Hero Supermarket, meeting the challenges of Indonesia today
Hero Supermarket, meeting the challenges of Indonesia today
Twenty-five years ago, when Hero Supermarket opened the first
of its stores on Jl. Falatehan in South Jakarta, the challenge
the company faced was a rather unusual one, it had to actually
create a demand for such a shopping option.
The concept of a supermarket chain was still new. Gelael was
the only comparable store at the time and only those who had
traveled abroad were familiar with it. Logically, therefore, the
targeted clientele was expatriates and upper-income Indonesians.
In the early days, Hero struggled to provide goods at
competitive prices because of low awareness and low demand.
Competition was intense from the popular owner-managed family
stores (P&D) that were on every street corner. These stores did
not have set operating hours. The owner chose the items for the
customer. The customer had to be content with what was given to
him even if the item was damaged.
Customers accustomed to such shopping practices had to be
taught the advantages of shopping in a supermarket where, in
addition to there being regular operating hours, customers had
the advantage of choosing the items themselves. They could now
reject a dented can or a damaged item.
Hero Supermarket rose to the challenge admirably. Customer
education was done on the spot. Supermarkets were opened in
shopping areas where population concentration was at its highest.
Some of the earliest Heros were in Hotel Jayakarta and Hayam
Wuruk Plaza which both attracted shoppers in large numbers.
Presenting itself as a sensible shopping option, Hero
Supermarket, the "super" market with the Kepala Romawi (Trojan
head) for its logo, strove to educate and inform its customers
through advertisements, mostly in the print media. Magazines
read by the expatriate community also helped to spread the
message. Sponsorship of fund-raising activities held in
international schools and women's clubs also helped build an
image.
Twenty-five years later, the customer profile has changed
considerably, necessitating a classification of its stores into
four categories and a need to bear in mind varying customer
preferences in different areas.
Stores categorized as "A+" continue to cater to the very-high-
income Indonesians and expatriates. In this category are the
stores located in Plaza Senayan, Mal Pondok Indah and Galaxy Mall
in Surabaya.
Stores graded as "A" include those located in areas such as
Green Garden, Sunter and Kebon Jeruk, where there is a local-
population majority.
Category "B" stores, such as those in Lippo City and Cilegon,
cater to the growing middle and upper-middle-class groups, while
category "C" stores, located in Pondok Bambu and Pamulang/Ciledug
in Tangerang, target the lower-middle and middle-class consumers.
Qualitatively, the products are identical in all the stores.
The earlier bias toward wealthy Indonesians and expatriates has,
today, given way to more B category and C category stores, where
competition is intense and the buying power of targeted customers
has increased considerably in conjunction with the country's
impressive economic development.
While approximately 50 percent of sales are registered in the
stores categorized A and A+, the increasingly larger number of
people shopping in B and C category stores have modified the
focus of the company's marketing strategies.
Hero Supermarket now sees itself as targeting the middle and
upper-income groups of shoppers; its special relationship with
very-high-income Indonesians and expatriates remains as strong as
ever as their continued patronage lends the name Hero a very high
credibility.
Growth
Founded in 1971, PT Hero Supermarket, a publicly-listed
company on the Jakarta Stock Exchange since 1989, today continues
its expansion and growth as Indonesia's preeminent food retailer.
The company has remained the industry leader since the early
1980s and has a current domestic market share of over 40 percent.
Total sales of Rp 308 billion (US$155 million) in 1991, more than
doubled to Rp 787 billion ($341 million) in 1995, while the
number of stores rose from 38 (28 in Greater Jakarta) to 59 (44
in Greater Jakarta) in the same period.
Today, Hero Supermarket, with its 65 outlets throughout
Indonesia (47 in Greater Jakarta) has a well-established national
presence that is expanding in line with rising demand for the
Hero name and continuing economic growth.
Outside Greater Jakarta, the stores are located in principal
metropolitan markets throughout Indonesia including Sukabumi,
Bandung, Cirebon, Karawang, Semarang, Yogyakarta, Magelang,
Surabaya, Malang, Banjarmasin, Balikpapan, Palembang and
Denpasar. Samarinda is to have its first Hero supermarket next
year.
Challenges and strategies
Unlike other department store-cum-supermarket chains, which
earn higher margins from the department store side of the
business while competing with Hero for a slice of the supermarket
action by fighting on prices, Hero's core business has always
been the supermarket, where profit margins are tight.
And with the coming of Western franchises like Wal-Mart and
European retailers like Carre Four, competition is likely to
become even more intense.
However, PT Hero Supermarket, a 100 percent Indonesian-owned
company, does not believe that the strategy to counter this
should be a price war in a bid to corner the market. The company
has, instead, turned its attention to improving product and staff
quality.
Over the years, the company has established advanced training
programs for both managerial and nonmanagerial positions, as well
as quality-adherence programs for food distribution and retailing
employees. These programs utilize the high international
standards set by organizations such as the International Grocers'
Alliance (IGA), a worldwide organization of independent
affiliated grocers of which Hero Supermarket is a member in good
standing.
Affiliations such as these require strict adherence to quality
standards. The training center at Green Garden, for management
and supervisor development programs, often draws upon foreign
expertise for specialist categories such as merchandising.
Working with IGA, Hero Supermarket launched the Total Customer
Satisfaction Program earlier this year. This program strives to
inspire employees to maximize their potential. They are
encouraged to ensure high product quality by keeping the
processing and serving areas clean; displaying clearly all
information to the customer; and offering the right-quality
product at the right time.
