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I. INTRODUCTION 1.1. Statement of the Problem Retail business is direct sale of goods in any type of outlet such as kiosk/stall, traditional/modern market, department store, boutique, etc., including delivery service, which generally supplies for purchasers personal consumption. Early 1970an was the beginning of massive changes in the retail business in western countries, this change had an impact on social and economic conditions of society. Retail change has occurred in the context of wide-ranging socioeconomic trends (Bromley & Thomas, 2003, p. 3). First, increasing affluence has been associated with a rise in car ownership and much greater mobility. Given the improvement in roads, people are now able and willing to travel far greater distances for their shopping and the car is increasingly being regarded by retailers as a “shopping basket on wheels”. However, those who do not own cars have become polarized as a disadvantaged group whose poor mobility constrains their access to urban facilities. The growth in car ownership and the consequent volume of traffic has also had detrimental effects on movement within the city, and growing central congestion has contributed to decentralization. Second, changes in the spatial redistribution and composition of population. Champion (1989, 1992) on Bromley and Thomas (2003) state that Counter-urbanization, involving the shift towards a less-concentrated pattern of population distribution, in which rural areas and small towns grow faster than large cities, was a dominant feature of the 1970s and 1980s. Furthermore, Champion & Townsend (1990) stated consumer services such as retailing have followed the population in decentralizing from city centres. Warnes (1989) stated Trends in composition have been equally significant. The population is ageing and the proportion of elderly people has increased markedly. There are now more households to participate in shopping and more of them are experiencing the restricted mobility associated with the

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I. INTRODUCTION

1.1. Statement of the Problem

Retail business is direct sale of goods in any type of outlet such as

kiosk/stall, traditional/modern market, department store, boutique, etc.,

including delivery service, which generally supplies for purchasers

personal consumption. Early 1970an was the beginning of massive

changes in the retail business in western countries, this change had an

impact on social and economic conditions of society.

Retail change has occurred in the context of wide-ranging

socioeconomic trends (Bromley & Thomas, 2003, p. 3). First, increasing

affluence has been associated with a rise in car ownership and much

greater mobility. Given the improvement in roads, people are now able and

willing to travel far greater distances for their shopping and the car is

increasingly being regarded by retailers as a “shopping basket on wheels”.

However, those who do not own cars have become polarized as a

disadvantaged group whose poor mobility constrains their access to urban

facilities. The growth in car ownership and the consequent volume of traffic

has also had detrimental effects on movement within the city, and growing

central congestion has contributed to decentralization. Second, changes in

the spatial redistribution and composition of population. Champion (1989,

1992) on Bromley and Thomas (2003) state that Counter-urbanization,

involving the shift towards a less-concentrated pattern of population

distribution, in which rural areas and small towns grow faster than large

cities, was a dominant feature of the 1970s and 1980s. Furthermore,

Champion & Townsend (1990) stated consumer services such as retailing

have followed the population in decentralizing from city centres. Warnes

(1989) stated Trends in composition have been equally significant. The

population is ageing and the proportion of elderly people has increased

markedly. There are now more households to participate in shopping and

more of them are experiencing the restricted mobility associated with the

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disabilities of age. Third, A set of socioeconomic trends result from the

changing character of the working population. Part-time employment for

both sexes grew considerably in the 1970s and 1980s, and retailing has

been prominent in this trend (Townsend 1986 and Watson 1992). The

proportion of women in the workforce has also increased, and retailing

itself shows continued feminization of the workforce, with women

comprising about62 per cent of workers (Sparks 1992). Those in work

experience time constraints on their shopping patterns, a factor of

particular relevance to women, whose traditional gender role has included

being the principal shopper (Davies & Bell 1991). However, alongside

these trends the growth of unemployment since the 1980s associated with

deindustrialization should be noted, and the suggested emergence of an

underclass (Eversley 1990). The shopping constraints of disadvantage are

a hallmark of the unemployed.

In Southeast Asia, the market share of traditional retail experience

diminishing trend, along with the increasing number and capitalization of

the modern retail business. In Indonesia, the performance of the modern

market has increased, while traditional markets decline. AC. Nielsen noted

the fact, that in 2004, the contribution of the traditional market of about

69.9%, this value decreased from 73.7% the previous year (2003), 74.8%

(2002), 75.2% (2001), and 78.1% (2000). On the other hand, the opposite

condition occurs in supermarkets and hypermarkets. The contribution of

each type of the modern market was increasingly large. Suryadarma et.al.

(2007) Researchers from independent research institutions in Indonesia,

SMERU Research Institute in his report concluded, that the existence of

modern markets (supermarkets) give effect to the reduction in the

contribution and performance of traditional markets. Quantitatively, the

existence of traditional markets (supermarkets) do not prove any

significant effect. Decline in more traditional market performance caused

by internal factors that lead to lack of competitiveness compared to the

modern market. Furthermore Suryadarma reported also, that the

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traditional markets that are close to the supermarket which is worse

affected than the who are far away from the supermarket.

AC Nielson (2010) mention that Indonesia is the second fastest

developing market in South- East Asia with an annual share change of

1.6%. This is likely to continue to grow at a fast rate with modern trade still

accounting for less than 40% of sales. The fastest growing channel in

Indonesia has been the mini-market, led by local giants Indomaret and

Alfamart. Over the decade, store numbers increased from just over 2000

to more than 11,500. It is now difficult in many cities to stand on a corner

and not see at least 2 of these stores!! The impact of mini-markets on

where people shop has been significant as their share of trade has

increased nearly six-fold to over 17%.

