Small retailers feel pinch of competition

Damar Harsanto, The Jakarta Post, Jakarta

With retailers doing robust business amid the country's economic slump, many people believe it is one of the toughest sectors.

But not all retailers get an equal slice of the economic pie. Among those who get the least are traditional grocery stores.

Barnawi, 60, who has owned a grocery store on Jl. Kayu Manis in East Jakarta for eight years, complained that business had decreased sharply partly due to the presence of larger retailers in her residential area.

She was referring to the presence of three retail outlets less than 500 meters from her shop that started to operate in the area in 1998. Two of them belong to retail giant Indomaret. Unlike the traditional grocery stores, the outlets are air-conditioned, providing shoppers with more comfort.

Before they opened in the area, Barnawi said her revenue was Rp 450,000 a day.

"Now, I would be grateful to get Rp 200,000 a day," she said.

A one time during the recession, she said, turnover went to as low as Rp 100,000 a day.

According to the revised Bylaw No. 8, 1992 on private markets, a private outlet standing on a plot of between 100 square meters and 200 square meters should be at least 500 meters from a traditional market. It does not mention small stores.

There are more than 10 small and medium-sized grocery stores in Barnawi's area, and several other stalls that sell household goods and basic commodities.

Maryono, who works in a medium-sized store that was built 10 years ago, said that competition among retailers had grown stiffer in the area.

But the business seems to remain promising, with large retailers taking the lion's share.

Maryono said that despite the decrease in business, the store he works in still takes in between Rp 500,000 and Rp 1 million a day.

A salesman at an Indomaret shop in East Jakarta, said about 500 people visited the shop each day.

"But the number of visitors jumps 25 percent to 625 visitors when we offer special prices for certain goods," he said.

He declined to divulge the daily turnover, but hinted that most customers spent between Rp 50,000 and Rp 100,000.

The business is still profitable as everyone needs basic commodities regardless of price or financial standing. But if inflation soars, most people cut back their spending on secondary commodities.

The Indonesian Retail Merchants Association (Aprindo) has warned that business will drop 10 percent this year as against 20 percent growth last year.

"The outlook is bleak as people's purchasing power will decrease due to inflation prompted by the expected increase in the price of basic commodities this year," said Rudy RJ Sumampouw, the association's spokesperson.

Rudi said the latest fuel and power rate increases, for example, would affect all economic sectors and in turn the retail business.

Many small and medium-sized retailers will compete to win a lion's share of customers.

Amid the tighter competition, the winners are likely to be giant retailers who have huge working capital, Rudy said.