Aprindo sees positive impact of foreign retailers

Zakki P. Hakim, The Jakarta Post, Jakarta

The expansion of global retailers into the country is positive, as it will force local players to up their game to compete, industry associations say.

Indonesian Retail Merchants Association (Aprindo) secretary general Tutum Rahanta said local retailers would learn from the international players, especially about efficiencies in running businesses.

"Without healthy competition, local players will not develop, they would run business just the way they always have. With global competitors in the country, the domestic retailers will be forced to improve themselves. Eventually, the customers will enjoy the benefits," Tutum told The Jakarta Post over the weekend.

Retailers like Hero Supermarket and Matahari department Store were among the local retailers that had managed to boost their operations to be able to compete on a level footing with foreign companies, he said.

"Matahari and Hero have learned their lessons well," Tutum said.

By studying the success of global chains, it would be possible for local retailers to open their branches in, for example, Singapore one day, Tutum said.

Britain's premium department store Debenhams opened its first store in this country here on Friday to compete with SOGO and Metro for the high-end customer. The store is Debenhams' second in the Far East.

Both local and foreign retailers have been aggressive in expanding their operations in the country to take advantage of the huge domestic market and strong consumer consumption, which during the past few years has been the main engine of economic growth.

Tutum said currently there were only three major retailers in the high-end market.

"More are (likely) to come to exploit the segment. Japan's premium department stores, such as Takasimaya for example, may well consider entering the country," he said.

Tutum acknowledged the expansion of modern retailers such as department stores, minimarkets, supermarkets and hypermarkets was eroding the market share of traditional retailers.

Experts have said the government should assist traditional retailers to adapt to a more modern way of retailing, to solve skill shortages and capital-gap problems.

"It is inevitable, the world is moving toward modern retailing. It is a global trend, the traditional market must adopt the modern way of retailing to survive," industry analyst and AC Nielsen director of retail and business development Yongky Surya Susilo said.

An AC Nielsen survey shows the number of traditional retailers is still growing but at a far slower pace compared to modern ones, particularly in urban areas.

However, traditional markets still dominate the country, selling 73.7 percent of goods in Indonesia.

French retailing giant Carrefour started the hypermarket hype here in 1998, opening its first outlet in Kuningan, South Jakarta, and offering a range of about 50,000 products -- from screwdrivers, clothes, televisions, meat, fruit and vegetables, to fresh-from-the-oven pastries.

The success of Carrefour has prompted Hero and Matahari to also expand into the hypermarket business. A report says Matahari is planning to open about 50 new hypermarkets in the next five years.

There are currently more than 50 hypermarkets operating in the Greater Jakarta area alone.