Chamber of Commerce (2010) or KADIN mentions that the retail

industry is one of Indonesia's strategic industries. This industry is the

second largest sector in terms of employment, which absorbs

approximately 18.9 million people, second only to the agricultural sector

that could absorb around 41.8 million people. Retail industry is divided into

two types: (1) Traditional Retail; and (2) Modern Retail. Traditional retail is

represented by traditional markets and small shops on the roadside, while

the modern retail is represented by Carrefour, the Ramayana, Indomart,

Alfamart, and so forth.

Furthermore, KADIN explained that traditional retailing in Indonesia

has a strategic value. Traditional retail markets in Indonesia are among the

most frequently visited, as many as 25 times per month, compared to India

and Sri Lanka are only 11 times per month and the Philippines are only 14

times per month. There are several advantages of traditional retail

markets, among others, is the ease of access for small suppliers, including

farmers. Besides, in the traditional retail market can occur bargain, fresh

goods, and close to home, but the traditional retail market has no place as

comfortable as modern retail market.on the other hand, modern retail

market in addition to having a comfortable place, the goods also have a

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high standard and quality as usual modern retail company will maintain the

company image. In addition, the service was excellent and also full of

goods available, from electronic goods to everyday needs. However, the

modern retail market cannot be negotiated.

Initially, Indonesian modern retail market dominated by a few leading

players who had long been in this business such as: Hero, Indomaret,

Ramayana, the Sun, Alpha. Invasion of foreign hypermarkets are so

intense in the 2000s made the competitive landscape of retail business

becomes increasingly fierce. The development of modern retail business

nationwide for the last five years is staggering. According to AC Nielsen

survey (2006), the number of trade centers, both hypermarkets, wholesale

centers, supermarkets, mini market, convenience stores, as well as

traditional stores rose nearly 7.4% during the period 2003-2005. Of the

1,752,437 total outlets in 2003 to 1,881,492 in 2005 outlets. The

development of a very high this indicates that the Indonesian market has a

very promising potential for retail business.

There are fears what will happen to domestic retailers, and even

more are feared to shift the traditional market. AC Nielsen noted, from year

to year starting in 2000, the market share of traditional retail market

continues to decline. In early 2000 the market share of 78.3% traditional

and increasingly reduced to 70.5% in 2005. The more proliferation of

foreign retailers should be wary of going to disrupt the "underprivileged"

who work on traditional markets. In line with the existence of socio-

economic shift, from the "A Consumers' (upper class consumers),

penetrated into the" B and C Consumers "(Consumers middle and

bottom), the traditional market infrastructure is absolutely necessary

repaired immediately.

The high rate of minimarkets development raises big questions, that

is. (1) What is the impact of the presence of minimarket to the traditional

retailer? (2) How much the percentage change in revenue/ received by

traditional retailers after the presence of minimarket?

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1.2. Objectives

The objectives of this research are:

1. To describe the traditional retailer and minimarket development in

Malang City

2. To identify the factors that influence consumer shopping in minimarket

and traditional retailer

3. To assess the impact of minimarket on traditional retailer.

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Chapter II

LITERATURE REVIEW

2.1. Retail Market : An Overview in Asia Pacific

The growth volume of the grocery sales was degenerated in 2009.

Nielsen (2010) notified, throughout the Asia Pacific region, countries

experiencing lower growth rates of grocery sales in 2009 compared with a

very strong performance in 2008. AC Nielsen noted that the countries with

the strongest market growth rates in 2009 are India and Vietnam, with total

sales increased by close to 15% when compared to the year 2008.

Furthermore, Nielsen reported that In China and Indonesia, a market that

has consistently enjoyed double digit growth during the last 5 years, the

growth rate slowed down to +3% and +5% respectively. China has seen a

strong recovery, although since Q4 2009 and now back to a growth of

11% in Q1 driven by strong demand for food categories.

The 2000’s noted by Nielsen as a decade of change for grocery

retailing in Asia. More than ten years, throughout Asia, the rapid changes

in the retail grocery business were recorded, driven by the retailer’s

investment in the establishment of new stores. Across the region, the

modern trade now accounts for 53% of the packaged grocery sales

tracked by Nielsen, from the 35% share in 2000. This shift of consumer

spending of nearly 2% per annum has been strongest in North Asia – led

by China where the importance of modern trade increased on average by

3%. The biggest number of expansion was seen in the China market,

China accounted for over 100,000 new stores or more than 60% of the

total new store investment and equivalent to a 1000% increase in a 10

year period. Furthermore, modern market share increased from 34% to

64% during the decade with all formats that encourage growth.

In china, hypermarkets are the strongest modern trade channel

accounting for 28% of packaged grocery sales. The importance of

Hypermarkets differ significantly by city; in Shanghai, 77% of shoppers

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claim to use them as their main store compared to just 45% in Beijing. The

biggest growth opportunity for this channel is now coming from the lower

tier cities with the key cities generally reaching relatively mature level of

development (Nielsen, 2010).

