Foreign powers enter retail war<\/p>\n
The arrival of new foreign chain stores to Jakarta has not
\ngone unnoticed in this time of economic crisis. Is this a sign
\nthat doing business here -- amid the crumbling purchasing power
\nof consumers, that analysts predict will take years to recover --
\nstill holds promise? The Jakarta Post reporters Aan Suryana, Emmy
\nFitri, Kamba Basrie, Lukman Natanagara, Sylvia Gratia M. Nirang,
\nSugianto Tandra and photographer P.J. Leo investigate the
\nprospects and strategies of these new arrivals.<\/p>\n
JAKARTA (JP): As Indonesia struggles through its worst ever
\neconomic slump, Jakarta consumers are seemingly being overrun
\nwith the arrival of several new foreign franchise stores all
\nvying for their attention.<\/p>\n
Among the most conspicuous newcomers are the French
\nsupermarket chains Carrefour and Continent. The Netherlands-based
\nwholesaler Makro has been established here for some years.<\/p>\n
The large investments made by these companies seem to indicate
\nthey are undeterred by the worst of the country's economic
\ntroubles and have confidence in weathering the current political
\nstorm.<\/p>\n
The "invasion" came after the signing of a letter of intent
\nbetween the Indonesian government and the International Monetary
\nFund (IMF) in March last year.<\/p>\n
As part of a package of policy reform required by the IMF for
\nthe country to qualify for the multi-billion dollar bail-out,
\nIndonesia had to lift its restrictions on foreign investment in
\nthe retail and wholesale markets.<\/p>\n
The Investment Coordinating Board (BKPM) issued two decrees,
\nwhich were strengthened by Presidential Decree No. 99\/1998. They
\nallow foreign investors to own a majority share in a partnership
\nwith local companies.<\/p>\n
One of the new players here, Continent, is a chain of large
\nsupermarket stores that aims to offer a great range of products
\n-- from groceries to clothes and refrigerators -- all in the one
\nplace.<\/p>\n
Jean-Luc Montembault, director of France's Promods Group --
\nwhich owns 51 percent of PT Contimas Utama Indonesia, the
\noperator of the chain here -- told The Jakarta Post that his
\ncompany would push forward with expansion plans in the country
\ndespite the ongoing economic and political crises.<\/p>\n
"Indonesia is one of few countries where this kind of business
\nwill develop in the future," he said, adding that he was
\nconvinced the hypermarket retail business would survive the
\neconomic crisis because it provided quality products at
\ndiscounted prices.<\/p>\n
He said customers these days were looking for discounts to
\nstretch their money further.<\/p>\n
Several supermarkets have criticized its presence in the
\ncountry, alleging Continent practices dumping tactics, selling
\nits products below manufacturer prices.<\/p>\n
Montembault denied the allegations, saying the company was
\nmerely slashing profit margins in the hope it would be
\ncompensated by a large sales volume.<\/p>\n
"It's not dumping," he said. "Because if it is, we can't be
\ndoing that for a long time. At some point you have to jack up
\nprices and by then we'll sink. It's purely the ability to manage
\nthe flow of products from factory to us.<\/p>\n
"It's a discount system: a low margin, big volume of sales, a
\nperforming organization. In this moment of crisis, we can help
\ncustomers provide a wide range of products with cheaper prices."<\/p>\n
Concerning the political uncertainty, Montembault said, "We
\nhave already calculated the risk."<\/p>\n
Indonesians will go to the polls on June 7, thought to be the
\nfirst fair and free elections after 30 years under the
\nauthoritarian rule of Soeharto.<\/p>\n
The prospect of elections has made many people jittery,
\nexacerbated by reports of bloody unrest and rioting in many areas
\nnationwide. Disturbances have often been marked by looting and
\narson of retail outlets.<\/p>\n
The 19-month-old economic crisis has catapulted about half of
\nthe country's more than 200 million people into poverty and led
\nto massive layoffs in major cities like Jakarta, with both the
\nbanking and manufacturing sectors in serious trouble.<\/p>\n
Montembault said the establishment of the first Continent
\nHypermarket at Pasar Festival in Jakarta's Kuningan area was no
\nabrupt maneuver. He said the decision was made in 1995, after a
\nbusiness partnership was formed the previous year with PT Sinar
\nKilat Buana of the Sinar Mas Group.<\/p>\n
