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Financing business in electronic sector expands to regions market.

Indonesia is a big market for electronic products and the market is growing to follow the growing population and advancing economy with improved political stability and investment climate. Indonesia have large population in productive age and fast growing middle class that are potential consumers of electronic products.

Indonesia, therefore, provides a potential market for various electronic products, both consumer electronic products and business to business products.

Electronic products such as home appliances and communications equipment including handphones, computers, and laptops are growing in use by the people. Fast advancing electronic technology results in rapid change in types of products with latest technology and models to remain competitive in the market. Electronic products are needed more to meet the lifestyle for many people.

The growing electronics requirement is also determined by a number of other factors. Financing service is one of the factors especially consumer financing. Almost all outlets of electronics sales offer consumer financing service. Only small traditional electronic shops sell electronic goods with cash payment.

Over the past several years, the number of players in the business of consumer financing for electronic products has increased fast. Direct consumer financing, however, is not the only system offered by electronic shops. They also accept payment with credit card, another type of consumer financing.

Interest rate is in the center of competition between direct consumer financing service and credit card in the market of electronic products. In addition to interest rate competition is also sharp in facility provided in the financing service.

Credit cards are dominant in modern electronics outlets or merchants, but direct financing system dominates payment system in traditional shops in both large and medium cities in the regions.

Sales Of Electronic Products Grow Significantly In 2013

The expansion of electronic industry notably industry producing home appliances and communications equipment such as handphones, computers, and laptops is reflected in the sales which have continued to grow in the country.

According to data at the Electronics Marketer Club (EMC), sales in 2008 were valued at Rp18.3 trillion, up to Rp20.1 trillion or an annual growth of 9.8 percent amid devastating global crisis which also had bad impact on the industry.

In 2010 sales of electronic products even grew more significantly with improvement in the country's economic condition. Sales grew 16.9 percent to Rp 25 trillion. New type of TV set, LCD TV, began to replace tube TV sets. However, TV sets with 32 inches tube remained competitive facing LCD TV of 32 inches because of the high price difference.

Sales of electronic products in 2012 rose again in value to Rp28.9 trillion, or an increase of 15.6 percent from Rp 25 trillion in 2011. The increase was attributable mainly to replacement of old models by consumers that want the type with higher technology.

TV sets were the largest contributors to electronics sales in 2012. The replacement of tube TV sets with the flat type of LED and LCD also contributed significantly to the rise in sales. TV set with flat monitor are more expensive.

Sales of TV sets were valued at Rp11.6 trillion, or 40% of the total electronics sales turnover in 2012. The increase in sales in 2012 was attributable partly to Euro Cup soccer championships in Poland and Ukraine in June-July, 2012.

The second largest contributors are refrigerators, the sales of which were valued at Rp2.92 trillion, or 22.9% of the total turnover, followed by air conditioners the sales of which were valued at Rp1.48 trillion or 11.6% .

Meanwhile sales of other electronic products such as displayers and DVD and audio declined. Sales of audio set in June 2012 were valued at Rp14.02 billion, down 13% from Rp16.1 billion in 2011. Sales of disk players and DVD fell 3% from Rp71.2 billion in May 2012 to Rp69.3 billion in June 2012.

According to EMC, in the first half of 2013, sales of electronic goods in value in 2013 were dominated by TV sets accounting for 37.5% or Rp6 trillion, followed by refrigerators with sales valued at Rp3.3 trillion or 20.62%, air conditioners Rp2.5 trillion or 15.6% of the total sales value and others.

Total sales of electronic goods were increased to Rp33 trillion in 2013. The increase in the sales value was attributable to price hike early that year, and an increase in demand.

Meanwhile in 2014 the sales were estimated to increase reach Rp37 trillion or rose 12% compared with 2013. The increase in the sales value was attributable to price hike early that year and an increase in demand of LED TV.

Modern Retailers Main Selling Center Of Electronic Products

Currently sales of electronic products are made mainly through traditional electronic shops, special stores and modern retail market outlets (hypermarket). Traditional stores account for 70% of sales of electronic goods with hypermarkets accounting for 20% and special electronic stores for 10%.

