Sun, 28 Feb 2010
From: The Jakarta Post
By Wendy Haryanto, Consultant
Bitter competition in retail industry in Indonesia started in the early 1970s with the opening of modern supermarkets, followed almost three decades later by the first hypermarket, namely, Continent in 1998 (taken over by Carrefour later). Today, Indonesia houses three major hypermarket players with total combined of almost 150 stores and 200 supermarkets. Few other foreign players are in queue to have a taste on Indonesia.

Indonesia with its growing population is a very attractive proposition to any retail operator in the world. Whether it's fashion or food, the number is simply too tempting to resist. Segmentation of the income level is only a concern to the fashion retailer.

For supermarket operators, the growth potential being offered is highly alluring. Late 1990s to early 2000s is the era of modern market expansion with Jabotabek as the starting point. As the multiplication commences, in parallel, the demand to increase market share rises, hence the competition draws the players to begin looking at secondary areas, coming closer to the traditional markets, and indirectly being blamed as the main reason for the decline in the market share of traditional markets.

There are many arguments with regards to the locations of modern markets within an area, some believe it creates intense competition with traditional markets, inducing unhealthy sense of competitiveness. The question always goes back to the conventional issue, what impact do modern markets have on traditional markets? Our government has studied, opened forum, analyzed, and eventually proposed a zoning solution to the above issue to protect the traditional markets. Certain distance to the traditional market was imposed on the permits of operating a hypermarket/supermarket, including limitation on trading area or size of the operation itself. Does this answer as the solution to the decline in traditional market popularity among customers? Or is it the simplest short term solution to the growing complaints?

Rule of the thumb: Competition creates better operators. It signals required improvements, modifications, and necessity of attention to details, especially unnoticeable flaws. Customers are the ones benefiting from competition. On the flip side of zoning solution, is a deeper issue on management practices within the traditional markets itself. The other more popular name for traditional market is wet market, or in bahasa "pasar basah". It literary translates to the physical condition of the market. Customers hand and feet are bound to get wet during their visit. Hygiene is not a main concern in this type of operation. Therefore, adapting to modern markets with its offer of affordable, high quality, wider variety and better environment, is as instant as blinking your eyes.

Modern market operation pays greater attention to customer service with its multiple payment methods, and product quality control. Would all these offer keep the customers away even with the zoning? Proximity is controlled through zoning, but the barrier initiates more attractiveness as a less approachable segment. It's temptation. Like an itch waiting to be scratched.

Few developers have initiated the development of an improved format of traditional market. It has proven to be quite successful in some areas, yet it is still a test case on whether the consistency of management practices can be maintained beyond their initial novelty periods.

Modern market is accountable as one of the factor for traditional market decline, yet the core issue is mostly caused by internal problems from which the modern market benefits. Solution to competitiveness should come from within, the management practices, the hygiene, cleanliness, improved infrastructure and facilities, are few of the basic ingredients to wage war with the modern market. Traditional market operators need to be acutely aware of their advantage and disadvantage, ensuring the sustainability of traditional markets would require an overhaul of the traditional market management system, enabling them to compete with and survive alongside modern markets.



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