Beside China, Korea was another market where the speed of

change has been rapid. Korea is a market where Hypermarkets occupy a

very strong share of trade (31%) (Nielsen, 2010). Beside Hypermarket,

there is another channel have also expanded rapidly in this country – the

Convenience stores-, it achieve a 12.5% share and the number of store

growing from 3,000 to nearly 17,000 stores in the last 10 years. Traditional

grocery stores have suffered most in Korea, with a closure rate of 5% per

year or more than 50,000 stores during the decade (Nielsen, 2010).

2.2. Retail Market Development In Indonesia

Indonesia is the second fastest developing market in South-East

Asia (AC. Nielsen, 2010). Rangkuti (2010), state that the Indonesian retail

sector began its rapid expansion in 1999, when a Presidential Decree

allowed Carrefour, a French retailer, to increase its outlet numbers in

Jakarta. As other foreign and local retailers followed, the Indonesian retail

sector grew and consumers benefited from stronger competition between

retailers. Furthermore, he state that the modern retail businesses such as

hypermarkets, supermarkets, and mini-markets are replacing more

traditional retail outlets, including wet markets and independent small

grocers.

The retail industry is one of Indonesia's strategic industries (Kadin,

2009). Kadin state that this industry is the second largest sector in terms of

employment; this absorbs approximately 18.9 million people. It is behind

agricultural sector that could absorb around 41.8 million people. Especially

in traditional retailing, the traditional retailing in Indonesia still has strategic

value. Furthermore, Kadin mentions that the traditional retail market in

Indonesia is the market's most frequently visited, as many as 25 times per

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month, compared to India and Sri Lanka are only 11 times per month and

the Philippines are only 14 times per month. There are several advantages

of traditional retail markets, among others, is the ease of access for small

suppliers, including farmers. Also in traditional retail markets, buyers can

haggle, the place is close to home, and goods is fresh, but in the

traditional retail market has no place as comfortable as modern retail

market.

Kadin (2009) categorize the retail industry in Indonesia into two

categories; (1) Traditional Retail; and (2) Modern Retail. Traditional retail is

represented by traditional markets and small shops on the roadside, while

the modern retail is represented by Carrefour, the Ramayana, Indomart,

Alfamart, and so forth. Unlike traditional retail markets, modern retail

market not only has a comfortable place, but also have quality goods

because it typically modern retail company will maintain the company

image. In addition, the service was excellent and also full of goods

available, from electronic goods to everyday needs. However, the modern

retail market price is not negotiable

The development of modern retail market in Indonesia is

experiencing expeditious progress. Ten years ago almost all supermarkets

located in Greater Jakarta, but now only 50% of them. Supermarket

development has expanded into other islands, even large villages in Java.

Initially the supermarket is just to ‘A’ consumers (Upper class consumer).

However, it has now expanded to ‘B’ and ‘C’ consumers (middle class and

low class consumer respectively). This phenomenon occurs because of

incessant supermarket expansion into smaller cities in Indonesia.

There are many advantages to be gained from the development of

modern retailing in Indonesia, among others: consumer feel pampered

with convenient shopping, security, a diverse variety of products, and also

the prices of competing products. On the other hand the presence of

modern retailers raises several issues, such as the elimination of the

traditional retail market. This is unavoidable due to their competitive ability

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is still low and also the lack of capital to support business activities of

traditional retailers.

Currently, the development of modern markets increasingly

flourishing and have started to intervene into the countryside. Among

Hypermarkets, Supermarkets, and minimarket, AC Nielsen (2010) record

that the fastest growing channel in Indonesia has been the mini-market,

led by local giants Indomaret and Alfamart. Over the decade, store

numbers increased from just over 2000 stores in 2001 to more than

11,500 stores in 2010. It is now difficult in many cities to stand on a corner

and not see at least 2 of these stores! The impact of mini-markets on

where people shop has been significant as their share of trade has

increased nearly six-fold to over 17%. To protect the local player,

government issued Presidential Decree No 112/2007. The decree stated

that only supermarkets under 1,200 square meters and minimarkets less

than 400 square meters should be owned by domestic investor.

Table 1 The number of Retail market in Indonesia period 2004 - 2009

No Kind of Store 2004 2005 2006 2007 2008 2009

1 Traditional Grocery Outlets

1.745.589 1.787.897 1.846.752 1.900.332 2.469.465 2.520.757

2 Minimarket 5.604 6.465 7.356 8.889 10.607 11.569

3 Supermarket 956 1.141 1.311 1.379 1.571 1.146

4 Hypermarkets 68 83 105 121 127 141

Source : Compiled from Nielsen (2004) – Nielsen (2010),

Kadin (2009) categorize the retail industry in Indonesia into two

categories; (1) Traditional Retail; and (2) Modern Retail.. The first is

traditional groceries, this category includes traditional market (wet market),

grocery stores and kiosks located at the edge of the road. The amount is

probably much less than the total number of traders in the field, given the

traditional traders in Indonesia are very numerous, and sometimes difficult

to determine the actual amount. The second type until the fourth is in the

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modern merchant category, which consists of Minimarket, Supermarket,

and Hypermarkets. Astonishing growth is the type Minimarket and

Hypermarkets. Within 6 years, the growth of both types of modern retail

traders has been doubled (see Table 1).

2.2.1. Traditional Retail Market Development In Indonesia

“Traditional Market” means a market that is built and managed by

the Government, the Regional Governments, Private Entities, State-

Owned Entities and Region-Owned Entities, including through cooperation

with private entities with such places of business as stores, kiosks, stalls

and tents owned/managed by small or medium traders, community self-

reliance or cooperative with smallscale enterprises, small capital and

dealing in commodities through bargaining; (President Regulation No 112

of 2007).

