Sat, 12 Mar 2005

Hypermarket proliferation should be regulated properly

Fajar Hidayat Jakarta

The hypermarket concept, which combines a supermarket and a department store in a gigantic retail facility with a wide range of products under one roof, including full lines of fresh groceries, apparel and appliances, was pioneered by the French retail group Carrefour.

This group opened its first hypermarket in 1962 in Sainte- Genevihve-des-Bois near Paris. In the nineties, the group started to expand its business to Asia, including Indonesia, where Carrefour, in 1998, opened its first outlet in Jakarta.

Currently, Carrefour has eleven outlets in Greater Jakarta and another four in Bandung, Surabaya, Medan and Palembang. They will open twenty-five new stores this year. Hero supermarket, which is in partnership with Malaysia-based Dairy Farm, has followed in Carrefour's footsteps and now they have ten Giant hypermarket stores. Domestic retailer Matahari has also jumped on the bandwagon with its Hypermart -- the brand name of its four hypermarkets.

The proliferation of these large, convenient and relatively inexpensive stores, certainly has greatly worried traditional market retailers. According to The Indonesian Traditional Market Retailer Association (APPSI), over the last five years, around 400 traditional market kiosks in Jakarta have closed down. This figure did not include kiosks in the seven traditional markets that were closed by the Jakarta administration for various reasons.

The APPSI has responded by urging the Jakarta administration to stop issuing new licenses for hypermarkets in the city center.

The government seems responsive to the traditional market retailers' demands, as evidenced by Minister of Trade Mari E. Pangestu's remarks that the government was studying the problems to seek an appropriate solution.

The government is preparing better regulations to enable hypermarkets and traditional markets to complement each other in sound market competition.

However, the government rulings on traditional markets and hypermarkets should only be guidelines for regional administrations. In the proposed presidential decree, to be issued later this year, regional administrations will have more power to issue permits for hypermarkets based on the region's development planning.

Hypermarket proliferation, particularly in big cities, reflects a significant change in shoppers' behavior, life-style and needs. Because of their hectic daily activities, upper-middle income shoppers prefer efficiency and convenience in shopping by satisfying all of their routine needs with one-stop shopping. They favor the shopping atmosphere in nice, clean locations, offering a wide range of products with competitive prices -- all the while providing modern and convenient facilities.

Hypermarkets can accommodate these shoppers' needs. The hypermarkets have lured the shoppers by stressing variety and quality as much as price, with upscale touches such as in-store butchers and a vast array of groceries and other items.

As a result, more shoppers have been turning their backs on traditional markets, because these markets cannot provide a competitive shopping atmosphere. In traditional markets, consumers usually have to haggle with dozens of retailers in different kiosks just to buy one shirt or one kilogram of rice, and some of the service is sub-standard. The uncomfortable condition of the traditional markets is a factor too; most are dirty, unventilated, crowded and not always safe.

Traditional markets are facing tough competition, not only from hypermarkets, but also from smaller types of modern market retailers, i.e. standard-size supermarkets and minimarkets. There is a trend whereby upper-middle income shoppers in big cities prefer hypermarkets for their monthly shopping, supermarkets for weekly shopping and minimarkets for daily shopping.

Traditional market retailers are facing a "double squeeze" situation, i.e. lack of efficiency, and innovation in their market niche, along with competition pressure from modern retailers.

Subsequently, a loss of market share is a logical consequence that has to be understood and dealt with by traditional markets. A survey by AC Nielsen revealed that the market share at traditional markets in Indonesia was 69.6 percent in 2004, down from 78.1 percent in 2000. Meanwhile, the share of modern markets reached 30.4 percent, up from 21.8 percent in 2000.

This development reflects the consequence of the market economy mechanism in Indonesia's retail sector. The mechanism rests upon the fundamental principle of consumers' freedom to choose among competing products and services, and the freedom of producers and traders to start or expand a business.

However, by allowing the traditional market retailers to go out of business could have a damaging impact because they create many job opportunities and stimulate small-scale entrepreneurship in society. For those reasons, the government should protect traditional market retailers.

