsung, HTC etc. That means that whenever there is a shift in consumer tastes, we can move very quickly. Nokia is a good example of this as well as Blackberry which has seen a decline globally but Indonesia has proved itself to be a unique market.

We take on the distribution, marketing and retailing for all the major mobile phone brands. For example, we have the largest Blackberry Lifestyle store in Asia. Also we are going to launch a new project called Android Nation in collaboration with Google which will allow people to see all of the features that the Android Operating System offers. Many people in Indonesia buy phones and tablets without knowing what the device is capable of so we will focus on the other key features of the Android phone.

Indonesia is an exceptional market for the mobile phone sector with an average of 1.8 handsets per person in 2011 and a relatively short replacement time. What is your outlook on the future trends that the sector will experience?

Blackberry was a success due to the data packages being offered by the telecom operators and also the free chatting application called Blackberry Messenger. Indonesians like to socialise and connect which is why social media has been so successful here such as Facebook, Twitter, Foursquare and applications including Whatsapp are gaining popularity quickly. Games such as Angry Birds also proved highly successful in Indonesia. These trends coupled with new products such as low cost tablet computers which combine a camera with games, music as well as being a mobile phone will make mobile devices an integral part of everyday life. This is the future for both the global market and Indonesia.

The group launched its own mobile handset brand called Venera. What are the main objectives behind the launch as well as the challenges in establishing a local brand in the Indonesian market?

Venera had been established by a company that we acquired which targeted the lowest end of the market. When you look at the Indonesian market, the low income market segment makes up the majority and new brands have been created to try to cater to this. Multinational brands such as Samsung and Nokia have begun to cut their prices to enter this market which has made it difficult for local brands to compete as Indonesia is a very brand conscious market. Venera has a loyal customer base in the third tier cities so this coupled with our infrastructure gives us a captive market in this segment.

The company has an extensive retail network of small scale stores as well as your recently opened Mega Stores. What can you tell us about your retail expansion and store concepts in Indonesia?

Mega Stores are large scale retail bases of more than 300 m2 and up to 800 m2 such as the one we just opened in Makassar which is 800 m2. The thinking behind this is that smart phones require customer demos to be able to experience all the features that the phone offers so we have to provide enough space for testing as well as television screens for them to try out games and applications. These larger stores also give us greater leverage when negotiating rental leases. Lastly, the headcount per square metre increases with a Mega Store compared to a 30 m2 store which illustrates the efficiency of the concept. Customers have also shown an increasing preference to visit our retail stores as everything IT related is available there such as printers, laptops and accessories.

Apple stores are a good example of drawing people in to try out the products and also to browse the accessories available to them. Therefore accessories will be a key area that we will want to expand on within our retail network.

Alongside your retail store network, have you witnessed an increase in online purchasing by consumers?

Purchasing online through our website has increased by 100% over the previous quarter but the volume is still small. Visiting stores in person and speaking with experts on how to use applications is still the most popular way in Indonesia and I see this trend continuing.

How is the company positioned towards working with international investors wishing to enter Indonesia’s mobile phone sector?

Most of our shareholders are foreign investors, at the moment we have sufficient capital. However for the future as we want to grow and expand, we will need further investment. Such investors will need to have experience in the sector that they can share with us. We have been in discussion with a company engaged in applications in another market as content is an area that we want to be involved in as it is very promising in Indonesia.

What should investors remember about Indonesia as a final message?

Indonesia is a unique country and the growth is there in the economy as a whole and particularly in the telecommunication sector. The buying power of the middle class is increasing while the lower end of the market still offers a large scale consumer market to untap.

Global Business Guide Indonesia - 2012

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