Minimarkets Targeting Suburbs: Jakarta, West Java

They are brightly colored, well lit and air-conditioned — but the logic behind sprouting minimarkets in Greater Jakarta suburbs is no different to the opening of streetside cigarette stalls.

Take the strip of Jl. Raya Cinere, south of Jakarta, for example: a franchised Alfamart store is situated around 230 steps — yes, footsteps — down and across the street from a Mitra minimarket.

And that’s only the competing store to the left of Alfamart. A five-minute walk to the right will land you in front of an Indomaret minimarket offering discount prices.

Alfamart is the latest minimarket chain to enter the market, serving the growing outer-settlements of Jakarta’s commuters.
Alfamart’s modern facade may seem like a threat for existing minimarkets, but none of its competitors seemed to be disturbed.
Each minimarket chain insists they are serving a different market; in much the same way the many cigarette-stall owners do.

Cigarette-stall owners, apparently, do not mind standing close by or across the road from each other, as they believe they are serving different flows of traffic; a different market from each other.

“We have not been affected by Alfamart. Sales have been stable and we are frequented more by people who are heading home from the Golden Mosque in Parung,” said the Mitra store manager, who asked not to be identified.

He explained that his store’s daily revenue averages between Rp 2 and 3 million, about the same amount claimed by its neighboring competitors.

“It seems the number of people who shop at minimarkets has grown along with the opening of new stores,” he said.

This phenomenon is not exclusive to this area.

A 20-minute drive away, along Jl. Raya Gandul, which runs parallel to Cinere, there are more than a dozen minimarkets.

Some stand only 100 meters away from one another.

This goes in line with data from the Indonesian Retailers Association that reports in Greater Jakarta alone the number of minimarkets grew by 11 percent in 2006, while total sales at minimarkets grew by 29 percent.

Currently, there are as many as 3,384 minimarkets in Greater Jakarta, a number equal to 38 percent of the total number of such stores nationwide.

According to a Jakarta bylaw, a minimarket is defined as a modern neighborhood store occupying a premise no larger than 200 square meters and selling no more than 100 different items.
In 2006, Jakarta issued a gubernatorial directive for all officials to stop issuing permits for new minimarkets.

However, it seems the stores moved to outlying suburbs, following the direction of the urban sprawl.

“It is almost a true competitive market phenomenon,” Tarumanagara University urban economy lecturer Kemal Taruc said.

“Theoretically, there will eventually be a zero profit equilibrium where no more minimarkets will be able to enter the market.”

Modern retail stores, like minimarkets, may have taken business away from traditional neighborhood grocery stores, but until now it seems that they have not taken business away from each other.

Franchising of the stores may have also contributed to this solid growth.

Under the Alfamart franchise, interested investors need only to provide a premise of around 100-square-meters in a strategic location to qualify to open a new store. Likewise, they can take over an existing store for Rp 400 to 500 million.

Similar schemes apply to stores under OMI, Al Hikmah, Indomaret and others.

“You can either choose the security of a location tucked inside a housing estate, or enter the competition along a main strip,” said Nurul Huda, owner of a franchised Alfamart who chose the first option.

“As a beginner in the business, I made Rp 3.5 million in daily sales during the opening week,” he said.

There was a time when people purchased their monthly groceries at neighborhood stores, but modern minimarkets do not seem to rely on that degree of customer spending.

“Most of our customers are those buying snacks or cigarettes or other daily goods. People usually go to supermarkets or hypermarkets for their monthly groceries,” the Mitra store manager said.

This is probably true, as during half-a-day of observation, those who entered the store appeared to come back out with no more than a medium-sized plastic bag of goods.

It seems the evolution of neighborhood stores into comfortable little air-conditioned minimarkets has changed not only the look of Jakarta’s suburban strips, but also the habits of consumers.

Anissa S. Febrina