Hypermarket proliferation
\nshould be regulated properly<\/p>\n
Fajar Hidayat
\nJakarta<\/p>\n
The hypermarket concept, which combines a supermarket and a
\ndepartment store in a gigantic retail facility with a wide range
\nof products under one roof, including full lines of fresh
\ngroceries, apparel and appliances, was pioneered by the French
\nretail group Carrefour.<\/p>\n
This group opened its first hypermarket in 1962 in Sainte-
\nGenevihve-des-Bois near Paris. In the nineties, the group started
\nto expand its business to Asia, including Indonesia, where
\nCarrefour, in 1998, opened its first outlet in Jakarta.<\/p>\n
Currently, Carrefour has eleven outlets in Greater Jakarta and
\nanother four in Bandung, Surabaya, Medan and Palembang. They will
\nopen twenty-five new stores this year. Hero supermarket, which is
\nin partnership with Malaysia-based Dairy Farm, has followed in
\nCarrefour's footsteps and now they have ten Giant hypermarket
\nstores. Domestic retailer Matahari has also jumped on the
\nbandwagon with its Hypermart -- the brand name of its four
\nhypermarkets.<\/p>\n
The proliferation of these large, convenient and relatively
\ninexpensive stores, certainly has greatly worried traditional
\nmarket retailers. According to The Indonesian Traditional Market
\nRetailer Association (APPSI), over the last five years, around
\n400 traditional market kiosks in Jakarta have closed down. This
\nfigure did not include kiosks in the seven traditional markets
\nthat were closed by the Jakarta administration for various
\nreasons.<\/p>\n
The APPSI has responded by urging the Jakarta administration
\nto stop issuing new licenses for hypermarkets in the city center.<\/p>\n
The government seems responsive to the traditional market
\nretailers' demands, as evidenced by Minister of Trade Mari E.
\nPangestu's remarks that the government was studying the problems
\nto seek an appropriate solution.<\/p>\n
The government is preparing better regulations to enable
\nhypermarkets and traditional markets to complement each other in
\nsound market competition.<\/p>\n
However, the government rulings on traditional markets and
\nhypermarkets should only be guidelines for regional
\nadministrations. In the proposed presidential decree, to be
\nissued later this year, regional administrations will have more
\npower to issue permits for hypermarkets based on the region's
\ndevelopment planning.<\/p>\n
Hypermarket proliferation, particularly in big cities,
\nreflects a significant change in shoppers' behavior, life-style
\nand needs. Because of their hectic daily activities, upper-middle
\nincome shoppers prefer efficiency and convenience in shopping by
\nsatisfying all of their routine needs with one-stop shopping.
\nThey favor the shopping atmosphere in nice, clean locations,
\noffering a wide range of products with competitive prices -- all
\nthe while providing modern and convenient facilities.<\/p>\n
Hypermarkets can accommodate these shoppers' needs. The
\nhypermarkets have lured the shoppers by stressing variety and
\nquality as much as price, with upscale touches such as in-store
\nbutchers and a vast array of groceries and other items.<\/p>\n
As a result, more shoppers have been turning their backs on
\ntraditional markets, because these markets cannot provide a
\ncompetitive shopping atmosphere. In traditional markets,
\nconsumers usually have to haggle with dozens of retailers in
\ndifferent kiosks just to buy one shirt or one kilogram of rice,
\nand some of the service is sub-standard. The uncomfortable
\ncondition of the traditional markets is a factor too; most are
\ndirty, unventilated, crowded and not always safe.<\/p>\n
Traditional markets are facing tough competition, not only
\nfrom hypermarkets, but also from smaller types of modern market
\nretailers, i.e. standard-size supermarkets and minimarkets. There
\nis a trend whereby upper-middle income shoppers in big cities
\nprefer hypermarkets for their monthly shopping, supermarkets for
\nweekly shopping and minimarkets for daily shopping.<\/p>\n
Traditional market retailers are facing a \"double squeeze\"
\nsituation, i.e. lack of efficiency, and innovation in their
\nmarket niche, along with competition pressure from modern
\nretailers.<\/p>\n
Subsequently, a loss of market share is a logical consequence
\nthat has to be understood and dealt with by traditional markets.
\nA survey by AC Nielsen revealed that the market share at
\ntraditional markets in Indonesia was 69.6 percent in 2004, down
\nfrom 78.1 percent in 2000. Meanwhile, the share of modern markets
\nreached 30.4 percent, up from 21.8 percent in 2000.<\/p>\n
This development reflects the consequence of the market
\neconomy mechanism in Indonesia's retail sector. The mechanism
\nrests upon the fundamental principle of consumers' freedom to
\nchoose among competing products and services, and the freedom of
\nproducers and traders to start or expand a business.<\/p>\n
However, by allowing the traditional market retailers to go
\nout of business could have a damaging impact because they create
\nmany job opportunities and stimulate small-scale entrepreneurship
\nin society. For those reasons, the government should protect
\ntraditional market retailers.<\/p>\n
However, the government policy should not only be \"protection-
\ndriven\", which could make the traditional market retailers
\nspoiled by the protection and unenthusiastic to improve their
\nservices or quality. The policy should also be \"market-driven\",
\nto force traditional market retailers such as business units to
\nsurvive in a competitive environment. The combination of a
\nprotection-driven and market-driven policy will produce
\nappropriate government regulations able to control hypermarkets'
\nexpansion and simultaneously empower traditional markets.<\/p>\n
Banning hypermarkets from operating outside provincial
\ncapitals, as proposed in one of the stipulations in the
\ngovernment draft presidential decree, is not wise. Several cities
\nthat are not capitals have significant numbers of upper-middle
\nincome residents, like Tangerang, Bekasi, Bogor, Depok,
\nSurakarta, Malang, Balikpapan, etc. And the fact is, hypermarkets
\nare now thriving in most of those cities.<\/p>\n
When hypermarkets are allowed to exist in a city, other
\nregulations could be imposed. For example, a hypermarket must be
\nlocated at least two kilometers away from traditional markets,
\nhave a maximum area of 5,000 to 8,000 square meters, and the
\nservice coverage ratio should be restricted to one hypermarket
\nfor, say, every 250,000 people.<\/p>\n
The writer is a senior researcher on economic policies and
\nbusiness at The Indonesian Institute -- Center for Public Policy
\nResearch.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/bhypermarket-proliferation-1447899208",
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