- Discover Indonesia Online

You are currently in > Just a blog about Indonesia > Indonesia's hypermarkets pinch locals

JAKARTA - Just as they have in the developed world, big-box hypermarkets, which are taking over the top end of the retail trade, are causing severe dislocations in the rest of Indonesia's food chain, from smaller supermarkets down to wet markets to the warungs where housewives sell cigarettes and candy out of their living room windows.
Certainly, the hypermarkets are growing fast. They have become Asia's new hobbyhorse, self-service retail outlets so big that with as much as 50,000 square feet under a single roof they look like warehouses on the outside. On the inside, they sell everything from steaks to sandals, televisions to toothpicks, garden tools to sports equipment.
Indonesia's Investment and Banking Research Agency says 11 foreign retailers have set up operations in Indonesia since 1998, with total retail outlets increasing from 780 outlets in 1998 to around 1400 outlets in 2002. In fewer than five years Carrefour, the French retailer, has opened 11 stores, especially in Jakarta. Giant has so far established two outlets in while local incumbents like Alfa, Goro and Makro plan to double their presence in Indonesia before 2007. PT Hero Supermarket Tbk, also the owner of Giant and Guardian Pharmacy and considered the country's largest food and beverage retailer, intends to acquire Tops super market chain, with 22 outlets, for Rp111 billion (US$13.5 million) making it one of largest midsized chains, with 111 outlets throughout Indonesia.
There is also a trend for hypermarkets, with larger discounts and promises of a one-stop shopping experience, to mushroom in major cities. It is estimated that hypermarkets will control close to 38.5 percent of the retail market space by 2005 while supermarkets and department stores are expected to contract to 29.6 percent from 32.9 percent, Mini-markets are expected to expand to 4.7 percent from 4.2 percent as consumers use them as pantries for day-to-day incidental shopping.
It is problematical whether Indonesia is experiencing a retail consumer boom. Certainly it hardly looks like it on the strength of its consumer spending, which has averaged increases of little over 4 percent annually over the past three years and appears set to rise by less than 5 percent in 2004. In addition, there are ominous indicators from such things as falling motorcycle sales that indicate the consumer might already be running out of gas.
At the same time, Indonesian tourism has been hit hard, first by the bombing of two nightclubs in Bali in 2002 that killed 180 mainly western tourists, and by the severe acute respiratory syndrome (SARS) epidemic that struck Southeast Asia. In addition, Indonesia's rupiah is the only currency in the region to rise markedly against the US dollar and the Asian countries that are closely tied to it, making it more expensive to holiday there.
Indonesia was also hit harder than any other Asian country by the 1997-1998 financial crisis, with its gross domestic product (GDP) dropping by 13.1 percent - a fall so steep that social stability was threatened and the Suharto government fell after 23 years in power. Despite lots of government cleanup initiatives, its banking system is still mostly filled with dud loans to derelict companies.
So if the rising volume of complaints is any barometer, the hypermarkets are cannibalizing consumers from their smaller, less tidy and more expensive competitors.
The small and medium businesses that have been dwarfed by hypermarkets and midsized chains like Hero and Alfa are worried about the growing competition they face. Some of these local retailers are demanding that the government impose zoning laws to regulate both foreign and domestic retailers from overcrowding an already saturated marketplace. For instance the National Committee for Healthy Competition (KPPU) has prevented the Indomart chain from establishing new outlets near smaller independent retail players called 'warungs.'