However, the government policy should not only be "protection- driven", which could make the traditional market retailers spoiled by the protection and unenthusiastic to improve their services or quality. The policy should also be "market-driven", to force traditional market retailers such as business units to survive in a competitive environment. The combination of a protection-driven and market-driven policy will produce appropriate government regulations able to control hypermarkets' expansion and simultaneously empower traditional markets.

Banning hypermarkets from operating outside provincial capitals, as proposed in one of the stipulations in the government draft presidential decree, is not wise. Several cities that are not capitals have significant numbers of upper-middle income residents, like Tangerang, Bekasi, Bogor, Depok, Surakarta, Malang, Balikpapan, etc. And the fact is, hypermarkets are now thriving in most of those cities.

When hypermarkets are allowed to exist in a city, other regulations could be imposed. For example, a hypermarket must be located at least two kilometers away from traditional markets, have a maximum area of 5,000 to 8,000 square meters, and the service coverage ratio should be restricted to one hypermarket for, say, every 250,000 people.

The writer is a senior researcher on economic policies and business at The Indonesian Institute -- Center for Public Policy Research.





News Search/Filter
Transaction Rates
19 Sep 18
Buy
Sell
AED1
3,923.78
3,923.78
AFN1
191.22
191.22
ALL1
132.86
132.86
AMD1
29.75
29.75
ANG1
7,814.78
7,814.78
AOA1
50.43
50.43
ARS1
362.50
362.50
AUD1
10,412.55
10,412.55
AWG1
8,000.41
8,000.41
AZN1
8,465.65
8,465.65
BAM1
8,612.62
8,612.62
BBD1
7,206.38
7,206.38
BDT1
171.79
171.79
BGN1
8,606.69
8,606.69
BHD1
38,220.14
38,220.14
BIF1
8.12
8.12
BMD1
14,412.77
14,412.77
BND1
9,539.47
9,539.47
BOB1
2,086.56
2,086.56
BRL1
3,464.53
3,464.53
BSD1
14,412.77
14,412.77
BTC1
91,283,053
91,283,053
BTN1
198.40
198.40
BWP1
1,321.97
1,321.97
BYN1
6,813.93
6,813.93
BZD1
7,173.18
7,173.18
CAD1
11,109.98
11,109.98
CDF1
8.78
8.78
CHF1
14,954.11
14,954.11
CLF1
616,457.50
616,457.50
CLP1
21.07
21.07
CNH1
2,100.74
2,100.74
CNY1
2,100.31
2,100.31
COP1
4.77
4.77
CRC1
24.94
24.94
CUC1
14,412.77
14,412.77
CUP1
565.20
565.20
CVE1
152.55
152.55
CZK1
661.85
661.85
DJF1
80.72
80.72
DKK1
2,256.03
2,256.03
DOP1
288.44
288.44
DZD1
122.13
122.13
EGP1
804.66
804.66
ERN1
961.03
961.03
ETB1
520.44
520.44
EUR1
16,829.80
16,829.80
FJD1
6,798.31
6,798.31
FKP1
18,977.31
18,977.31
GBP1
18,977.31
18,977.31
GEL1
5,890.00
5,890.00
GGP1
18,977.31
18,977.31
GHS1
3,021.86
3,021.86
GIP1
18,977.31
18,977.31
GMD1
296.25
296.25
GNF1
1.59
1.59
GTQ1
1,882.87
1,882.87
GYD1
68.96
