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)