Is It True That Purchasing Power Has Dropped In Indonesia, Causing Business Owners To Close Their Businesses?

Having a business or business that is advanced and always growing is certainly the hope of every business owner. But what if the facts say otherwise? Buyers who come are decreasing, and demand is decreasing, of course, this will affect business performance, and this also happens to the culinary business that I have built since 2014. Many say that this is due to falling purchasing power. The next question is whether purchasing power has fallen in Indonesia causing business owners to close their businesses.

Is It True That Purchasing Power Has Dropped In Indonesia, Causing Business Owners To Close Their Businesses?
Closed writer's culinary business (Photo: Privately owned)

The same question is often asked by business people when gathering together with other business people, especially in the business community. This fact of course cannot be covered, because the decrease in purchasing power certainly results in the business that is opened cannot generate income, even to fulfill the obligations that must be done is not enough let alone to meet other needs.

Is Inflation The Cause Of People's Purchasing Power Falling?

It is undeniable that the decline in purchasing power has slowed down economic growth. Of course, the decline in purchasing power will pose a threat to the economic balance of a country.

There are so many factors that cause a decrease in purchasing power, one of which can now be seen and felt is "inflation".

Even taking data from Bank Indonesia, there is a decrease in the Consumer Confidence Index, which is 123.5 in the July 2023 period. This score is down from 127.1 in June 2023 and 128.3 in May 2023.

The decline in the Consumer Confidence Index in non-July was marked by a decrease in the current Economic Condition Expectation Index and Consumer Expectation Index in July 2023 which were recorded at 113.8 and 133.2, respectively, lower than 116.8 and 137.5 in the previous month.

We all know that high inflation has become the cause of the decline in the purchasing power of the Indonesian people.

The question now is "How can inflation affect people's purchasing power?"

It can be said simply that this inflation makes the value of the currency fall which makes people's purchasing power weak. The weakening of purchasing power is caused by an increase in prices made by sellers, this is done by sellers as a step to get value so that sellers continue to get profits after inflation.

According to Bhima Yudistira, Director of the Center of Economic and Law Studies (Celios), it is estimated that inflation in Indonesia until the end of the year will reach 7% to 7.5%.

When compared to the average minimum wage increase, it will only increase by 1% in 2023. This makes the income owned by the community not in line with inflation that occurs, thus making people's purchasing power very vulnerable to minus 6%.

This fact has been running until September 2023, this can be seen from the number of business places that are closed, not only culinary places, shops are also closed, and malls are quiet, so if this happens continuously, it will make the country's economy fall.

The effect is that the standard of living will become increasingly declining, as necessities become too expensive for people to afford.

Sadly, this is still happening today entering January 2024, and many complain about the same thing. Of course, this makes small business owners have to rack their brains so that the business can still run, employee salaries are paid, and can also support their families. But can this survive in Indonesia?

The Impact of Declining Purchasing Power

Many things a businessman should consider when facing this economic downturn.

Maintaining the business, the losses obtained are even greater. Closing the business, it's a pity that the investment has been spent."

Similar culinary businesses that closed (Photo:

Of course, this is confusing. Speaking in general, when people's purchasing power decreases, economic growth slows down.

This causes many businesses to go bankrupt or suffer losses because people do not buy the products sold."

Steps To Save A Business

One important thing in business so that business can run is the continuous purchase of products.

The steps taken by business people to save businesses in the face of this decline in purchasing power include:

1. Work to optimize sales.

Whatever happens, optimizing sales becomes a major step in saving a business. One of the things that can be done is to promote carefully.

This promotion must also be done carefully because if done ineffectively it will burden the company's costs and of course even erode profits or profits.

2. Reduce costs.

This can be done to reduce price increases, namely by reducing costs incurred in the production process, ways that can be done include:

  • Make efficiencies on factory overhead costs.
  • Avoid excessive amounts of exertion and do it for productive work.
  • Find ways to lower raw materials without degrading quality.

3. Innovate.

Maybe this method is the last way to be able to increase sales, namely by making products that are out of the box. But the main thing to do depends on each businessman.

Is Closing The Business A Step That Must Be Done After The Rescue Steps Have Been Taken?

Of course, many questions arise in the minds of buyers or customers when they see culinary places that they usually go close to or suddenly deliberately close their business.

A café that closed its business permanently (Image: Nita)

Maybe I, you, or other customers, have said something like this, 'There are still buyers coming!", is it not a loss to have to close the café for more than 10 years!, there have been many customers, and various statements made by these customers regarding the closure of their business or place to eat.

Many things actually, why a business owner must be forced to close his business. Of course, a lot has been done to save the business. So it doesn't necessarily close the business immediately.

Even from various discussions carried out, especially culinary business owners, cafes, and restaurants, it turns out that there have been many things, ranging from strategies and alternatives to be able to increase the buyers who come, but this does not affect increasing sales, until in the end the decision to close the business becomes a last choice that must be done.

That's a little note about "Is it true that purchasing power drops in Indonesia causing business owners to close their businesses?". May it be beneficial.


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