Hypermarkets: Lessons from abroad

Hypermarkets: Lessons from abroad

Barlev Nicodemus
Brussels

An article that appeared in The Jakarta Post on Dec. 20
attracted my attention. The article, When violence is used to
overcome big business, shed light on an issue that is very
crucial to all of us. The writer said small suppliers were
complaining about the number of hypermarkets around Jakarta, and
were afraid of being displaced by these massive retailers.

These hypermarkets are supported by multinational companies
with unlimited capital and world-class management. Because they
buy goods directly from producers in huge quantities, they
receive price reductions, which they then pass on to customers.

It is no surprise then that hypermarkets can provide goods at
lower prices than smaller retailers. This is the key to the
retail business. Under these circumstances, small suppliers and
retailers really have no way to compete.

This is clearly understood by the governments of the countries
from which the hypermarkets come. In their home countries,
hypermarkets are allowed to open stores only on the outskirts of
cities. The reason is straightforward: to protect local or small
retailers.

Customers therefore have to drive quite a long distance to
reach the hypermarkets. They have to spend more time and money to
obtain the cheap goods. We have here, as the economists say, an
opportunity cost. As time is in short supply, the more time they
have to spend getting to the hypermarket, the less time they have
for other activities.

As a result, people will tend to go to smaller stores in their
neighborhood rather than to big retailers. Only when they have
time will they go to the hypermarket. Obviously, this policy
helps small shops survive and grow.

As a student abroad, I never saw a hypermarket located in the
business center of a city. Take a look Carrefour, for instance.
Here in Brussels, you will not find a hypermarket in Rogier (a
business center similar to Kuningan in Jakarta). You will only
find them in suburban Brussels, standing on a crossroad.

In fact, that is how Carrefour got its name. The French word
"carrefour" means crossroad, and the store took this name because
the markets are typically built on a crossroad.

This same situation occurs in the Netherlands, where another
big retailer, Makro, operates.

However, the situation in Jakarta is completely different.
Carrefour, for instance, has opened stores in many strategic
locations, such as Kuningan, Harmoni and Ratu Plaza. People can
easily reach these locations even when they are on the way home
from work. There is no disincentive to shopping at a hypermarket.
In other words, here in Jakarta we have conditions that would be
unacceptable even in Carrefour's homeland.

More surprisingly, Makro does not have seem to have the same
privileges as Carrefour. Their shops typically are located on the
outskirts of Jakarta, such as in Ciputat, Kampung Rambutan or
Meruya.

Since we have two different situations, which one is correct
under the law?

I would suggest the problem here is a lack of laws, not merely
the implementation. The fact that President Susilo Bambang
Yudhoyono plans to issue a decree in the future to regulate
wholesalers, as the article in the Post said, is clear evidence
of this. There is currently a lack of regulations. The absence of
laws has led to the two completely different treatments discussed
above. Whoever can pay more will probably receive more
privileges. Consequently, we cannot say big retailers are
operating under the law because the law is not there.

Another point I would like to put forward is the way foreign
investment is perceived. There is generally an overreaction to
foreign investment, which is clearly needed to create jobs.

However, this does not mean Indonesia cannot develop its own
domestic firms. The authorities must realize that when large
companies enter a country, they can stifle local firms.
Therefore, protecting small shops is not a mistake. It is an
acceptable practice, even in developed countries.

There is no reason to worry that such a policy would reduce
foreign investment. Indonesia does not want "a winner take all"
society, which would only lead to disempowerment and
impoverishment. Let us hope this belief will underpin all of the
regulations on foreign investment.

The writer is a student at Katholieke Universiteit Brussel and
can be reached at BarlevNicodemus.Marh@student.kubrussel.ac.be.