The Weird Logic Behind Indonesia's Mini Market Wars

It's an Indonesian truism if there ever was one: where there's an Indomaret, there's an Alfamart. Or vice-versa. It's so true that you can almost always stand at the front doors of an Alfamart and see the the iconic bullseye logo of Indomaret a short distance away.

I remember seven years ago, it was hard to find a mini market outside Java. I was in Lombok, West Nusa Tenggara, and I had just finished hiking the island's volcano Mount Rinjani when I was wandering the streets of Senggigi looking for somewhere—anywhere—to buy menstrual pads. But there wasn't a single Indomaret or Alfamart in town.

When I returned one year (the beaches are beautiful) the same streets had sprouted a bouquet of mini markets. It was there, on the idylic beaches of western Lombok, that I had a realization: Indomaret and Alfamart are always next to each other. Always.

So why are these two mini markets always so close to each other? Turns out it's a deliberate choice. The two companies control 95 percent of the market, meaning that they both a) have the case to keep opening new stores and b) are unwilling to cede even an inch to their competitor. So you end with a country where the two mini markets are often in direct, like across the street direct, competition.

"That's just the consequence of a market dominated by two companies," said Asnan Furnito, a marketing expert at Bina Nusantara University. "It's head-to-head. Whenever one opens a store, the other one follows because they are the only two with sufficient capital to do this. The others just don't stand a chance. They can't keep up with the rhythm and investment."

Indomaret opened its glass doors in 1988, growing to more than 12,800 stores by 2016. Alfamart opened 1,000 new stories in 2016 alone, plus an additional 200 tiny Alfamidi markets. It's now eyeing a larger share of the market in neighboring Philippines, targeting to double the number of Alfamidi stores there nationwide.

The stiff competition is sometimes too much for the company's executives. In 2014, PT Indomarco Prismatama's Marketing Director Wiwiek Yusuf complained that Aflamart had just copied their business model, right down to the color scheme.

"They learned a lot from us, and some of our employees joined them instead," Wiwiek told local media. "We share the same target market, and while we go to the trouble of scouting a prospective location, they just follow us."

But this market domination is bad for the country's traditional warung. These independent mom-and-pop shops are ubiquitous throughout the country. Most are no bigger than a small shack and they offer customers a wide range of food, drinks, and packaged goods at super low prices. There's actually a law in place in Jakarta that mandates mini markets keep their prices above those found in the warung. But it's often not enough to keep these small shops afloat.

Mini markets, with their air conditioning, overflowing shelves, and near-constant deals, offer a package that's hard to beat. It's like a David and Goliath story, if David had his slingshot and Goliath was a giant who also owned an international arms manufacturer.

But all these competition also means cheaper prices for Indonesia's consumers.

"These mini markets are neck-and-neck," Tutum Rahanta, the head of the Indonesian Retailers Association (Aprindo) told me. "They're competing for space, but as long as it doesn't become an oligopoly, it's OK. It's good for the customers anyway. As long as it's a healthy competition, it's not a problem."