Most distribution networks operate in Java

Most distribution networks operate in Java

JAKARTA (JP): Distribution networks of manufactured goods in
the country are mostly located in Java due to the lack of demand
in other parts of the country.

According to a three-month survey conducted by research
company, Business Intelligent Report (BIRO), on 1,145 companies
in nine provinces, about 65 percent of the manufacturing
companies have concentrated their distribution and retail
networks in Java either through their own branches or through
authorized distributors.

Respondents in the survey included 924 agents and distributors
and 221 trading houses, covering 40 products ranging from
electronic wares to heavy equipment. The survey also included
1,397 brand names.

The companies, with most of their distribution networks in
Java are predominantly those producing electronic goods with over
2,800 outlets, automotive products and spare parts, with 1,750
outlets and building material with over 630 outlets.

Java was also chosen as the distribution and retail center of
companies producing and selling optical products (83.7 percent),
textile and textile related products (82.6 percent), medical and
laboratory equipment (82.1 percent), furniture (72.6 percent),
metal products (69.2 percent) and food and beverages (57.5
percent), the survey said.

According to the survey, companies that concentrated their
distribution networks in provinces like Sumatra, Kalimantan and
Sulawesi were those dealing in heavy equipment and parts
supplies.

"Manufacturers of heavy equipment and their related parts
concentrate their marketing networks in the three provinces to
benefit from operations of natural resources-based companies in
the areas," said the survey.

The survey also found that in the retail sector the
competition among the players was so tight that none of them
could really dominate the market.

"Conglomeration in the retail sector is unavoidable as a
result of the integration of the upstream and downstream sectors
by several firms. However, no retailer can really control the
market because the market is so fragmented," it said.

The survey indicated that most trading companies opened their
own logistics and retail divisions to cut operational costs.

Local giant consumer goods distributor Tigaraksa, for example,
has logistics company TNT Logistic, and hypermarket Carrefour to
distribute and sell its goods.

Another local business empire, the Salim Group, also operates
grocery chains under the flag of Indo Grosir, supermarket chains
Super Indo and minimarket chains Indomaret and trading house
Indomarco to distribute and market its consumer goods.

The survey also found that these giant business groups also
expanded their retail operations by acquiring stakes in foreign
retailers such as the France-based Carrefour, partly owned by
Tigaraksa, and Price Mart, partly owned by Wicaksana.

Renown local supermarket and department store operators like
Hero Supermarket, Matahari and Ramayana were focusing their
businesses on their own retail services and had not merged with
local or foreign trading houses.

It said that local retailers should not be too worried about
the recent entrance of big foreign retailers because the latter
could not dominate the market.

Several foreign retailers such as Japanese Yaohan, WalMart,
NTUC and Singapore-based Lion have been forced to pull out of the
country for failure to compete with local retailers.

The survey said product distribution networks in the country
was expected to be more efficient in the near future thanks to
the adoption of information technology by many of the country's
manufacturers and retailers.

Business Intelligence Report said that the total sales in the
domestic retail sector reached Rp 140.8 trillion, contributing
about 12.6 percent of the country's Gross Domestic Product (GDP).

The research company estimated the per capita consumption in
the country would increase to Rp 2.9 million this year from Rp
2.3 million in 1999. (cst)