The hypermarket invasion in Asia

["Ulhas Joglekar" <joglekarulhas@xxxxxxxxxxx>]

Friday, May 10, 2002

ASIA FILE

The hypermarket invasion

In most other places in Asia, small groceries and mom-and-pop stores are on
the run from a growing invasion of the Asian retailing scene by
Western-style mega malls and hypermarkets, says Barun Roy

If there's one place in Asia that can be called a corner-shoppers'
paradise - outside South Asia, and especially outside Kolkata, which
generations of street vendors and small-time livelihood seekers have turned
into one big convenience store - it's Hong Kong.
I remember, in the mid-levels, my apartment on Bonham Road was right next to
a small but well-stocked Wellcome supermarket, and a minute down the road
was a Park'n'Shop.
Opposite our block were a night-and-day 7-Eleven store, a couple of
groceries, a hardware shop, and Sunbeam, which had all the stationery and
office supplies we needed. Across the road and down a slope was our wet
market. One couldn't expect anything more convenient.
Hong Kong, of course, has changed since I left it in 1989, but its
corner-shop character largely remains.
It's still basically a place where people prefer to go to neighbourhood
supermarkets, mini marts, grocery stores, and wet markets than to mega marts
and discount stores to shop for provisions. Carrefour, the French retailing
giant, tried to foist a hypermarket on Hong Kong but lost heavily and gave
up.
In most other places in Asia, small groceries and mom-and-pop stores are on
the run from a growing invasion of the Asian retailing scene by
Western-style mega malls and hypermarkets.
Even in Singapore, which, like Hong Kong, is essentially a supermarket and
market-stall country, there are four hypermarkets already, including one run
by Carrefour.
These all-in-one retailing Goliaths, anything in size from 90,000 sq ft to
over 350,000 sq ft, offer a staggering variety of products at prices that
mom-and-pop stores will never be able to match. And because they buy
wholesale and in bulk, hypermarkets also tie up suppliers, leaving small
retailers high and dry.
These behemoths combine supermarkets and department stores within a single
roof, are clean, cool, and fashionable, and are good fun for the entire
family. To a growing number of Asians, the experience is irresistible.
But because they soak up the business of traditional retailers, grab prime
real estate, and often throw downtown traffic into chaos, governments have
begun to wonder if it's wise to give hypermarkets a free rein.
After letting hypermarket biggies like Carrefour, Giant, and Makro blitz
through the Klang Valley for almost a decade, Malaysia last month decided
enough was enough and imposed a temporary ban on new hypermarket operations
to let things cool down a bit. It also came out with new guidelines for
existing operators wanting to expand.
One of the conditions is that they will have to carry 30 per cent local
products and source some of their products from bumiputra (meaning Malay)
suppliers. Besides, applications for a new branch must be submitted two
years in advance and branches can't be located within 3.5 km of a
residential area.
In Thailand, with 81 stores already on the ground, the march of the
hypermarket seems unstoppable. Hypermarkets are now the biggest commercial
real estate clients in Bangkok and analysts say there will be at least 300
of these heavyweights operating in the country by 2010.
Now, under intense pressure from lobbyists, the government is considering a
law - likely to be ready this month - to protect small retail shops from
being driven out of business. It's even inclined to dictate prices that
international hypermarkets may charge.
Similar concerns have been expressed in Taiwan - where the entire
traditional intermediate distribution system is under attack from over 100
hypermarkets and warehouse stores.
In South Korea, hypermarkets are gobbling up an increasing share of the
30-trillion Won Korean grocery market. Right now, these stores have a 45 per
cent share of sales despite their low 2.5 per cent share of the outlets.
But while governments ponder their options, international operators are on
an offensive, too, to prove they aren't just a pack of marauders.
For one thing, they have begun to carry increasing quantities of local items
to please local consumers. In US-based Wal-Mart's stores in China, for
example, consumers can even buy native delicacies like whole roasted pigs
and live frogs.
At the same time they have begun to place Asian products on their shelves
worldwide. Last year, international chain stores bought $ 30 billion worth
of goods in China through their local purchasing offices, and this volume
accounted for 12 per cent of China's domestic goods exports for that year.
US-based Wal-Mart has a global purchasing centre in Shenzhen, buying $ 10.3
billion worth of goods from China annually. Carrefour has purchasing outlets
in 11 Chinese cities, making China its largest purchasing base in Asia. Last
year it bought $ 3.5 billion worth of Chinese-made products.
It's hardly surprising, therefore, that China has decided to give
international retailing giants special treatment. So far, some 70 per cent
of the world's top 50 retail conglomerates have established a presence in
China. Wal-Mart has announced plans to have as many as five branches in
Beijing.

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