Producers under-utilize trading houses' services
Producers under-utilize trading houses' services
JAKARTA (JP): Indonesian producers have not yet fully utilized
the services of trading houses in distributing their products, a
survey conducted by the Indonesian Business Data Center (PDBI)
revealed yesterday.
"They (producers) prefer to use conventional distributors or
set up their own networks," PDBI's director, Christianto
Wibisono, told The Jakarta Post.
He pointed out that the condition resulted from the fact that
most of the trading houses have to distribute many kinds of
products, including those from foreign companies.
Therefore, they tend to discriminate against local products
which are the same as those they get from foreign firms, he said.
Small and medium-scale producers, in turn, prefer to adopt the
conventional system of distribution, while the big producers set
up their own systems of distribution.
PDBI's survey of 209 producers with 40 different products
found that they established 157 firms to handle their
distribution systems.
The greatest concentration happens in the pharmaceutical
sector, with 54 producers setting up their own systems of
distribution, followed by the food and beverage sector with 46
producers and the building materials sector with 20 producers.
Christianto also said that only two new trading houses have
started operating in the last five years. These two are well
connected to their groups of businesses with a captive market.
"This is in contrast to the rapid increase in the number of
new plants in the country," he said.
Sales
In 1994, total sales of 16 Indonesian trading houses amounted
to Rp 5.2 trillion (US$2.28 billion). The largest sales were
recorded by PT Indomarco (with sale revenues of Rp 851 billion),
followed by PT Enseval Putera Megatrading (Rp 499 billion) and PT
Wicaksana Overseas Int'l (Rp 458 billion).
Of the three, only Wicaksana Overseas functions as a pure
trading house and is not directly connected with any producers.
"In the retailing sector, restructuring is underway among
local retailers as they are facing open competition with foreign
retailers," Christianto said.
The PDBI survey concluded that there has been a tendency among
local department stores to enlarge their businesses into "super
or mega stores" with product diversification from just fashion to
include other consumer goods such as food and drink.
Matahari, for example, reduced the proportion of its fashion
sales from 62 percent in 1991 to 51 percent in 1994, while
increasing the sales of other consumer goods from 10 percent to
15.4 percent.
"It's interesting to see that Matahari is following the global
trend," he said. "Retailers with foreign licenses such as
WalMart, for example, are moving toward the formation of super
stores with a 'one-stop shopping' system," he pointed out.
"But local retailers have their own strengths so that others
will be edged out of the market," he said.
According to Christianto, the demise of Yaohan from the local
market demonstrates that retailers with foreign licenses cannot
be guaranteed to survive.
During the last five years, the number of retailers in the
country increased by 44 percent from 121 with 393 outlets in 1991
to 153 with 562 outlets in 1995.
Their total sales in 1994 reached Rp 5.3 trillion, an increase
of 76.6 percent from Rp 3 trillion in 1990. Their total sales in
1995 were estimated at Rp 6.2 trillion, and are expected to
increase further to Rp 9.7 trillion in 1998. (13)