Penney's failure blamed on inept concept

Penney's failure blamed on inept concept

JAKARTA (JP): The failure of American high-end retail chain JC
Penney in Indonesia was caused by an unsuitable marketing concept
rather than the country's monetary crisis, an observer said.

The executive director of the Association of Indonesian
Retailers, Kustarjono Prodjolalito, told The Jakarta Post Friday
that it was known JC Penney had problems selling its merchandise
here long before the monetary crisis hit the region in July.

"The current monetary crisis only accelerated the process of
(JC Penney's) inevitable closure."

Kustarjono said that the company's decision to end its
operation in Indonesia should be seen as an isolated case rather
than a trend for retailers, either local or foreign.

He acknowledged that the monetary crisis had affected the
retail sector in general but it was unlikely to force retailers
to shut up shop as quickly as JC Penney.

The chain decided to halt its operation in Indonesia as of
Dec. 31 and its liquidation sale started last month.

There used to be six outlets around the city in Plaza Senayan
in Central Jakarta, Mal Pondok Indah in South Jakarta, Mal Kelapa
Gading in East Jakarta, Mal Taman Anggrek in West Jakarta, Mal
Pluit in North Jakarta and Mal Lippo Karawaci in Tangerang.

The outlets at Plaza Senayan, Mal Pondok Indah and Mal Kelapa
Gading closed last month.

JC Penney started operating in Indonesia two years ago in
partnership with Multipolar of the Lippo Group, targeting upper-
middle class customers. It employed 400 workers at the peak of
its operation.

Kustarjono said JC Penney's outlets had failed to attract
buyers because its merchandise was expensive and the brands were
relatively unpopular here.

And the prices were high because most of the merchandise was
made in America.

"JC Penney should have been more aggressive in popularizing
the brands of its merchandise to woo buyers. But it did not
succeed."

He said a Japanese retail chain here had initially utilized a
similar concept to JC Penney but it specialized in Japanese
products.

The Japanese chain realized that the concept resulted in
prices which were too high so it switched to using materials and
designs from Japan and producing the merchandise here.

The new concept made it possible for the chain to survive
until now, he said.

Kustarjono said JC Penney's failure might also have been
caused by tough competition in the high-end market.

JC Penney overlooked the fact that the largest retail market
potential was among lower-middle class consumers, he said.

The store manager of JC Penney at Karawaci, Minfu, noted that
the high-end market was now saturated with specialty stores.

Next store

The British fashion chain Next said over the weekend that
Indonesia's monetary crisis has cut into its sales here by about
40 percent.

But Sutrisno, the president of Next's Indonesian license
holder, PT Mitra Adiperkasa, said Friday he believed the drop
would not last long.

"I am confident that the drop is only temporary," Sutrisno
said, reported Antara.

He said he believed Next's net sales would pick up again as
the rupiah strengthened against the U.S. dollar.

On Friday, Next opened its fourth store in the country at the
Pasaraya Shopping center in South Jakarta. Sutrisno said the
store was its biggest outlet here.

The company operates another two clothing outlets in Jakarta
and one in Surabaya.

Sutrisno said the company plans to open stores in Surabaya
(East Java), Medan (North Sumatra) and Bandung (West Java) next
year despite the monetary crisis, which has slashed the value of
the rupiah.

The fashion line, owned by Britain's Next Plc, entered the
country in 1995. It is operated by Mitra Adiperkasa, a joint
venture between Indonesia's Gajah Tunggal Group and Singapore's
Royal Sporting House Group.

Sutrisno said 60 percent of Next's consumers here were local
buyers while the remaining 40 percent were foreigners.

He said the prospects for fashion lines for those from the
middle-class economic background here were still bright because
demands continued to rise. (jsk/das)