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Hypermarkets seem to be growing rapidly, at the expense of
traditional wet markets. However, there is still some way to go before
traditional wet markets become a rarity.
There are reportedly over 1.8 million traditional retailers operating
in Indonesia, accounting in value terms for approximately two-thirds of
the domestic retail market.
Nonetheless, traditional retailers' sales have shown a consistent
decline over the past few years. On the other hand, the presence of
hypermarkets, pioneered by Carrefour with the opening of its first
store back in 1998, has been well accepted by Indonesian society.
Since then, the number of hypermarket outlets has rapidly expanded to
more than 100 in 2006. This sector is dominated by a few large major
operators, such as Carrefour (29 stores), Hypermart (27 stores), Giant
(17 stores) and Super Indo (47 stores).
Although Jakarta and other areas of Java have been at the forefront of
the boom, the expansion of hypermarkets has not been confined to the
major cities. Other potential areas outside of Java have also attracted
the superstores' attentions.
Empirical studies indicate that areas with populations of at least
500,000 people having an average monthly household expenditure of
US$100 are ideal locations for hypermarkets. So, there are many
prospective areas that remain untapped by this modern retail concept.
Undoubtedly, the popularity of hypermarkets will always pose a major
threat to not only traditional markets, but also other modern retail
outlets, such as supermarkets. However, the question naturally arises,
why are the hypermarkets so popular among the consumers? Although there
is no clear answer to this question, three essential variables stand
out -- prices, products and locations.
The competitive pricing strategy adopted by hypermarkets has increased
their popularity among all income groups, in line with the slogan,
"Poor people need low prices while rich people love low prices."
Furthermore, the emphasis on product quality gives the hypermarkets
tremendous bargaining power vis-a-vis their suppliers, allowing the
stores to secure the lowest possible prices for all of their products.
Hypermarkets can further increase their competitiveness by eliminating
the middleman, resulting in a shift in pricing power from producers to
retailers. Furthermore, the purchase of goods in bulk enables the
suppliers to deliver merchandise directly to stores, bypassing
distribution centers, hence further eliminating unnecessary costs.
The convenience factor is also a critical variable in hypermarket
popularity. Gigantic retail facilities are capable of housing an
enormous range of products under one roof, ranging from foodstuffs to
furniture.
Due to their large footprints, a typical hypermarket occupies between
15,000 and 20,000 square meters of retail space compared with 2,000
square meters in the case of supermarkets. Hypermarkets also carry more
than 30,000 items compared with the less than 10,000 carried by a
typical supermarket.
It should be noted, however, that the average size of hypermarkets is,
in fact, getting smaller, ranging between 8,000 and 12,000 square
meters, based on the belief that this sort of size is more conducive to
purchasing rather than browsing.
One might argue that people in general do not shop at hypermarkets on a
daily basis due to their locations, which make it rather difficult for
shoppers to visit them on a daily basis.
However, this may not necessarily be the case in Asian countries,
including Indonesia. In countries such as Thailand, people are known to
shop at hypermarkets on a daily basis, with a frequency of up to four
times a week. This is based on the belief that it will be cheaper for
them to shop at a hypermarket, even if they have to make a 50 kilometer
round trip. This trend is reinforced in Indonesia, where hypermarkets
can be found in almost every major residential area, for example,
Carrefour in Puri Indah (West Jakarta) and Hypermart in Lippo Karawaci
(Greater Jakarta).
Hypermarkets are likely to continue expanding in Indonesia given that
their penetration rate is still low. Indeed, they have emerged as the
single most powerful modern retailing format in the country's fast
growing market. This will consequently lead to heightened competition
for both traditional markets and other modern food retailing concepts,
such as supermarkets. In fact, supermarkets have suffered from
disappointing growth over the last few years due to their continuous
struggle to compete with the hypermarkets in terms of pricing and
product range.
So, is the outlook for traditional wet markets all that bleak? Not
necessarily. Note that more than half of consumer spending goes on
perishable items, which many wet markets specialize in. Wet markets
also have the edge compared to modern outlets in consumer perceptions
of product freshness. While this is not always true, it will be
difficult to change such perceptions overnight. Given all this, we
believe that the country's traditional wet markets will continue to
exist for some time, despite further contraction in market share.
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