The role of traditional markets (shops or stalls), for this moment is

still larger than the role of modern market in contributing to the Gross

Domestic Product (GDP) of Non-Oil and Gas in 2000. It is a condition that

the opposite happens; that the modern market in the province, have a

greater contribution to revenues, as compared with the municipality /

district. The contribution of the modern market looks bigger in urban than

rural areas. Efforts to compensate for the speed of development of the

modern market by using the instrument levy does Generate Revenue

(Pendapatan Asli Daerah-PAD) which is greater at the provincial and

district levels. However, the redistribution of income is addressed by the

modern market in the form of higher capitalization. In addition, modern

market contributed to the PAD responded by submitting reporting lower

output and the occurrence of the phenomenon of increased hindrance

(entry barrier) to prospective new entrepreneurs to enter the modern

market (supermarkets).

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2.2.2. Modern Retail Market Development In Indonesia

According to the Regulation Of The President Of The Republic Of

Indonesia Number 112 Of 2007, “market” is means a place where goods

are dealt in by more than one seller that is referred to as either a shopping

center, traditional market, store, mall, plaza, trade center or other

reference; and “Modern Store” means an independent self-service store

that retails a large variety of goods through Minimarkets, Supermarkets,

Department Stores, Hypermarkets or grocers that constitute Grocery

Stores;

The modern retail market development in Indonesia, most retail

observers would immediately remember the name "Sarinah Department

Store". Sarinah department store may be cited as the first modern retail

presence in Indonesia. 1970s-1980s, continued growth in this retail

business format. The early decades of the 1990s, 'Sogo' -one of Japan's

largest retailer-was entering the Indonesian markets; this decade is often

referred to as a historical landmark entry of rite lasing in Indonesia.

Modern retailing in Indonesia and then developed so rapidly as the

government, according to Presidential Decree no. 99 year, 1998, issued a

retail business from the negative list for foreign investment (Pandin, 2009).

Before the decree issued, the number of foreign retailers in Indonesia is

very limited. Retail formats in Indonesia has continued to develop

according to the economic development, technology, and people's

lifestyles.

To view the early development of the modern retail market in

Indonesia, let us look at Figure 1. The figure show that in the period of

1968-77 there was only one supermarket registered in Jakarta. Then,

supermarket outlets began to spread rapidly after 1983 along with

economic growth and increases in income per capita marked as the

beginning of the green revolution era (Natawidjaja, 2005). The first

supermarket in Indonesia was recorded in the early 70s and there was no

further development for ten years.

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Source: Natawidjaja, (2005)

Figure 1 Early Development of Supermarket in Indonesia 1968-97

In the period 1978-1992, the supermarket sector grew 85% per

year. While the growth rate declined, expansion continued at 12% per year

between 1993 and 1997 (Natawidjaja, 2005). On that period, initially, the

development of supermarkets mostly in Jakarta, and then spread to major

cities (the capital of the province) on the island of Java, like Bandung,

Semarang, Yogyakarta, and Surabaya. In the mid-1990s, the concept of

hypermarkets started to go into Indonesia. It is characterized by the entry

of retail giants of French companies, "Carrefour and Continen" in 1997. In

Indonesia, they become one company by the name which operates 12

Carrefour hypermarkets in Jakarta, Surabaya, and Medan. In 1998, the

giant company USA "Wal-mart" also entered the retail business in

Indonesia. In that year also their first store on fire during riots in Jakarta as

a result of the multi-dimensional crisis in Indonesia. After the incident, Wal-

Mart then decided to leave Indonesia. After the crisis that hit Indonesia,

that moment is just like to bring fresh air in modern retailing developments

in Indonesia. Because the issues discussed was the decentralization of

development. With the issue of decentralization of development, the

construction of the shopping center began to spread to small towns in the

area. Natawidjaja, (2005) notes, there are two new actors in hypermarket

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business, Giant and Hypermart. Giant is managed by Hero Group and

Giant, a retail company from Malaysia. Hypermart is managed by Matahari

Group. As we can see on Figure 2, the number of hypermarkets is still

quite small but consistently increasing by 27% per year in the last 5 years.

Today, the modern retail business in Indonesia is expanding its

territory up to the remote areas quickly. Many opinions are pros and cons

of their existence. The presence of hypermarkets, supermarkets, and mini

markets, for most consumers of modern markets are providing an

attractive alternative to shopping. Not only offers the convenience and

quality products, but also their prices are also quite competitive –it is even

cheaper than the traditional market (Tambunan, 2004). On the other hand,

these circumstances make small retailers feel worried. Some small

retailers feel the true impact of the presence of modern markets, such as

hypermarkets, i.e. their income is significantly lower.

Source : Natawidjaja (2005)

Figure 2 Development of Modern Market in Indonesia period 1997-2003

Nowadays, Nielsen (2010) state That the "2000's" - a decade of

change for grocery retailing in Asia. And this is happening in Indonesia. If

you look at figure 3 above, it appears that modern developments in the

Indonesian market are growing very rapidly, especially the minimarket.

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Source: Nielsen 2004 – 2010 (diolah)

Figure 3 Development of Modern Market in Indonesia period 2003 -2009

Nevertheless, the rapid development of modern market often

created protest from the party that was inflicted, such as traditional market

or even modern retail itself. Even, the President Regulation No. 112 of

2007 about Arrangement and development of traditional market, shopping

center, and modern market, which was just validated in December 2008,

created a controversial. Especially, concerning the violation of modern

retail that is selling nine basic goods below the price of traditional market.

