Modern hypermarkets vs. traditional markets

Patrick Guntensperger, Jakarta

The emergence of a powerful force in retailing has caused some very reasonable concern among residents and merchants throughout the world and here in Jakarta. Wherever competition in the retail marketplace exists, bulk stores, no-frill stores, warehouse or factory outlets and hypermarkets have started to proliferate. There is a certain irony in these retailers being the product of a competitive market since their business strategy and ultimate goal is to eliminate competition.

Originally tolerated if not welcomed by the public these mega- stores brought low prices and bulk purchasing to the budget conscious consumer. The idea was that these large retailers would open stores that could stock huge inventories and sell at a discount because of their purchasing power.

By buying enormous supplies of their inventory at once and from a sharply limited number of suppliers, they were able to get extraordinarily low prices. This reduced overhead allows them to undercut their competition.

Buyers had little choice but to go along with the trend. If a name brand item is ten percent cheaper in one store than elsewhere, it would be irresponsible of a family on a budget not to shop there. The first thing that a shopper notices at the big- basket stores is an ostentatious attempt to imitate the ambience of a warehouse rather than a retail outlet or traditional market. That, of course is a deliberate effect.

The idea is to leave the shopper with the impression that the ordeal they have to endure to buy fifty kilos of rice, a carton of noodles and ten tubes of toothpaste is justified because of the enormous savings they'll encounter.

But the next thing they'll notice is a distinct lack of choice among the products. Yes, it's true that you can buy, say, a tea kettle for less than you expected. But you'd better not be choosy. There might be as many as two different types in two different colors.

Of course that's part of the deal. They get discounts from the manufacturers because they make certain manufacturers their exclusive suppliers. And signing an exclusive deal with the big guys can mean the difference between life and death for a manufacturer.

As a result a lot of smaller manufacturers of lesser known brands go out of business. So a few cooperative suppliers -- usually the bigger brands -- gain an enormously wealthy customer, families change their shopping habits to accommodate the inconvenience imposed by the hypermarkets and, at first, anyway, save substantially.

Let's think about the overall effect of this shift in buying habits as it will affect the unique Indonesian culture and lifestyle. If the big stores are successful (and if the city officials issue the permits, they assuredly will be), the first casualty will be the downtown core.

The big stores locate themselves on the outskirts of the city where the vast tracts of land they need are still available so the purchasers travel to the suburbs and beyond for their supplies. And since they buy in bulk, they don't have to make their daily purchases any more; that destroys the livelihoods of the warungs and other small neighborhood outlets that need daily purchases to survive.

Wet markets lose their daily purchasing customers to the savings-oriented large-quantity purchasers.

Beyond the immediate effect upon the owners of soon-to-be- bankrupt family companies, this death of those small businesses is particularly hard on the poor of the downtown core; they don't own the car that they need to get to the monster store or to bring home the bulk purchases. It wouldn't matter anyway; they don't have the money that it takes to buy the huge volumes necessary to experience those tempting savings.

They have fewer and fewer places to buy the necessities, because the traditional markets are either closing or having to raise prices out of their reach. As the downtown core dies, urban decay sets in.

An Indonesian scenario would be a radical stratification of the economic classes. The middle class, as it begins to grow, would rapidly become isolated from the urban poor. The middle class in Indonesia is miniscule but growing. In fact, it is growing significantly enough to support the proliferation of the monster stores.

As the new middle class emigrates to the suburbs, the poor would populate the urban centers in ever increasingly squalid conditions. The mingling of the social and economic classes that typifies the conditions in the traditional markets will be gone. The poor will be relegated to the few, small markets that pop up then disappear quickly, while the better-off load up their Kijangs once a month at the superstores.

This effect will likely be gradual. The effect will only occur as quickly as the growth of the middle class and the speed with which the stores are built to supply their demands. But as long as we fail to exercise foresight and allow the unrestrained growth of these enormous stores, it will be inexorable.

While the growth of the middle class is something to be desired and encouraged as a sign that Indonesia is approaching economic maturity, thought and planning must be exercised if that prosperity is not to be more of a cure than a blessing. Because along with the benefits, there will be casualties. So, ladies and gentlemen... the Wal-Mart Effect.

The writer, social and political commentator, can be reached at ttpguntensperger@hotmail.com