Large chains keep on expanding

I. Christianto, Contributor, Jakarta

Like other nations in Asia and other parts of the world, the retail industry in Indonesia has evolved significantly from poor traditional markets and modest kiosks to sophisticated hypermarkets and superstores.

People are now more accustomed to shop for daily necessities such as sugar, canned foods, soap and other products in malls although they have to join a long queue to pay for their purchases.

Although most business sectors are still in a grave condition due to the economic crisis which has afflicted the country since late 1997, the retail sector is on a rebound.

Many big players have been engaged in major expansion projects. The growing retail sector, however, has stimulated fierce competition among retail giants such as Matahari, Hero, Alfa, Rimo, Ramayana, Goro, ClubStore, Makro, Carrefour, Diamond, Pasaraya, Sarinah, Indomaret and Sogo.

PT Hero Supermarket's legal and corporate secretary Poedji I.H. Prasetyo said the company, which focused on retail food products, would keep on expanding to take advantage of the growing business.

"There are currently only some 30 million people or one-sixth of Indonesia's population of 210 million, who spend their money at modern markets. So there are good prospects," she said, adding that this year rivalry among retailers had been increasing, resulting in greater choice for consumers.

Poedji said this year business was generally stagnant due to the political and economic conditions as well as electricity, gas and labor costs.

"As an old player, Hero will be more aggressive in the following year as competition will be stiffer. We still look for new opportunities and offer competitive prices to our customers," she said.

She added that Hero had the advantage of having maintained its position as a leading player in the retail food sector in the last three decades through competitive prices and a well- organized distribution system and supplies.

Poedji, however, declined to reveal Hero's market share, saying there were no accurate figures.

Hero was established in 1971 as a small shop. It became the country's first supermarket and now operates 79 Hero outlets, 53 Guardian drugstores and 31 Star Mart convenience stores. Next year Hero will add up to 10 outlets.

The tight competition has brought many benefits to customers, especially to those who are smart and have creative shopping habits.

"For some people including my family, shopping is a kind of fun activity. We go to hypermarkets like Carrefour just for recreation, but I prefer to buy goods at Makro as I know it offers cheaper prices for certain goods," said Nancy Harris, a mother of two.

She said supermarkets were now sending brochures by mail, boasting cheaper prices for certain products.

"But I believe they set higher prices for other products. I think other people also realize this gimmick. So I only buy the promoted product and go to other stores for other goods," she said.

Another consumer, Lidya Chandra, admitted she liked to shop but bought only from selected retailers for low prices only.

"Sometimes I don't mind shopping at traditional markets for daily needs as they still offer the best prices," she said.

Lidya added there were also other reasons to shop wisely, saying that some supermarkets offered memberships or discount cards, and that in some places children were not allowed entry.

"I think comparison is important. Just because a shop has a 'sale' doesn't mean the prices are cheaper than another stores. I usually try to consider quality and value, not just price. Paying more for something that will last twice as long makes sense," she said. She added warranties and service also played a role in shopping.

One of the main challenges retailers face is the space rental fee. It is understandable if a retailer sets a competitive price for a particular product but puts a higher price on other products compared to its rivals as they still have to profit.

The domestic retail industry is expected to enjoy a sales turnover of approximately Rp 36.7 trillion (about US$3.5 billion) this year, of which 32.3 percent will be generated by hypermarkets such as Carrefour and Makro, according to a survey conducted by Business Intelligence Report (BIRO).

BIRO said in a statement earlier last week, over the next four years turnover would more than double, reaching Rp 87.5 trillion in 2005. By that time, hypermarkets will account for 38.5 percent of the total sales turnover, causing a contraction in other retail categories such as supermarkets, department stores, mini- markets, and convenience stores.

The survey was conducted over a period of three months, between August and October, among 1,855 outlets owned by 532 companies, which were categorized under supermarkets, department stores, mini-markets, convenience stores, and hypermarkets.

BIRO said that the growth of the retail business was due to market expansion, increased buying power, and the anticipated higher prices of goods in the next four years.

In Asia, Indonesia's retail business ranks seventh out of 10 Asian countries outside Japan, while India ranks second after China.