Modern hypermarkets vs. traditional markets

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