Even the violation of zone and distance that has been going on for a long

time, has taken many casualties from the traditional market. However, the

Association of Retail Businessmen Indonesia (Asosiasi Pengusaha Ritel

Indonesia - APRINDO) has filed a complaint from modern retailer about

the content of regulation of trade ministers No. 53 of 2008, among other

concerning trading term cost limitation from the juridical and commercial

aspect.

The phenomenon of the rise of retail business actually been seen

since the mid-1990s. A survey conducted by AC Nielsen (2006) showed

that the number of traditional markets in Indonesia, as many as 1.7 million

or 73% of the overall market, the remaining 27% of the modern retail

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market. Surprisingly is the survey conducted by FAO in 2006 which states

that between 1997 to 2003, the retail business increased by almost 30%,

with growth reaching 15% for modern retail and 5% for the traditional

market. This indicates a shift from public market into the modern market.

The growth rate is different than the traditional market is expected to

create increasingly eliminated from the competition arena. AC Nielsen in

its calculations mentioned that the elimination of the traditional markets of

1.5% annually. (Kadin, 2009)

Tabel 2 presents the number of hypermarket developments from

2003 until 2010. From the table, there are four big players in the

hypermarket business in Indonesia, namely: Carrefour, Alfa Gudang

rebates (in 2009 purchased shares of Alfa Carrefour), Hypermart, and

Giant. Table 2 also show how Carrefour dominated the hypermarket

market in Indonesia.

Table 2 Number of Hypermarkets (the 4 biggest player) in Indonesia periods 2009 - 2010 Brand Name 2003 2004 2005 2006 2007 2008 2009 2010 Carrefour 11 15 19 29 37 58 60 42 Alfa Gudang Rabat 23 35 34 32 31 16* 16* Hypermart - 4 16 26 36 43 43 46

Giant 10 12 17 17 26 30 34 *) : ex Alfa, become Carrefour

Source: AC. Nielson (2004); AC. Nielson (2005); AC. Nielson (2006); AC. Nielson (2007); AC. Nielson (2008); AC. Nielson (2009); AC. Nielson (2010) (compilation)

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Source: (Natawidjaja, 2005)

Figure 4 Hypermart and their locations in Indonesia

Figure 4 is the present distribution of hypermarket in Indonesia. In

gdari picture shows that most of the hypermarket is still there / is

concentrated in the area of Jakarta, Bogor, Tangerang, Bekasi an, ie by

58%. As for which dominate the market Hypermarket in several areas in

Indonesia is Carrefour.

Table 3 Number of Supermarket in Indonesia periods 2009 - 2010

Brand Name 2003 2004 2005 2006 2007 2008 2009 2010

Ramayana 80 85 82 81 71 95 93 93

Super Indo 37 44 46 50 56 63 64 65

Yogya and Griya 38 43 46 49 53 56 56 57

Giant 1 1 1 1 23 55 55 59

Hero 104 88 83 89 71 53 52 41

Matahari/ Foodmart 57 45 42 32 29 23 23 23

Borma 17 20 21 21 23 23 23 24

Gelael 18 13 13 16 16 15 15 15

Carrefour Express - - - - - 14 14 15

Hardy's - - - 11 12 11 13

Macan Yaohan - - - 9 8 8 13

Sri Ratu - - - 8 8 8 7 Source: AC. Nielson (2004); AC. Nielson (2005); AC. Nielson (2006); AC. Nielson (2007);

AC. Nielson (2008); AC. Nielson (2009); AC. Nielson (2010) (compilation)

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Still the same as the distribution of Hypermarket, supermarket

distribution is also concentrated in Java. Supermarkets are the biggest

percentage presence in the area of Jakarta, Bogor, Tangerang and Bekasi

(Greater Jakarta).

Source: (Natawidjaja, 2005)

Figure 5 Supermarket and their locations in Indonesia

Mini market is the self-service market just like supermarket that

have only one or two machines only, and only sell products basic

household needs (basic necessities). Minimarket, one of the modern

markets, currently is growing rapidly, offering convenience stores or

outlets because of its location close to consumers in the residential-

housing. According to President Decree No 112 of 2007 size of the store

or outlet is not too large, approximately not more than 400 square meters

and sells items 3000-4000 units. Mini market does not necessarily require

huge investment and most of its market share is an individual and

housewives, especially those who work and give priority to the

convenience and speed or time not long in the shop. Here the number of

minimarket in Indonesia (see Table 4). The data only show the five biggest

retail chains in Minimarket.

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Table 4 Number of Minimarket in Indonesia periods 2009-2010

Minimarkets 2003 2004 2005 2006 2007 2008 2009 2010 Indomaret 801 1.001 1.420 1.857 2.425 3.093 3.312 3.892 Alfamart 546 973 1.263 1.629 2.361 2.736 2.896 3.422 Yomart - 25 66 110 146 162 177 220 Star Mart 39 44 52 64 87 116 122 124 Alfa Midi - - - - - 60 71 109

Source: AC. Nielson (2004); AC. Nielson (2005); AC. Nielson (2006); AC. Nielson (2007); AC. Nielson (2008); AC. Nielson (2009); AC. Nielson (2010) (compilation)

Looking at a rapidly development of minimarket, minimarket

become the most rapid progress in retail business. Minimarket player, in

building its business, will build a minimarket in areas close to residential.

