Tale of two shops: Markets and malls

In recent years, customers have been spoiled by the ever- increasing number of modern shopping centers that often engage in price wars to win customers. The Jakarta Post's Maria Endah Hulupi, Ida Indawati Khouw and contributors Prapti Widinugraheni, I. Christianto and Tri Hafiningsih look into the issue of smart shopping.

JAKARTA (JP): What makes a shop popular? Friendly staff, cheap prices, air-conditioning, ample parking space, after-sales warranties? In a perfect world, all of these. And in these seemingly hard times, you would think competitive prices were most important.

As it turns out, the aesthetic sensibility and wallets of some Jakarta residents are still as deep and as padded as they were before the economic crisis; these people will pay to shop in comfort. Not surprisingly, responsive retailers have no qualms about giving great service and loyalty perks to high rollers -- like in the good old boom days.

Not far down the road, other shoppers believe price is king and comfort can be compromised. In fact rubbing shoulders with a crowd of strangers, sweating and haggling for a piece of merchandise is seen as an art in itself.

"It's worth it. If you earn 'just-enough' income, but you still want to look fashionable and trendy, get your clothes at the market. Just make sure you inspect very closely the details of everything you buy, like the neatness of the sewing on clothes," says Wilandari, an academic, referring to the Mangga Dua and Tanah Abang markets where she shops for most of her clothes.

These markets are among the biggest wholesalers in Jakarta for clothes, textiles and other items. Parts of Mangga Dua and almost all of Tanah Abang have no air-conditioning. They are poorly ventilated, almost always crowded and full of stalls that are crammed in together, separated by narrow aisles. It's wise, Wilandari says, to wear old clothes and no jewelry when shopping there. The more inconspicuous you are, the better.

The same goes for shopping at Jakarta's electronics hub. An executive at Glodok in Central Jakarta who requested anonymity admits that vendors of electronic goods occupying Glodok electronics center and surrounding buildings have nothing going for them except cheap prices and plenty of choice. Even then, customers must bargain if they don't want to be duped.

"Most of our tenants are wholesalers and almost all retailers in Indonesia get their supplies from here, including some department stores," he says.

For the individual consumer, the only advantage is getting cheap goods through haggling. "But still, you must be smarter than the vendor. Look around beforehand and make sure the price you settle on -- after bargaining -- doesn't exceed the 'market' price," he says.

Comfort shopping

Shopping in such places is no doubt for the brave at heart. For timid souls who sport a reasonably thick wallet or desire to shop in comfort, there are more appealing shops. These are the clean, air-conditioned and brightly-lit places where customers may expect to be greeted and have their complaints resolved.

Some of these stores are oldies making a comeback, such as Ratu Plaza, a shopping center popular in the 1980s which shut down in 1995 and reopened last September. Plaza Slipi Jaya, a victim of the May 1998 riots, is now also back into full swing.

No doubt, these are signs of a return of boom-time consumerism so shopping hubs are once again scrambling to look pretty and inviting to customers.

The Metro Department Store group, managed by PT Metropolitan Retailmart, sends its sales staff to training programs that teach them how to greet customers, take care of personal appearance and handle complaints.

Metropolitan Retailmart finance director Handonowarih Nitiseputro says the company makes sure that defective goods are replaced within seven days of purchase, while all complaints should be dealt with within three days.

Gatot Praptoriadi, the company's business process improvement manager, says that if a certain product receives more than one complaint, Metro will give a warning to the product's supplier. If the vendor continues to disregard Metro's demands then the company will look for another supplier.

Up one level on the complaint chain, building managers must look out for customers who complain about the retail shops that occupy the building.

Henny Udy, tenant and guest relations senior manager of PT Plaza Indonesia Realty, the operator of Plaza Indonesia in Central Jakarta, says: "We want to make sure that the customers of our tenants are satisfied with the services they receive while visiting Plaza Indonesia."

Henny says the company has strict standards for tenants' product quality and services. Since most shops at Plaza Indonesia sell branded goods, customers are mainly members of Jakarta's upper-middle to extremely-wealthy class. No doubt these are people who would not hesitate to give meaning to the saying "the customer is king".

Some of the most common issues raised by customers include questions about the authenticity of products sold by a tenant. But similar questions also come from branded goods-sellers upon hearing that another tenant is selling their goods, says Henny.

Customer loyalty is an increasingly important issue in the face of competition. Many retailers these days offer perks that can be gained through "exclusive club" memberships or similar programs.

Sularno Karyanda, the sales promotion manager of Pasaraya Department Store says the store has launched membership cards allowing holders to enjoy advantages like getting points for a certain amount of purchase, receiving prizes after collecting a certain number of points, being invited to special events and receiving latest information on sales promotions.

"Since we target customers from the middle to higher-income bracket, we focus on serving with comfort -- we have spacious shopping centers with carefully-arranged displays. We also have a customer relations division which can immediately handle problems of customers," he says.

Is the price right?

While some people do not mind spending heaps in order to shop in style and buy pieces of branded merchandise, there still exists in Jakarta a level-headed, middle-income class that believes that price should come second after a sensible degree of shopping comfort is assured.

Stores that cater to this group focus their promotion more on prices than on product brand.

Sri Purwanto, the marketing and communication manager of PT Alfa Retailindo Tbk., the operator of Alfa stores, says: "Our strategy is focused on lowering prices so we can guarantee to pay the difference if people can prove that (for the same product) other stores have cheaper prices -- with the condition that the products are not on sale."

Sri adds, however, that very few customers have made use of this advantage. "I think it's because people don't want to go through the hassle for the sake of a little difference."

Another strategy involves reducing prices as the volume of shopping increases. Not surprisingly, such pricing policies are responsible for the store's meager profit margin. Through cross- subsidy and by focusing on the quantity of goods sold, it expects to get higher profits from otherwise less-valuable merchandise.

Alfa also tries to gain customer loyalty through membership cards which allow the holder to get a three to five-percent discount for selected items, get free movie tickets, enjoy discounts at certain hotels or restaurants and other perks.

Evidently, it's a tough life for retailers like this. Head of public relations and organization division of the Association of Indonesian Retailers (Aprindo) Rudy Sumampouw admits that pricing policy is perhaps the biggest problem of the retail business in Indonesia.

The free market has led retailers to engage in unfair competition, price wars and even the selling of merchandise at prices below production cost. This is particularly true with the influx of international-chain retailers.

One example is Carrefour, an international chain with outlets spread across Jakarta, that claims that goods sold at its stores are cheaper than elsewhere. At the same time, it can afford to operate at sustainable levels.

Carrefour Public Relations Officer Triono, says: "As a big retailer, we always get our supplies in large quantities. We have authorized suppliers and we establish mutual good relations with them. We see them as partners ... This good relationship has allowed us to get bigger discounts from them and, in turn, enabled us to sell the goods to consumers at lower prices."

Rudy Sumampouw points out that competition between local, small-scale retailers and international chains like this is aggravated by the fact that there are no rules of the game.

"We don't have any kind of 'code of ethics' for pricing and competition," he says.

Such devastating pricing policies by smaller retailers are usually made for the sake of image and market domination. "But to sell below production cost for a long period requires huge capital that is unfeasible for local retailers whose businesses are built on bank loans," he says.

Regardless of the retailers' plight, at the end of the day it is the customer who benefits from the situation.