Retailers have agreed to comply with a new regulation that puts limits on listing fees and trading terms that retailers may charge suppliers.
Despite its compliance, the Indonesian Association of Retailers (Aprindo) said the regulation would hurt its profit margin even more during these adverse economic times.
Last Friday, Aprindo signed an MOU with the Indonesian Modern Market Supplier Association (AP3MI) and the government on the implementation of the regulation, which broadly regulates the guidelines for the management and development of traditional and modern retailers and shopping centers.
Indonesia’s retail markets are dominated by several major players, while there are thousands of suppliers. The situation, at times, gives more power to retailers regarding contracts, which in some ways hinders suppliers from gaining a favorable profit margin.
AP3MI data revealed cases in which major retailers exploited their bargaining power, such as by holding on to payments after the due date, one-sided purchase order contract terminations and reducing the number of ordered items.
“We’ve had hundreds of meetings regarding the regulation to make things fair for everybody,” said AP3MI head Susanto.
“We’re glad the implementation MOU has finally been signed by all stakeholders.”
Aprindo had expressed disappointment with some of the clauses in the regulation that they considered a violation of the principles of freedom to contract.
One of Aprindo’s main objections to the regulation is over the trading term clause, which puts a limit on maximal fixed rebate, conditional rebate and listing fees.
The groups says the limits will not allow them to set higher margins, which the industry desperately needs in times of crisis.
Sales from Aprindo members in 2009 are expected to decline by at least 10 percent from last year’s Rp 74.5 trillion (US$6.2 billion) on lower purchasing power as economic growth slows.
Sales from Aprindo members contribute about 20 percent to retail sales nationwide.
Aprindo also considers suppliers’ contract issues outside the realm of the government’s control, which should be left to market forces.
To facilitate input or objections from all stakeholders over future regulations, the government will form a communication forum panel by the end of the month.
“We have listed 23 names from various associations for the panel,” said Gunaryo, director of market management and distribution at the Trade Ministry.
Aprindo chairman Benjamin J. Mailool said retailers had nothing against the regulation, but
only wished that all stakeholders would have a chance to be heard in the panel.
“It’s very important to keep an open dialogue on the regulation, because the issues are not simple,” he said.
Aprindo’s 300 members have at least 7,500 stores nationwide in five store formats: hypermarkets, supermarkets, minimarkets, department stores and specialty stores, such as single-brand outlets. (hdt)