They will provide low prices to customers; in addition, they also provide a

variety of promotional and discount programs, making it very attractive to

customers.

Source : Natawidjaja (2005)

Figure 6 Minimarket and their locations in Indonesia

The minimarket players which dominate the market are Indomaret

and Alfamaret. Indomaret is the pioneer of Minimarket in Indonesia. In

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2001, Indomaret already have, more than 550 stores spread across

Jakarta, Bogor, Tangerang, Bekasi, Bandung, Surabaya and Yogyakarta.

Currently Indomaret growth rapidly and spread over the country. In 1997,

Indomaret decided to use franchise concept in their development of the

store. With this method, the number of outlets Indomaret increasingly

scattered in small towns.

Alfamart, is the second largest player in the retail format

Minimarket. Alfamart started Minimarket business sector by in 1999 with a

brand of 'Alfa Minimart' by Alfa Mitramart Utama Company. In 2002, the

company already has 141 outlets Alfa Minimart, and since then started

expanding exponentially with the new name of 'Alfamart'. Despite the

global economic crisis in late 2008, the Company achieved significant

growth in terms of market coverage, supported by a growing number of

stores amounted to 21.4% or 594 of 2779 in 2008 to 3373 in 2009.

2.3. The Impact of Modern Retailer on Traditional Retailers

Consumers generally put a cheap price in the first rank among

several factors in shopping. This usually applies to all commodities in

traditional and modern markets. In addition to price, in terms of service,

consumers are also very concerned about environmental security as a

very important factor. Consumers sometimes do not give a high priority on

commodity factors, namely: neat packaging, product availability, and

variety of the items sold. Similarly for factor services, consumers

sometimes regard; proximity of the location of the house, opening hours

are long, and the proximity of the location of the office. Toward consumer

goods, consumers generally place an accurate measure factors in the

second rank after the price. Another factor that can sometimes be the

concern of consumers when shopping is on: grading the quality of

commodities, and product counterfeiting. Consumers will evaluate the

behavior of traders who indicated fraudulent practice should be a priority to

be addressed. Consumers pay high attention to the importance of safety,

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comfort, and cleanliness at the time of shopping. Consumers do not take

priority over the location of the proximity factor shopping from home or

office.

There are indications that Minimarket provides consumer

satisfaction level higher than the traditional market. In general, the high

levels of consumer satisfaction to minimarket are on these factors: size,

packaging, hygiene, comfort, safety, and adequacy of public facilities. As

for traditional markets, factors that usually provide services such as low

levels of consumer satisfaction. In general, there are no attribute traditional

markets that provide high satisfaction to the consumer. In the development

of an increasingly developed market, the more negotiable the price factor

can be shifted by a factor of grading the quality and size accurately.

The common impact of the presence of minimarket, based on at a

glance observations in the field are: the number of types of merchandise,

the number of buyers, and the amount of labor. The existence of

minimarket will reduce the number of types of goods traded in traditional

markets. This indicates that, when the minimarket is built, the development

of the number of buyers, the number of suppliers, and the amount of labor

in the traditional market will tend to decline. The most prominent problems

are the development of the number of shoppers at traditional markets.

The Presence of minimarket, currently not negatively impacted the

performance of several indicators of traditional market traders, namely: the

average turnover, inventory turnover, and margin commodity prices.

Based on at glance observations in some traditional markets, the average

turnover in traditional markets showed a decline, but this should not be too

worried by the traditional traders. In terms of turnover of goods in the

traditional markets, it has not been influential. For the price margin at the

first glance indicator of the results of field observation showed no effect, so

it can be concluded that the existence of mini not negatively impact the

price margins in traditional markets. Overall attendance was minimarket

only negatively impact the number of shoppers at traditional markets. This

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suggests that the demise of the traditional markets is caused by changes

in consumer tastes. In response to this, one way for traditional markets to

survive can be done by way of retaining customers not to switch to modern

markets, namely by making traditional markets become more convenient

for consumers.

Traditional markets have non-economic advantages from the

perspective of macro-economic interests, namely the provision of choice of

business opportunities, employment, and the contribution of output,

although these options may conflict with the interests of local governments

to increase the original income (Pendapatan Asli Daerah-PAD). Therefore,

it is not surprising that the protection of traditional retailers have not got a

very important priority when viewed from the interests of regional

development. Delays in the development of traditional markets is much

less rapid than the modern market penetration has become evident that

the government tends to be more open to modern retail investment rather

than develop the traditional markets.

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Chapter III

Research Methodology

According to Baker (2000), a comprehensive evaluation is defined

as an evaluation that includes monitoring, process evaluation, cost-benefit

evaluation, and impact evaluation. This research is only considered on the

Impact evaluation. According to Baker (2000), impact evaluation is

intended to determine more broadly whether the program had the desired

effects on individuals, households, and institutions and whether those

effects are attributable to the program intervention. Furthermore, impact

evaluations can also explore unplanned consequences, whether positive

or negative, on beneficiaries. Effective impact evaluation should therefore

be able to assess precisely the mechanisms by which beneficiaries are

responding to the intervention (Khandker, 2009). Furthermore Impact

evaluation can be conducted by qualitative and quantitative methods.