While the zoning laws are yet to be implemented, there has already been a fair amount criticism as to how the government would implement a fair zoning system similar to Europe's, which has a business zone system that was imposed several years ago after small traders and mom-and-pop shops complained about unfair practices of giant hypermarkets in their location.
"Indonesia is unlike Europe or even certain countries in Europe. There are regional autonomy laws that have to specify the role and function of each municipality and province as well as the central government, said Benny Siddharta, a Jakarta lawyer. "Even the Jakarta Municipality in the past has been unable to regulate a sensible zoning system between local domestic players and foreign-owned hypermarkets. It becomes even more complicated when Indonesia is supposed to follow in the tracks of the ASEAN Free Trade Agreement (AFTA) that is supposed to open up the local protected retail markets to foreign competition. Finding that balance between foreign investments and local interests is a difficult proposition for the government," he said.
Even the government has admitted that the opening up of the retail sector to foreign investors is partly due to International Monetary Fund (IMF) pressure. However should the Indonesian government decide not to renew its agreement with the IMF then there would be more flexibility within the ranks of the government to create a more level playing field for those in the retail sector argued a government official that is in charge of regulating the retail sector of Indonesia.
"Although there are some benefits, we have realized that it takes time to study some of the pros and cons of opening up the retail market too quickly that made it rather too easy for foreign investors to conduct business in Indonesia," said an official from the People's Representative Council. "Now, under the regulations, we have issued another similar decree where foreign investors need to work closely with local retailers so as to help all retailers become self-sufficient. That was the aim and the initial intention although sometimes implementation of retail systems may differ from the blueprints."
Antok Indrayano, who shops at Carrefour at least four times a month, said that he used to frequent smaller traditional retailers but found it more convenient with the use of credit card purchases as well as having a family outing at least once every week.
"I shop in Carrefour for my groceries since it's easy to find everything in one location instead of spending time wandering to smaller retail outlets or wet markets. Also the convenience of using my credit card has made it easier to manage my household expenses," he said. Some smaller retail outlets do not provide any facilities for payments via ATM cards or by credit cards and rely only on cash.
Antok is emblematic of much of the rest of Asia, where consumers share a unique set of circumstances - rising economic growth, stable incomes, falling birth rates and household sizes, and high savings rates. Asian and global trade patterns are being altered by World Trade Organization rules, opening the doors for western exporters. Even at a time when the rest of the world looks perilously near a clash between the United States and most of the Islamic world and economic conditions are unsettled at best, Asia's borders are more fixed than in decades, with the exception of some adventurism on the part of North Korea.
A generational shift is under way as well. The traditional family is breaking down so that no longer are three generations living under a single roof. Household formation is rising faster than population growth. Governments are increasingly attempting to switch from export-led economies to consumer-led ones. Nonetheless, Indonesia's stock market has been responding to these and other issues including rising exports, growing nearly 25 percent in local currency terms and 34.1 percent in US dollar terms since the beginning of the year, and putting discretionary income into consumers' hands to spend where the stores are air-conditioned, there is leisure to make shopping an entertainment experience - and the prices are higher.