68.96
HKD1
1,837.43
1,837.43
HNL1
600.05
600.05
HRK1
2,265.55
2,265.55
HTG1
207.72
207.72
HUF1
51.96
51.96
IDR1
1.00
1.00
ILS1
4,014.35
4,014.35
IMP1
18,977.31
18,977.31
INR1
197.83
197.83
IQD1
12.09
12.09
IRR1
0.33
0.33
ISK1
131.46
131.46
JEP1
18,977.31
18,977.31
JMD1
106.05
106.05
JOD1
20,313.90
20,313.90
JPY1
128.36
128.36
KES1
142.84
142.84
KGS1
211.52
211.52
KHR1
3.51
3.51
KMF1
34.21
34.21
KPW1
16.01
16.01
KRW1
12.84
12.84
KWD1
47,578.38
47,578.38
KYD1
17,301.62
17,301.62
KZT1
39.27
39.27
LAK1
1.69
1.69
LBP1
9.52
9.52
LKR1
87.17
87.17
LRD1
90.13
90.13
LSL1
968.25
968.25
LYD1
10,411.78
10,411.78
MAD1
1,534.80
1,534.80
MDL1
856.69
856.69
MGA1
4.22
4.22
MKD1
273.36
273.36
MMK1
9.23
9.23
MNT1
5.90
5.90
MOP1
1,784.55
1,784.55
MRO1
40.31
40.31
MRU1
402.59
402.59
MUR1
419.58
419.58
MVR1
935.89
935.89
MWK1
19.81
19.81
MXN1
766.51
766.51
MYR1
3,479.24
3,479.24
MZN1
237.59
237.59
NAD1
968.25
968.25
NGN1
39.75
39.75
NIO1
449.51
449.51
NOK1
1,767.47
1,767.47
NPR1
124.00
124.00
NZD1
9,493.62
9,493.62
OMR1
37,430.33
37,430.33
PAB1
14,412.77
14,412.77
PEN1
4,360.47
4,360.47
PGK1
4,337.72
4,337.72
PHP1
266.56
266.56
PKR1
116.88
116.88
PLN1
3,924.82
3,924.82
PYG1
2.46
2.46
QAR1
3,958.44
3,958.44
RON1
3,623.13
3,623.13
RSD1
142.27
142.27
RUB1
213.93
213.93
RWF1
16.47
16.47
SAR1
3,843.04
3,843.04
SBD1
1,826.92
1,826.92
SCR1
1,059.40
1,059.40
SDG1
800.99
800.99
SEK1
1,618.75
1,618.75
SGD1
10,520.60
10,520.60
SHP1
18,977.31
18,977.31
SLL1
1.71
1.71
SOS1
24.93
24.93
SRD1
1,932.52
1,932.52
SSP1
110.64
110.64
STD1
0.68
0.68
STN1
696.26
696.26
SVC1
1,647.71
1,647.71
SYP1
27.98
27.98
SZL1
967.73
967.73
THB1
442.65
442.65
TJS1
1,529.79
1,529.79
TMT1
4,106.22
4,106.22
TND1
5,187.43
5,187.43
TOP1
6,237.84
6,237.84
TRY1
2,252.29
2,252.29
TTD1
2,139.16
2,139.16
TWD1
468.97
468.97
TZS1
6.31
6.31
UAH1
512.08
512.08
UGX1
3.77
3.77
USD1
14,412.77
14,412.77
UYU1
434.44
434.44
UZS1
1.79
1.79
VEF1
0.05
0.05
VND1
0.62
0.62
VUV1
132.83
132.83
WST1
5,567.93
5,567.93
XAF1
25.65
25.65
XAG1
204,300.46
204,300.46
XAU1
17,289,799.16
17,289,799.16
XCD1
5,333.02
5,333.02
XDR1
20,209.56
20,209.56
XOF1
25.65
25.65
XPD1
14,605,570.10
14,605,570.10
XPF1
141.03
141.03
XPT1
11,746,354.18
11,746,354.18
YER1
57.58
57.58
ZAR1
968.98
968.98
ZMW1
1,325.82
1,325.82
ZWL1
44.71
44.71
Taxation Exchange Rates
31 Aug 16 - 06 Sep 16
USD 1
13,232.00
AUD 1
10,043.30
CAD 1
10,213.70
DKK 1
1,999.40
HKD 1
1,706.22
MYR 1
3,283.28
NZD 1
9,623.63
NOK 1
1,605.23
GBP 1
17,433.70
SGD 1
9,757.68
SEK 1
1,569.45
CHF 1
13,631.10
JPY 100
13,101.00
MMK 1
11.01
INR 1
197.29
KWD 1
43,920.70
PKR 1
126.23
PHP 1
285.00
SAR 1
3,528.53
LKR 1
91.12
THB 1
382.08
BND 1
9,756.53
EUR 1
14,885.50
CNY 1
1,987.61

Okusi Associates: Indonesian Business & Management Services