Competition in the market of electronic goods is getting sharp especially in price. For example, Electronic City continue to open more outlets to increase market share. Most of its outlets are in the Greater Jakarta area. Currently Electronic City has the largest share of 40%-50% of the sales recorded by electronic special stores.

In addition to open more outlets Electronic City improved its service and offers cheaper price to attract consumers. TV sets account for 40% of its sales in value, with household electronic goods accounting for 20%. Electronic City practiced cross subsidy. It sets lower profit margins for goods selling fast. The profit margin for goods not selling fast such as hand phones and laptops and computers are wider.

The rival of Electronic City among special stores are Electronic Solution and Best Denki. Over the past year, there has been a new comer, White Brown Electronic, operated by PT. Home Centre Indonesia which also operates Informa (furniture retailer).

Payments In Modern Retail Outlets Dominated By Credit Cards

Electronic special stores offer payment with credit card without interest to attract buyers of electronic goods. LotteMart cooperates with state lender Bank Negara Indonesia offering BN I credit card holders to buy electronic goods from Lotte Mart to be repaid by installments in 6-12 months without interest.

Carrefour has the support from associate Bank Mega, both subsidiaries of the CT Group. Holders of Bank Mega credit card are entitled to a 5% price discount.

Special store such as Best Denki cooperates with a number of banks to facilitate such transactions. Holders of credits cards of BNI, Bank Mandiri, BCA, CitiBank, HSBC, Mega, and Amex Danamon are entitled to a 10% discount with payment by installments without interest.

Meanwhile, multifinance companies offer direct financing service to buy electronic goods from large and small electronic stores in large cities like Jakarta. Players in this business include FIF Spektra, Adira Kredit (PT Adira Quantum Finance), Source Kredit in cooperation with electronics stores such as in the Glodok shopping center in Jakarta. Credit financing services such as Kredit Plus and AEON are credits offered to buy electronic goods from special stores and chain stores and electronics shops .

Kredit Plus of PT Finansia Multi Finance has a big chain with units all over the country. Kredit Plus service, which is offered to buy motorcycles or goods electronic set a financing target of Rp 2.6 trillion in 2012.

AEON Credit of PT. AEON Credit Service Indonesia reported financing service totaling Rp180 billion in 2011. In 2012 its financing target is set at Rp360 billion.

AEON cooperates with retail chains like Carrefour, Giant, Lotte Mart, and Hypermart. AEON also cooperates with a number of electronics stores and furniture shops. AEON also plans to establish cooperation with similar Informa and Ace Hardware.

Currently AEON has 100 counter booths (payment counter) in the Greater Jakarta area, Bandung, Semarang, and Surabaya. It plans to open new counter booths in Pekan Baru and Makasar.

Some multifinance companies open its own electronic outlets such as Columbia.

Credit Card Competition In Interest Rate

The interest rates offered by credit card issuers are lower than non credit card financing services. Credit card issuers are aggressive in promotion with payment by installments without interest in 3 up to 12 months.

Meanwhile, the credits offered by direct financing companies or multifinance companies, carry interest rates as high as 35 percent to 45 percent per year. Therefore, it is difficult for multifinance companies to expand operation to modern retail outlets.

Multifinance companies slap a high interest rate as they face higher risk of non performing loans as the creditors of multifinance companies are generally financially less reliable than holders of credit cards. Around 12 percent of the interest gains is used as provision against bad debts and to cover cost of surveys.

Credit card holders do not need to make new applications every time a new deal is made. Application is needed only once for the credit card. User of multifinance credits have to propose every time they want to buy goods with credit and the proposal have to be approved by the financing agency.

The advantage of using direct financing is that the process is much simpler. Consumers of direct financing are more concern with the requirements that are simpler and the installments being within their reach.

Credits offered with direct financing is generally smaller averaging with the minimum price of Rp 500 thousand.

Financing Companies Expand Operation To The Regions

Modern retailer outlets have expanded mainly in large cities, but in the regions and medium and small cities traditional stores are still dominant. Direct financing service, therefore, are more dominant than credit cards.

