The convenience of modern supermarkets (including hypermarkets and other modern food retail formats) is probably something that urban people in Indonesia cannot live without. Consumers enjoy these markets’ airconditioned buildings, more varieties of products including fast arrival of new products as well as competitive prices. However, what are the impacts of these modern retailers on traditional traders?
On 1 November 2011 at PPIA (Indonesian student association) academic workshop, Hery Toiba, a PhD candidate of School of Agriculture, Food and Wine at the University of Adelaide, presented his work entitled “Indonesian Consumers’ Choices of Food Retail Formats: Are Traditional Food Retailers being ‘Crowded Out’?. The workshop was well-attended by Indonesian students and researchers currently residing in Adelaide, South Australia.
Despite ‘common beliefs’, looking at traditional retailers inside traditional markets in Indonesia, Suryadarma et al 2010 (see the working paper version here) find that there is no statistically significant impact of supermarket on the profit and revenue of traditional traders. The fact that many traders have gone out of business during the last 3 years can be explained more by other factors. They find that “traders who mainly sell to non-households and have maintained a good relationship with their customers over a long period of time are more likely to stay in business”.
Hery Toiba contributes to the existing literature by looking at the issue from consumers’ perspectives and taking into account the presence of not only modern food retailers (supermarkets and hypermarkets) but also various traditional food formats such as local shops (warung) and street vendors (pedagang makanan kaki lima) outside traditional markets that are not part of Suryadarma et. al (2010)’s scope of survey. His project is part of a bigger project funded by ACIAR collaborating with the Indonesian Center for Agricultural Research and Policy Studies (ICASEPS). A survey was conducted to 1180 urban households in three cities in Java, namely Bogor, Surakarta and Surabaya. These cities were chosen to represent small (Bogor), medium (Surakarta) and large (Surabaya) cities. Respondents were defined as those who had primary responsibility of purchasing food for their household.
Using ordered probit analysis, Hery Toiba finds that majority of respondents still shop at traditional food retailers especially to buy meat, fish, seafood, fruits and vegetables due to low prices and the freshness of the products. He also identifies the characteristics of consumers at modern supermarkets by looking at the association between modern supermarket choices and several individual characteristics including education (positive), income (positive), household’s assets (positive), the ownership of debit cards (positive), concerns about nutrition (positive), concerns about food safety and convenience attributes such as proximity (positive).
Attendees raised some concerns over several aspects of the study. The difference in definitions between modern and traditional food retailers can be somewhat vague. For example, how should we categorise a market which has similar setting to traditional markets but is air-conditioned and has facilities similar to those of modern markets? But, if we consider the weaknesses of traditional markets, that type of markets could be ‘the future of traditional markets’. Note that results from Suryadarma et al (2010) suggest that those who can maintain a good relationship with customers stay in the business longer. Providing good facilities (something that traditional markets still lack of) at a traditional-market setting (ie many owners, direct communication with customers, etc) may sustain their presence in Indonesian market chains. This should be done along with improvements in food hygiene, etc in which the Indonesian government can be involved in for example by providing technical assistance to traditional food retailers.
Another concern is on price differential. Hery Toiba’s results point out the importance of lower prices for consumers who shop at traditional markets. As the price differential deminishes, the traditional food retailers’ market share could possibly decrease. Therefore, improvements in several factors mentioned above, ie convenience and food safety that traditional supermarkets are still struggling in comparison to modern markets, are essential. Traditional markets may also form or join a cooperative at the local region (this is similar suggestion given in the case study of chilli farmers we discussed earlier in here) to gain economies of scale through centralised purchasing and joint logistics.
This article is prepared by Risti Permani.