Tuesday, December 1

Too many supermarkets … too few customers


IT’S rather ominous that at the start of a new year of a new decade that a giant in the retail business has announced its full withdrawal from the Sarawak and Sabah markets – it’s the Giant group; and this follows the earlier departure of its higher end chain of Cold Storage retail outlets as well. It would appear that something is very wrong with either the falling demand of consumer goods (can’t be as the population has been increasing) or the fall-out of far too many new retailers entering the market (the most likely scenario).

In simple words, the market cannot sustain the level of new entrants into this very lucrative cash-based business – the supermarket.

In the days of old, by which I mean from around the mid-1960s to the mid-1980s – there were just three classes of retail shops insofar as groceries, food, and edible fresh foods and dry goods were concerned.

There was first of all the simple mom and pop grocery store, a small simple one shop lot manned usually by family members, which stocked virtually everything you might want – from sugar and rice to ice cream and milk, potatoes, onions, soya sauce, apples and bananas, to toothbrushes and cordials, sanitary pads to toilet rolls, washing detergent to ballpoint pens, and pesticides and soaps.

They are found in every little nook and corner of the countryside, in the small towns and bigger cities. A few still survive to this day, as a matter of fact the ones in the rural areas thrive, coupled with the fact that they had also become short-term interest-charging credit lenders, as most of them supply goods on a monthly credit basis to their regular customers, collectable only at the beginning of each following month. In the plantations and the timber-camps, in the project based compounds where many families call home, they would simply deduct their owed sums from the operating company’s pay-roll at the end of the month. Such is their power.

These outlets will always be there. They serve a useful and necessary purpose and without them the wheels of commerce and industry would grind to a halt very quickly.

Then there are the more select, what I call niche middle to upper middle class retailers, more often calling themselves mini-marts, specialist marts, or simply a nice sounding English name. They are far and few in between: but they still stock your basic daily needs of rice and sugar, a smaller selection of foods and dry goods, edible and non-edible. But in addition they have added on chiller and frozen departments and can retail seafood – prawns, fish, and all sorts of seafood both freshly chilled and frozen; as well as meats – usually stocking both halal and non-halal goods – chicken, beef, lamb, pork, and a variety of frozen imported cuts. They would also have a rather wide selection of dairy products of milk, cheese, butter, and other condiments.

The biggest difference between the ‘mom and pop’ grocers and these outlets would be in their range and their bigger selection of imported goods – in packets, cans, bottles, and other containers. They usually cater to a slightly upper middle class market and are located suitably at high-end housing estates and residences. Their mark-ups would accordingly be higher. This type of retailer normally attracts their own niche customers, albeit a smaller segment of the buying population but their bigger profit margins can sustain their continual survival.

It was only in the late 1990s that the third category of the retail business as we know it today was created from out of nowhere – the hypermarket, the giant sized store of more than 10,000 square feet each, fully air-conditioned, as immense as a warehouse, with a parking lot big enough for hundreds of vehicles and usually sited in the suburbs. This hyper or super supermarket would stock and sell everything, from a paperclip to a giant flat-screen television, from baked goods to garden tools, from freshly roasted chicken to a fully ready to use wheelbarrow.

For many of the items they would have daily promotions of special prices on goods either offered by the manufacturers, producers, or the market itself. Because they are usually part of a chain of many stores spread throughout the country, they are in a better position to negotiate bulk discounted prices from the suppliers of whatever goods they intend to promote. What they can buy in one single order, the smaller retailer might need a year of orders to fulfil.

These hypermarkets would be very well designed, brightly lit, nicely piped in muzak playing over the loudspeakers (some with announcements of special price breaks every so often), and the aisles are spacious and the trolleys are huge. If you notice carefully, every new arrangement of selling space or shelves would have impulse purchase items trying to woo you to take a closer look and better still to just take one and pop it into your trolley! Usually items attractive to kids will always be displayed at their eye levels as well!

Notice too how those small handy lower priced snacks and other items are also nicely displayed at the checkout cashier counters just enticing you to pick one while you’re queuing on your way out? In a good and properly managed hypermarket, every turn of a corner is a subtle trap for the casual shopper to buy more than just what he’s got on his shopping list!

In the last 20 to 25 years, the number of this third category of retailers, the hypermarket, has grown so much and so fast that today they are in danger of imploding – and I suspect that more than a handful would have to shutter their doors before the year is out.

The simple reason being that they are all competing for the same customer ringgit – and those shoppers who frequent such giant stores are well aware by now of when and where and what to buy – as they are extremely smart with pricing policies and would be able to tell the different prices that various different chain of stores charge. The average housewife here would travel some distance if only to buy a can of food costing maybe 20 sen less, especially if she buys it in bulk. She also knows that sometimes chilled meats and seafood at a particular supermarket can be quite a lot cheaper than at her nearest wet market – so she’d shop there for that as well,

Times have changed and will keep on changing. The mom and pop grocers will stay but many will close soon as they grow older as their children will not want to take over the family business. The niche specialist medium sized marts would survive, some might even prosper; but sadly the giant hypermarkets will reduce in number in the very near future. Our current population here simply cannot sustain so many new entrants into this category of retailers and that’s a fact of life.

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