Players like FIF Spektra concentrates operations in medium and smaller cities like Surabaya, Banjarmasin, Balikpapan, Solo, Tegal, Pekalongan, Surabaya,

Jember, and Banjarmasin. Players establish long term cooperation with a number of electronics shops.

FIF Spektra has a chain of more than 500 outlets all over Indonesia. FIF Spektra has established cooperation with a number of modern stores like Giant, Carrefour, Hypermart, Electronic Solution (ES), Infinite, and more than 3,200 traditional electronic shops all over Indonesia. FIF Spektra also has established cooperation with Online Stores such as and Currently FIF Spektra has a 15% share of the financing market. It operates with 51% of its financing service in Java and 49% outside Java.

FIF Spektra's sources of funds include bank loans, bond sales, and own funds. In 2012 total financing for electronic credits provided by FIF Spektra reached Rp1.25 trillion, up from Rp.960 billion in previous year.

Adira Kredit (PT Adira Quantum Finance) recorded total financing at Rp1.44 trillion up to the third quarter of 2012. Currently Adira Quantum has a chain of 304 business units including 34 branch offices, 17 representative offices, and 253 outlets in more than 250 cities in Indonesia.

Success in expanding operations to the regions has also been recorded by a major player Columbia which has a chain of business units in 72 cities in Indonesia. Columbia, however, has no cooperation with electronic shops, instead it has opened own outlets which also serve to offer consumer financing.

The business operation of Columbia have expanded with outlets covering small cities like Klaten and Wonosobo in Central Java. Columbia has also expanded operations in Sumatra, and Bali, West Nusa Tenggara, Kalimantan and Sulawesi. In Java it has outlets in 31 cities.


Indonesia is a big and potential market for electronic goods such as home appliances including TV sets, AC, refrigerators, and washing machines, as well as communications equipment such as handphones, laptops, and computers. Demand for the products are growing because of growing population and the tendency among the consumers to use the latest products with new models and higher technology to replace the old ones.

Electronics sales value has increased from year to year. According to EMC, in 2012, electronic sales were worth Rp28.9 trillion in the country or an increase of 15.6 percent from Rp25 trillion in the previous year.

Based on the trend and the country's economic growth, which was estimated at around 5.75%, electronic sales in 2013 was increased 14.2% to Rp33 trillion. Meanwhile in 2014 the total sales were estimated to increase reach Rp 37 trillion. The increase in sales in this year, attributable to World Cup championships in June 2014.

Sales of electronic products have been made mainly through traditional shops, special stores and modern retail outlets. The main players in special stores include Electronic City, Electronic Solution and Best Denki, which have branches in almost all big cities in Indonesia. Among retail chains selling electronic goods include Carrefour, Hypermart, LotteMart and Giant.

Buyers of electronic goods from modern retail outlets are mainly people of middle to high income brackets and buyers of electronic goods from traditional stores are dominated by middle to low income people.

The increase in the market value is partly attributable to interest shown by banks and non bank financing agencies in providing credit facility. Almost all outlets of electronics accept buyers with payment system of credit cards and other forms of consumer financing. Only small shops require payment in cash.

Competition is sharp among banks in providing consumer financing service . Major banks, which have expanded operation to this industry by issuing credit cards include Bank Mandiri, BNI, BRI, BCA, and Citibank. Major multifinance companies offering direct consumer financing service include FIF Spektra, Adira Kredit, Columbia, AEON and Kredit Plus with business units in almost all parts of Indonesia.
Sales of electronic products in Indonesia, 2008-2013
(Rp Trillion)

Year    Television    Refrigerators    AC    Washing     Other
                                             machines   products

2008       6.77           3.82        2.87     1.62       3.20
2009        7.6            4.0        3.2      1.8        3.5
2010        9.5            4.6        3.5      2.2        3.7
2011       10.2            5.0        4.0      2.5        3.3
2012       11.6            6.0        4.7      3.0        3.6
2013       13.5            6.8        5.2      3.5        4.0

Year    Total   Growth (%)

2008    18.28
2009    20.1       9.9
2010    23.5       16.9
2011    25.0       6.4
2012    28.9       15.6
2013    33.0       14.2