Posted in Economy @ 26 July 2003 by Jeroen · 'Blog' RSS feed · permalink

There are no reactions on this blog entry yet. Be the first one to give a reaction here!

Log in to write a reaction

You are not logged in to the website. You have to be logged in to write a reaction on this blog entry.

· If you already have an account, please login.
· If you have lost your password, please retrieve it.
· If you don't have an account yet, you can create one.

Add this blog entry to your email, your own blog, MySpace, Facebook, or whatsoever via AddThis:
Bookmark and Share

e-mail updates for this blog article

Login if you want to receive emails for reactions on this blog entry. You will receive an update as soon as a reaction on this blog entry is posted.

Your website for tickets in Indonesia!
Looking for e-tickets for flights in Indonesia? Here's your solution! Order your e-tickets at
· 2015, 28 entries
· 2014, 591 entries
· 2013, 750 entries
· 2012, 1061 entries
· 2011, 792 entries
· 2010, 644 entries
· 2009, 916 entries
· 2008, 504 entries
· 2007, 725 entries
· 2006, 1014 entries
· 2005, 723 entries
· 2004, 558 entries
· 2003, 525 entries
· 2002, 375 entries
· 2001, 162 entries
· gigolo
· jakarta
· blogger
Automatically generated every hour
· General (1205 entries)
· Economy (643 entries)
· Politics (574 entries)
· Accidents (561 entries)
· Terrorism (541 entries)
· Earthquake (539 entries)
· Volcanoes (387 entries)
· Crime (357 entries)
· Corruption (349 entries)
· Flooding (278 entries)
· Elections (276 entries)
· Travel (268 entries)
· Bird Flu (254 entries)
· Religion (242 entries)
· Tourism (239 entries)
· Oddly enough ... (219 entries)
· Violence (198 entries)
· Drugs (196 entries)
· Health (192 entries)
· Aceh conflict (191 entries)
· Environment (185 entries)
· Weather (171 entries)
· Military (168 entries)
· Protests (157 entries)
· Culture (106 entries)
· Garuda Indonesia (91 entries)
· C. Sulawesi conflict (86 entries)
· Human rights (82 entries)
· Forest fires (78 entries)
· Sidoarjo mudflow (71 entries)
· Power supply (64 entries)
· Ramadan (63 entries)
· PT Freeport (55 entries)
· Picture guess (48 entries)
· Maluku conflict (47 entries)
· Dengue Fever (37 entries)
· History (37 entries)
· Infrastructure (36 entries)
· Polio (35 entries)
· Mexican flu (35 entries)
· Website (25 entries)
· Media (22 entries)
· Nuclear power (21 entries)
· Sports (20 entries)
· Sexy (16 entries)
· SARS (15 entries)
· Nightlife (10 entries)
· Others (5 entries)
· Lippo Cikarang (5 entries)
· Close smallest categories
EUR-IDR: 16,590 · 16,620  The Rupiah rate declined since yesterday
@ 17 May 2018 18:12 CET
JPY-IDR: 126.83 · 126.95  The Rupiah rate improved since yesterday
@ 17 May 2018 21:58 CET
MYR-IDR: 3,545 · 3,549  The Rupiah rate declined since yesterday
@ 15 May 2018 08:42 CET
SGD-IDR: 10,479 · 10,501  The Rupiah rate declined since yesterday
@ 07 May 2018 07:48 CET
THB-IDR: 439.14 · 439.41  The Rupiah rate declined since yesterday
@ 16 May 2018 09:18 CET
USD-IDR: 14,097 · 14,157  The Rupiah rate declined since yesterday
@ 17 May 2018 00:46 CET
Go to 'exchange rates' 
·  At 03 March 2021 07:43 hotwin reacted on Three more bodies of AirAsia victims to Surabaya hospital
·  At 10 November 2020 16:59 AdvocaatHulp reacted on Three more bodies of AirAsia victims to Surabaya hospital
·  At 14 July 2020 08:32 newnight reacted on Three more bodies of AirAsia victims to Surabaya hospital
·  At 20 September 2018 06:54 erik12 reacted on Fuel prices lowered, again
·  At 19 October 2015 17:17 imambudianto5 reacted on Bank Indonesia maintains benchmark interest rate at 7.75%
·  At 04 March 2015 19:18 merdekaSah reacted on Alleged terrorists shot dead three villagers in Poso
·  At 04 March 2015 13:11 Yogya-Bali reacted on Alleged terrorists shot dead three villagers in Poso
·  At 26 February 2015 13:02 Irena reacted on Sexy, a young woman with candy
·  At 08 May 2014 09:51 jstar reacted on No alcohol should be sold in warung
·  At 01 May 2014 10:07 jstar reacted on Indonesia to be among the top 10 peacekeeping contributors
·  At 27 March 2014 05:50 harlys reacted on PPP leader voices concern over Islamic parties' future
·  At 10 March 2014 06:11 Yogya-Bali reacted on Sriwijaya Air leaves behind 200 passengers at airport
·  At 09 March 2014 00:11 Yerun reacted on Sriwijaya Air leaves behind 200 passengers at airport
·  At 08 March 2014 20:33 nicknick reacted on Sriwijaya Air leaves behind 200 passengers at airport
·  At 18 February 2014 04:17 Yerun reacted on Ash from Mount Kelud eruption spreads over all of Java
·  At 16 February 2014 05:41 Amed East Bali reacted on Ash from Mount Kelud eruption spreads over all of Java
·  At 14 February 2014 22:27 Anne Mieke reacted on Asylum seekers in Medan wish to be sent to Australia
·  At 14 February 2014 22:22 beritaislam reacted on Asylum seekers in Medan wish to be sent to Australia
·  At 16 January 2014 15:37 Anne Mieke reacted on Landslides cut off Tomohon-Manado road
·  At 16 January 2014 15:21 Yerun reacted on Landslides cut off Tomohon-Manado road
Go to 'forum topics' 

Created by · feedback & contact · © 2000-2021
Other websites by · · ·

Valid HTML 4.01 Transitional 146,630,272 pageviews Discover Indonesia Online at