Combining quantitative and qualitative methods is the ideal because it will

provide the quantifiable impact of a project as well as an explanation of the

processes and interventions that yielded these outcomes (Baker, 2000).

Qualitative analysis, as compared with the quantitative approach, seeks to

gauge potential impacts that the program may generate the mechanisms

of such impacts, and the extent of benefits to recipients from in-depth and

group-based interviews. Whereas quantitative results can be

generalizable, the qualitative results may not be. Nonetheless, qualitative

methods generate information that may be critical for understanding the

mechanisms through which the program helps beneficiaries.

On the basis of the above background, this study combines

quantitative and qualitative methods. There are two quantitative methods

that are commonly used in impact evaluation, based on baker 2000 there

are difference-in-difference (DiD) and use econometric models. The

qualitative method on impact evaluation conducted in-depth interviews

with key informants. This study used a questionnaire to the consumer, to

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the traders and a guide to the key informant interviews as research

instruments. The questionnaire of consumer contains questions about the

opinion of the consumer (consumer preference) and the question of trader

contains about the business and the impact of minimarkets, and also the

facts regarding the trader’s activities.

3.1 Analitical Framework

There are three tentative conclusions can be drawn from the first

impressions of retailing in developing countries (Paddison ,2005). First, the

study of retailing systems in developing countries encompasses a wide

range of environments, related principally to the importance of local, often

culturally embedded factors. Second, the study requires a dynamic

framework which is capable of capturing the interaction between world

economic influences and the place-specific forms of the retailing

environment. Third, whilst there are strong conservative forces which

ensure a degree of continuity in the retailing systems of developing

countries, there are equally rapid changes taking place resulting mainly

from the so-called modernization of retailing through the import of western

retail institutions and western types of consumer behavior.

In all economic systems the retail distribution of goods and services

is a vital link in the distribution channel from production to consumption.

This shows how important the retailing in the economy. Regardless of how

big the role of retailing in terms of trading volume transacted, retail is

important in all societies as a distribution mechanism as the economic and

social institutions. In developing countries this is mainly because of the

role of retail and marketing play a wider distribution system of basic needs'

(mainly food, but also other essential goods such as clothing). Traditional

retailers in developing countries occupy a strategic role in economic

development. For example, in Indonesia, most of the retail players are in

traditional merchants ranging from the trader in traditional markets, kiosks

/ shops and street vendors.

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Saat ini, di Indonesia, muncul format yang masih dianggap baru

oleh sebagian orang, yaitu “Minimarket”. Minimarkat walaupun dianggap

sebagai salah satu format ritel modern yang masih baru, dan masih

dimainkan oleh pamain lokal, namun format minimarket di Indonesia

mengalami perkembangan yang sangat pesat dalam 10 tahun terahir.

Sebelum muncul format minimarket, para konsunem membelanjakan

sebagian besar uangnya di ritel tradisional (termasuk pasar tradisional),

lihat gambar berikut:.Ritel tradisional mempunyai karakteristik:

a. Bukan sistem swalayan

b. Pilihan barang terbatas,

c. Kualitas barang terkadang rendah (sudah terlalu lama di toko)

d. Pelayanan kurang ramah

Figure. x the condition before Minimarket presence

Trad

Retail 1

Trad

Retail 2

Trad

Retail 3

Trad

Retail 4

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Gambar tersebut menggambarkan kondisi ritel tradisional sebelum

kehadiran minimarket. Secara umum consumen sudah terbiasa

membelanjakan uangnya pada toko tertentu yang menjadi prioritas/

langganan mereka. Dan itu biasanya sudah berlangsung lama. Ketika

tidak ada barang yang dibutuhkan pada toko langganannya, maka ia akan

ke toko lainnya, dan itu hal yang biasa terjadi.

Figure. Xx. The condition when the Minimarket presence

Kehadiran ritel modern dengan format yang baru seperti

minimarket, diindikasikan membawa dampak baik positif maupun negatif.

Trad

Retail

Trad

Retail

Trad

Retail

Trad

Retail

MINIMARKET

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Positif mungkin bagi koncumen, tetapi mungkin bnegatif bagi peritel

tradisional. Lihat gambar xx. Gambar tersebut memperlihatkan kehadiran

minimrket di wilayah (milayah pada gambar x). Minimarket dengan

karakteristik yang berbeda dengan peritel tradisional –harga persaing,

kualitas produk lebih baik, variasi produk lebih banyak, sistem swalayan,

serta pilihan produk yang lebih banyak– akan dengan mudah berkompetisi

dengan peritel tradisional dan dengan mudah akan menguasai pasar di

wilayah tersebut.

Pada saat minimarket hadir di suatu kawasan, kemungkinan

dampak positif yang timbul adalah bagi konsumen. Mengapa? Karena

secara teori, konsumen akan memilih ke tampat belanja dengan harga

lebih murah, dengan kualitas barang lebih bagus, dengan jumlah pilihan

lebih banyak, dan berbelanja di tempat yang nyaman. Oleh karena itulah

mengapa konsumen akan memilih berbelanja di Minimarket ketika barang

yang ingin di di toko langganannya tidak ada atau tidak tersedia. Pada

saat mereka berbelanja di Minimarket, pengalaman berbelanja yang

dialami oleh konsumen akan sangat mempengaruhi preferensi konsumen

untuk waktu belanja yang akan datang. Oleh karena itu, dapat

diindikasikan bahwa jika pelanggan sudah merasa nyaman berbelanja di

minimarket, maka mereka akan lebih memilih berbelanja di minimarket

untuk waktu belanja yang akan datang (bulan berikutnya). Ini adalah

dampak positif yang dialami konsumen.

