Benny Sindhunata BIRO data center

Shopping malls: Trendsetters in retail industry

Shopping malls and plazas in big cities particularly in Greater Jakarta have played a significant role as trendsetters in the dynamic development of the country's retail industry.

Their existence has allowed both buyers and sellers to be engaged in mutually beneficial interaction.

The latest survey of Business Intelligence Report (BIRO) has found that shopping centers are building an image as a place where specific products are available.

This trend is one of the conclusions made in BIRO's survey on the existence, problems and potential of the national retail business.

The survey, titled: Prospects and Opportunities of the Retail Business in Indonesia, conducted between Aug. 2001 and Oct. 2001, evaluates two aspects, namely the retail businesspeople or mall vendors and shopping mall owners on a national scale, in macro and micro analyses.

For Greater Jakarta, which includes Bogor, Tangerang and Bekasi, the analysis has been conducted on the basis of 14 malls measuring a total of 807,700 square meters with 3,489 tenants. Some conclusions of the survey are: 1. In terms of the tenants' businesses, fashion stores top the list of tenants with 770 outlets or 22.1 percent of the total number of tenants, followed by restaurants (643 outlets or 18.4 percent), electronics stores (395 outlets or 11.3 percent) and footwear and accessories stores (271 outlets or 7.8 percent). 2. There is a trend in which some malls are oriented toward specializing in specific products or goods. This will eventually result in an image of the mall as a shopping center offering specific products. This trend is evident from the concentration of tenants in malls and plazas.

Fashion outlets, for example, account for 24.1 percent of the total tenants in Mal Taman Anggrek, 32.8 percent in Plaza Senayan, 33.2 percent in Plaza Indonesia and 44.8 percent in Pasaraya Blok M.

On the other hand, computer and electronics vendors dominate Roxy Mas, Mal Ambassador and Plaza Gajah Mada. In these shopping centers, computer and electronics outlets represent 50 percent, 34.3 percent and 39.1 percent of the total number of tenants, respectively. 3. In terms of number of tenants, Mal Taman Anggrek has the biggest number, with 490 outlets, followed by Megamal Pluit with 478 outlets, Mal Ciputra, 368, Mal Ambassador, 300 and Plaza Gajah Mada, 279.

A large number of tenants has a positive impact on the existence of the mall as it can offer a richer variety of products to consumers, especially if the mall is dominated by certain products. 4. Giant retailers play a very strategic role and, as anchor tenants, have more bargaining power with mall owners. Take for example, Matahari department store. It occupies 19 percent of the total shopping space in Mal Ciputra, 17.5 percent in Mal Taman anggrek and 19 percent in Megamal Pluit.

Likewise, Sogo occupies 36 percent of Plaza Indonesia shopping space, 35 percent of Plaza Senayan and 33 percent of Mal Kelapa Gading.

Metro department store takes up 60 percent of the total shopping space in Mal Pondok Indah and about 20 percent in Plaza Senayan. Therefore, it stands to reason that developers usually look for giant retailers as their prospective anchor tenants before building a shopping center. 5. By the year 2003, it is predicted that Greater Jakarta will have 19 new shopping centers with an additional shopping area of 852,000 sq m.

Of this space, some 60 percent or 497,000 sq m will be located in Central Jakarta and will comprise six projects. In South Jakarta, there will be five projects measuring a total of 128,000 sq m and in Bogor, two projects to occupy 60,000 sq m.

West Jakarta and Bekasi will each have two projects, measuring 53,500 sq m and 49,000 sq m respectively, while North Jakarta and East Jakarta will each have one project, measuring 55,000 sq m and 10,000 sq m respectively. 6. The composition of the main shopping center owners is predicted to change with the entry of Djarum Group, which will supply 210,000 sq m of new space, or nearly a quarter (24.6 percent) of the total new space available. In the future the "big three" controlling 60.3 percent of total space will comprise Djarum (24.6 percent), Sinar Mas (20 percent or 175,000 sq m) and Agung Sedayu (15.8 percent or 135,000 sq m). 7. In the long run, selling of space/shop units on the basis of a strata title arrangement should be reason enough for caution for mall owners, especially if the buyers are investors not merchants.

If more investors than merchants buy the space, the impression will be that the malls are empty even though all the space has been sold. Obviously, investors would not use the space they have bought as they will wait for an opportune time to resell.

Efforts must be made to ensure that the marketing of apartments on the basis of the strata title arrangement, as was done in Jakarta during the property business boom, does not reoccur.

From the above findings BIRO can draw several conclusions about the country's retail business; 1. The trend among shopping centers of selling specific products can have a positive impact, especially if it is supported by internal management policies to communicate that image to consumers.

Each shopping center will have a certain dominant product segmentation without having to reject the presence of other strategic sectors. Malls have become pioneers in ensuring that retailers shape the behavior and segmentation of consumers. 2. The plan for retailers' expansion to the regions in the context of benefiting the wider regional autonomy must be immediately anticipated jointly by retailers and developers who own shopping centers as both are strategic partners and work in synergy with one another.

Every year, the trillions of rupiah that the public spend on consumer goods flows from Jakarta to the 360 regencies in the country. 3. Competition in building both new medium-scale shopping centers and mega projects should be seen more clearly in the light of the ongoing crisis.

The likelihood of failure and bad debts is still looming large. In this context, clear strategies and positioning of each shopping center will be needed. 4. The expansion of foreign retailers, through both branding and direct investment is a real consequence of the global business battle. It explains why no special measures, except the government's policy to impose selective restrictions on a national scale, have been taken to prevent these foreign retailers from operating.

However, their expansion into the regions will give rise to different perceptions and policies among regional administrations. Each region will vie with the other to lure investors by offering various facilities and adopt different regulations.

This, indeed, is one of the important points that must be taken into account, by both the central government and regional administrations, if these establishments wish to get rid of the unfavorable impact brought about by the entry of modern retailers, national or otherwise.