Source : Electronics Marketer Club (EMC), Data Consult processed

Types financing service to pay for electronic
goods from modern retail markets

Electronic retail outlets   Types of financing
Special store :

Electronic City             Credit cards

                            Direct financing
Electronic Solution         Credit cards

                            Direct financing

Best Denki                  Credit cards

Columbia                    Direct financing
Hartono Electronic a        Credit cards
Glodok Electronic           Direct financing
White Brown Electronic      Credit cards
                            Direct financing

Ritel jaringan :

Carrefour                   Credit cards

                            Direct financing
Hypermart                   Credit cards
                            Direct financing
Lotte Mart                  Credit cards
                            Direct financing
Giant                       Credit cards
                            Direct financing

Electronic retail outlets      Players in financing service

Special store :

Electronic City             BCA, Bank Mandiri, ANZ, Bank CIMB
                            FIF Spektra
Electronic Solution         BCA, Permata Bank, Bank
                            Mandiri, Bank BRI, Bank Bukopin,
                            Bank Mega, Bank Danamon, Citibank,
                            HSBC, CIMB Niaga, Standard
                            FIF Spektra, Adira Kredit,
                            AEON, Kredit Plus
Best Denki                  BCA, BNI, Bank Mandiri, Citi
                            Bank, HSBC, Bank Mega, Danamon
Columbia                    Columbia
Hartono Electronic a        BCA
Glodok Electronic           Adira Kredit
White Brown Electronic      BCA, Bank Mandiri, Citibank, HSBC
                            AEON, FIF Spektra

Ritel jaringan :

Carrefour                   Bank Mega, BCA, Citibank, Bank
                            FIF Spektra, Adira Kredit, AEON
Hypermart                   BCA, BNI, Bank Mandiri, CIMB Niaga
                            FIF Spektra, AEON, Kredit Plus
Lotte Mart                  BNI, Bank Mandiri, BCA
                            FIF Spektra
Giant                       Bank Mandiri, BCA
                            FIF Spektra

Source : Data Consult, processed

Reguler interest rates, period, limit of credit buying with
credit cards and direct financing, 2013

Players                           Type of         Period of
                                 financing       installments

Bank Mandiri                    Credit cards         6-12

Bank BNI                        Credit cards         3-24

BCA                             Credit cards         3-24

Bank Mega                       Credit cards         3-12

Bank Danamon                    Credit cards         6-18

CIMB Niaga                      Credit cards         3-24

Citibank                        Credit cards         3-24

ANZ Bank                        Credit cards         3-12

UOB                             Credit cards         3-24

HSBC                            Credit cards         6-12

FIF Spektra                        Direct             12

Adira Kredit (Adira Quantum   Direct financing       6-24
Columbia                           Direct             12

AEON                               Direct            6-18

Kredit Plus                        Direct            6-12

Players                        Interest      Buying Limit

Bank Mandiri                    05-0.7      Based on credit
                                              card limit
Bank BNI                        1.6-1.9     Based on credit
                                              card limit
BCA                            0.75-1.25    Based on credit
                                              card limit
Bank Mega                      0.77-1.45    Based on credit
                                              card limit
Bank Danamon                   1.9-2.29     Based on credit
                                              card limit
CIMB Niaga                      1.9-2.3     Based on credit
                                              card limit
Citibank                       1.45-1.68    Based on credit
                                              card limit
ANZ Bank                       1.79-2.19    Based on credit
                                              card limit
UOB                              1.67       Based on credit
                                              card limit
HSBC                           0.69-2.25    Based on credit
                                              card limit
FIF Spektra                    2.9-3.75     Minimum Rp 500
Adira Kredit (Adira Quantum     1.5-3.5     Minimum Rp 500
Finance)                                       thousand
Columbia                       2.9-3.75     Minimum Rp 500
AEON                           1.65-2.65    Minimum Rp 500
Kredit Plus                    1.15-1.30    Minimum Rp 500

Source: Data Consult
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Publication:Indonesian Commercial Newsletter
Geographic Code:9INDO
Date:Apr 1, 2014
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