Kemudian apa dampak negatif dari kehadiran minimarket? Jika

indikasi preferensi konsumen bahwa konsumen lebih memilih minimarket

untuk berbelanja pada bulan-bulan berikutnya, maka ini akan menjadi

dampak negatif terhadap pedagang tradisional (toko/ kios).Apa dampak

negatif yang dialami peritel tradisional adalah penurunan jumah konsumen

(pengunjung toko), panurunan nilai transaksi, penurunan stok barang,

lebih lanjut adalah penurunan pendapatan dan penurunan keuntungan.

Jika peritel tradisiona tak mau bersaing dengan Minimarket, maka ada

indikasi jumlah peritel tradisional akan mengalami penurunan sebagai

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akibat dari tutupnya beberapa toko karena dampak negatif minimarket

tersebut. (lihat gambar XXX)

Figure xxx The condition after/ selama adanya minimarket

Gambar xxx menunjukan bahwa setelah kehadiran minimarket,

jumlah konsumen pada beberapa peritel tradisional mengalami

penurunan. Sebagai akibat dari beralihnya tempat belanja konsumen ke

minimarkat. Namun apakah dampak tersebut signifikan, itulah yang

menjadi fokus utama dalam studi ini.

Trad

Retail

Trad

Retail

Trad

Retail

Trad

Retail

MINIMARKET

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3.2 Difference-in-Difference (DiD) Method

The difference-in-differences (DiD) estimator is one of the most

popular tools for applied research in economics to evaluate the effects of

public interventions and other treatments of interest on some relevant

outcome variables (Abadie, 2005). This method was used by

Suryadharma (2007) to evaluate Impact of Supermarkets on Traditional

Markets and Retailers in Indonesia's Urban Centers and used by INDEF

(2007) to evaluate the Economic Impact of the presence of Hypermarket

on Traditional Retailer/ Markets

DID method require the recording of circumstances in the two time

periods - before and after treatment (Abadie, 2005). In this study, the

treatment is opening minimarkets. Furthermore, there must also a control

groups (example: traditional traders/ shop/ kiosk without a minimarket in

the vicinity), and characteristics of treatment groups and control groups

should be similar. The Framework of DID method is shown in equation 1.

Impact = (T2 – T1) – (C2 – C1) (1)

where : T1 : the condition of the traditional traders before the presence of a

minimarkets near the traditional traders T2 : the condition of the traditional traders after the presence of a

minimarkets near the traditional traders C1 : the condition of the traditional traders where there is no

minimarket nearby for the same period as the treatment group (T1)

C2 : the condition of the traditional traders where there is no minimarket nearby for the same period as the treatment group (T2)

If the impact is significantly different from zero, then supermarket indeed impact traditional markets. In this study, the period of initial data (baseline) set in 2006. The

reasons underlying such determination is the presence of minimarket into

the sub-districts in Malang is on it. In addition, the determination of year is

also to ensure that traders are relatively still have good memories on the

situation at that time.

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3.3 Econometric Model

Suryadrma (2007) states that the DiD method is only calculate

differences between control and treatment groups were statistically

significant without controlling for other variables. Therefore, to look at other

conditions, it uses econometric model for the econometric model to control

other conditions that contributed to the results. According to him, the

conditions measured include merchant education level, type of

commodities sold, and the location of the store / kiosk. Furthermore, to

control the circumstances that are not observed, the location as dummies

are also included in some specific variables.

Suryadarma (2007) in his research using two forms of direct

econometric model that directly can be estimated (reduced forms). The

first one uses only the ex-ante (prior to the intervention condition) as

control variables, while others use both ex-ante conditions and the

changes. The model was used by Suryadarma is the model to be used in

this study. General model used is shown in equation 2 and 3.

∆Ci = α + βXi +γSi +εi (2)

∆Ci = α` + β`Xi +θ`∆Xi +γ`Si +εi (3)

where :

∆Ci : is the proportional change in performance indicators of trader i.

The performance indicators that we use are profit, earnings, and

number of employees.

Xi : is the control variable,

∆Xi : is the changes in the control variables, and

Si : is the variable that differentiates the control from the treatment

groups. To test two differentiating indicators: a dummy variable

and the distance to the nearest minimarket.

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3.4 In-depth Interview

Qualitative impact evaluation carried out on qualitative data

obtained by using in-depth interviews. In-depth interviews will be

conducted on the stakeholders in the retail sector: traders/ traditional

retailers (owners of shops/ kiosks) which are selected; minimarket

manager; relevant government officials in regional planning agencies,

traditional traders association, district trade office, in the research location

3.5 Sampling Framework

This research will be focus on the sub districts in Malang City with

the highest levels of minimarket density. Traditional traders/ kiosk / shop

that became the object of treatment were selected purposively according

to the following conditions: there are minimarket within a radius of 3

kilometers from the store/ kiosk, mini market begins to operate between

2006 and 2009, or if there are several minimarket, it has operated on that

period; for traditional traders in the control group, the traditional merchant

must be located in the same the district/ area as in the minimarket; store

location is more than 4 km from the minimarket, and traditional merchants

have never renovate his shop since 2006.

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REFERENCES