The store was to have opened in May 1998, but it was delayed
\nuntil October of that year because of the political turmoil
\nsurrounding Soeharto's downfall.<\/p>\n
Continent, the second French retail chain to operate in
\nIndonesia after Carrefour, provides more than 15,000 different
\nproducts at discounted prices. Earlier last week it opened its
\nsecond 8,000-square-meter hypermarket at Pluit Megamall in North
\nJakarta.<\/p>\n
Montembault said Promods would open its third US$5 million
\nhypermarket retail operation in Jakarta at the end of July.<\/p>\n
The expansion philosophy of Promods, according to
\nMontembault, is to adapt its business practices to local nuances.<\/p>\n
"People who know Indonesian customers are our Indonesian
\ncolleagues ... but we train them to understand details. We want
\nthem to (be in charge when we) open the new stores," he said.<\/p>\n
Montembault said Continent was facing tough competition both
\nfrom other foreigners and local retailers.<\/p>\n
With the Makro chain competing on the wholesale front, and
\nCarrefour and the well established Hero supermarkets vying for
\ncustomers, no one can be complacent.<\/p>\n
Montembault said local retailers were quick to respond to
\nContinent's presence by improving ways of doing business.<\/p>\n
"They are very professional," he said, while showing the Post
\nhow a local supermarket chain had imitated its arrangement of
\ncooking oils.<\/p>\n
Continent displays the whole range of cooking oils in one
\naisle, rather than arranged by manufacturer as local stores were
\nused to doing. Montembault said his way was more convenient for
\ncustomers.<\/p>\n
"It will be a tough competition for us (with local
\nretailers)," he said.<\/p>\n
And as Continent is new, it has to work hard to develop its
\nconnections with manufacturers and suppliers to catch up to its
\nmore established competitors.<\/p>\n
The other French retail chain here, Carrefour, is also
\nenthusiastic about its prospects in Indonesia.<\/p>\n
"We will continue to expand our business here as long as the
\npolitical and security conditions enable us to do so," said Handy
\nLim, Senior Development Manager of PT Carti Satria Mega Swalayan,
\nthe operator of Carrefour Hypermarket, as quoted by Bisnis
\nIndonesia daily.<\/p>\n
Sources at BKPM said an Australian retail chain, Point Break
\nEnterprises, would also open an outlet in Jakarta by the end of
\nthis year, in partnership with a local company.<\/p>\n
Makro is an older foreign retail store operator, an affiliate
\nof SHV Makro of the Netherlands. Under a deal with PT Karabha
\nUnggul, Makro opened its first outlets in Pasar Rebo, East
\nJakarta in September 1992. Now Makro has eight outlets, five of
\nwhich are scattered around the Greater Jakarta area, with the
\nothers in Bandung, Surabaya and Bali.<\/p>\n
Basuki Ismael, Makro's spokesman, told The Post that although
\nthere are other store chains like Continent and Carrefour, Makro
\ndoes not want to compete head-on.<\/p>\n
"Of course, we try to provide the lowest possible prices. But
\nif Continent and Carrefour sell their products cheaper than Makro
\ndoes, we will not follow them," Basuki said.<\/p>\n
Makro outlets require its customers to be members, at the
\nannual cost of Rp 25,000.<\/p>\n
Asked whether Makro intended to pressure retailers like Golden
\nTruly, Hero and Gelael, Basuki said they had no intention at all.<\/p>\n
"Our main intention is to sell the best and cheapest products.
\nWe don't want to influence people to go to Makro and not to go to
\nGolden Truly. We leave it up to them," Basuki said.<\/p>\n
And how do customers respond to the glut of such stores to
\nchoose from?<\/p>\n
Mirna A. Basalamah, public relations manager of Hotel Mercure
\nRekso, said she enjoyed doing her monthly shopping in Continent
\nbecause it is more convenient than other supermarkets.<\/p>\n
"I can buy almost everything I need here at lower prices. I
\ncan save my time and my energy," she said.<\/p>\n
Dewi, a housewife from Cilincing, North Jakarta, said she used
\nto do her monthly shopping in Indomart or Diamond outlets in
\nKelapa Gading. Both are local supermarket chains, but she has
\nstarted to go to the Carrefour outlet in Cempaka Putih because of
\nthe lower prices.<\/p>\n
It is of course the customers that make or break a retail
\nstore, and they tend to go to the shop that suits their needs
\nbest. (team)<\/p>",
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