Staff improvement programs also impart special negotiating and
store-management skills to employees. The Space Management and
Reordering Technology (SMART) program, in collaboration with
Survey Research Indonesia (SRI) is aimed at cutting inventory
costs and optimize the shelf space.
It was first introduced in Hero, Mal Pondok Indah.
Investment in equipment includes installing scanners which
help speed up the payment process. This will be followed by bar-
coding of all products, at no extra cost to customers. As part of
introducing greater efficiency in store operations, Hero
Supermarket works closely with David Holdings of Australia in
managing the central warehouse and in handling distribution.
Foreign consultants are involved in designing store layouts
for improved customer convenience.
As part of its human resources development, store managers
identified as future store leaders are sent on diploma programs
created by Monash University, Melbourne, Australia. By motivating
and equipping its employees with special skills to combat the
challenges of global free trade, the company rightly believes
that long-term benefits will accrue. Plans are on the anvil for
increased investment in staff training programs next year.
A sound business strategy dictates that a judicious client mix
can build a solid fund of goodwill. While Hero Supermarket enjoys
the majority share of the middle to upper-market segment, the
company believes that the growing demand in the middle to lower-
market segments, where consumer shopping trends indicate a need
for Hero-style quality products at competitive prices, need to be
addressed as well.
Hero Supermarkets employ the latest advanced point-of-sale and
customer-service technology. These have enabled the company to
remain apprised of customer demand and enabled it to introduce
related subsidiary businesses that enhance Hero supermarket's
core offer.
Popular examples of these are the Family Bakery Shops and
Garden Fresh Produce Centers. Constantly fine-tuning and
upgrading its marketing and merchandising mix, the company has
become widely known for its introduction of new quality brands
and products. The magic of the Hero name has helped the company
successfully expand its private label lines, permitting higher
profitability while providing the customer with a wider
selection.
Innovation in marketing
Hero Supermarket is recognized nationally for its innovative
marketing and promotional activities. The Funk and Wagnall's
encyclopedia promotional campaign conducted in 1994 and 1995 saw
the sale of more than 3,000 sets of the 29-volume encyclopedia,
costing Rp 370,000 per set, during the four-month promotion
period. The December 1995 Linea promotion for a range of Spanish
nonstick cookware was so successful that demand far exceeded
supply and necessitated an extension of the campaign for another
four months.
The recently-concluded Magic Stamp promotion for Pyrex-ware
was a runaway success. Introduced about two-and-a-half years ago,
it proved extremely popular with customers from all income groups
as the items were made available at prices less than the cost to
the supermarket. Profit is not the aim of these promotions,
unwavering consumer loyalty is.
The continued success of these annual promotional campaigns
over the years has reinforced the marketing power of the Hero
name. Future promotions include an Australian-designed high-grade
stainless steel cutlery set with an 18-10 nickel-chromium
content, which is scheduled for November this year.
Customer interaction
Hero believes that customer feedback is vital to achieving its
goals of constantly improving quality and services. Working with
SRI, the company annually conducts the Supermarket Omnibus, where
customer demographics and preferences are monitored.
On a macrolevel, SRI-assisted quantitative surveys are also
conducted periodically in selected stores to draw up shoppers'
profiles and quantify amounts spent. Regular focus groups with
customers helps get valuable customer feedback on products and
services.
The provision of special food counters, targeting ethnic
groups, such as Indians, Japanese and Koreans, is the outcome of
such periodic evaluations and monitoring. At the store level,
morning tea gatherings are popular occasions to elicit customer
reactions. Every worthy suggestion is acted upon promptly.
Complaints are usually handled on the spot by store managers,
whose photographs and names are prominently displayed for easy
identification. However, customers can also approach the office
of the Vice President (Operations) or Marketing Manager. A
customer hot line to the marketing department is also available
on 8300963.
The popular Hero Customer's Club program, run jointly with
Bank Bali, gives a 5 percent discount -- in point form -- on
purchases made with the debit card. Customers can join the Hero
Customer's Club by paying an annual Rp 25,000 fee, of which Rp
10,000 goes into a Bank Bali savings bank account while Rp 15,000
is used by Hero to subsidize cooking demonstrations, factory
visits and seminars for club members.
Discount vouchers are mailed to members for special events,
such as a restaurant opening or launch of a new product.
The Hero Mastercard, a co-branded international credit card,
earns customers a 5 percent discount on credit card purchases.
The monthly magazine Mesra, started in 1988, acts as a
communication channel to keep both Hero Supermarket's customers
and staff informed about the various programs and events.
Community services and sponsorships
Hero Supermarket's impressive growth has seen a marked
increase in its social commitments over the years. Sponsorship of
fund-raising events held at Jakarta International School and the
Women's International Club bazaars are regular features.
Graduates from SMEA (Senior High School for Economics), SMKK
(Senior High School for Home Economics), and Sekolah Menengah
Pariwisata (Senior High School for Tourism) are given three
months on-the-job training to learn supermarket operations. The
Directorate General of Fisheries' annual Festival Ikan (Fish
Festival) is cosponsored by Hero.
Local kindergartens are also supported in educational programs
intended to promote healthy eating habits among small children.
Proceeds from annual charity dinner galas go to Yayasan Jantung
Sehat (Heart Foundation of Indonesia) and fund school and
community projects, such as building prayer halls.
As an overriding feature of its corporate mission, Hero
Supermarket is committed to excellence, offering customers the
highest quality available in terms of service, products and
marketing.
Ranked number one in Indonesia for product quality and store
layout and management, Hero Supermarket has been awarded the Seal
of Excellence by the IGA for achieving international standards in
store management.
Hero Supermarket is proud to be the first and only recipient
of IGA affiliation in Indonesia.