Wednesday, November 28, 2007

Modern electronic stores increasingly aggressive

Hyperstores are now quite a common sight in major cities. This phenomenon has unconsciously lured consumers from various social groups with the promise of modern facilities and other added benefits. Even the industry players have been showing rapid growth. There are a number of major players like Agis, Electronic City, Electronic Solution, Best Denki and others that are geared toward a particular market segment like Bang & Olufsen (B & O) as well as a number of other new players.

In the 1980s, Indonesians were believed to be the largest consumer tourist groups bound for shopping blitzes in Singapore. However, with the passage of time, major cities in Indonesia, particularly Jakarta, have turned into megapolitans. As a result, hyperstores are to be found everywhere. A number of these hyperstores involve giant retailers like Carrefour, Giant and Hypermart. As a result, these giant retailers have been dragged into a price war. Today, therefore, it is the consumers who benefit from this, enjoying lower prices, guaranteed quality and reliable after-sales service.

Therefore, it is not surprising to find modern electronic stores swarming with visitors. These stores come in two broad categories. First, electronic stores that are part of giant retailer outlets like Carrefour, Giant and Hypermart. In these retail stores, prospective consumers may choose the items they wish to buy and compare one item against another on the basis of price and features. The products on sale are categorized on the basis of types, not brands. Second, there are the electronic shops that sell only electronic goods such as Agis, Electronic City, Electronic Solution and so forth. In these modern electronic stores, the goods on offer are laid out according to brand. In concept, the layout resembles an exhibition.

In fact, in Indonesia, Agis was the first modern electronic hyperstore. Agis has gained great popularity as it opened in Indonesia at a time when Indonesia, particularly major cities like Jakarta, were experiencing an electronic craze.

In the early 1990s there were many electronic exhibitions recording sales that increased from one year to the next. Owing to this favorable phenomenon, Electronic City came into being in 2001 as one of the pioneers in modern electronic retailers. "It was Electronic City that initiated the use of a retail concept that resembles an electronic exhibition," said Harjanto Joewono, Commercial Director of Electronic City when The Jakarta Post met him some time ago.

This concept has earned a favorable response from giant electronic companies like Sharp, Sony, Samsung, LG, Toshiba and others. These companies are allotted a space for their products just like in an exhibition. If they take part in an electronic exhibition at the Jakarta International Convention Center (JICC), for example, these companies must pay for their space but at Electronic City they are exempted from this payment. This means that these companies can put their products of permanent exhibit for brand-minded consumers. For electronic companies, this concept is very attractive and advantageous. Another plus point is that the location of Electronic City is quite strategic so that electronic companies do not have to erect and take down their stands like they do in an exhibition, which usually lasts for only a week.

One of the competitors of Electronic City is Electronic Solution. What is interesting about Electronic Solution is that it applies a concept of blending two different genres. Household products are offered at affordable prices and laid out as they are in retail stores. These are placed side by side on the basis of their types, for example electric fans, electric irons, blenders and so forth. As a result, visitors can choose what they wish to buy and then compare the prices and features of the products they desire. This means that it is possible for a consumer to buy a product within his or her budget. Meanwhile, branded products, which are usually expensive, are arranged on the basis of their brand names just like at Electronic City.

One of the new players in this industry is Best Denki, a giant Japanese electronic retail network. The outlet located at Senayan City is its 594th and is believed to be the largest in Asia, outside Japan. In addition, there are also more segmented electronic retail players, namely Bang & Olufsen (B&O). B&O is a famous brand from Sweden.

B & O indeed has a more specific target market as the products it offers are high-end in nature and suit the upper-income group. The products are in the audio-visual, telephone, sound system and other super-sophisticated multimedia categories. The prices, however, also tend to be very high as they suit the character of the target market of B&O.

The rapid growth of modern electronic stores is certainly inseparable from the various benefits they offer in comparison with traditional electronic shops. It comes as no surprise, therefore, that the public has become increasingly addicted to buying electronic goods at modern electronic stores. At first, buyers were worried that the prices offered at major stores would be higher, However, after visiting the stores, their worries evaporate and they will see before them a greater variety of products on offer of a guaranteed quality.

In addition, other supporting factors include the comfort of shopping at the store, competitive prices, financing facilities and reliable after-sales services. Then the prices of the products on offer are fixed. As an illustration, there are 12 choices of credit financing companies in collaboration with Electronic City. Nine of them are banks issuing credit cards while the other three are financing companies like AEON, Adira and Sumber Kredit. "People used to embarrassed to buy on credit but that is no longer so. Today, buying things on credit has become part of the urban lifestyle. Electronic City is the first to introduce a 0 percent installment program," said Harjanto, adding that close to 35 percent of consumers at the store make purchases on credit.

It is this that has helped Electronic City take the lead in the modern electronic market in Jakarta. According to Harjanto, every month no fewer than 60,000 visitors come to Electronic City in Sudirman Central Business District (SCBD). It is not surprising, therefore, that Electronic City took only two years to reach break-even point. Today, the domination of Electronic City has also been felt in other places in Greater Jakarta, Bandung, Bali and Medan.

One of the minus points of a traditional market is that it does not offer fixed prices. If a buyer is good at haggling, he or she can buy something at a lower price. Otherwise, he or she will buy something at a price higher than its actual value even though the item may not have a direct guarantee from the principal. In some cases, the guarantee is provided only by the shops. This means a consumer must be really careful and observant before deciding to buy something. Then, in a traditional market, a consumer will be charged 3 percent for a transaction using a credit or debit card. In a modern electronic store, this transaction cost is waived.

Nevertheless, as Harjanto acknowledged, in composition the market for electronic goods is still dominated by the traditional markets. Modern electronic stores can absorb only about 10 - 15 percent of the existing market share. However, in fact, growth has been quite fast as in the early 1990s retailing of this type secured only about 5 percent of the market share. (Iwan S. Jatmiko)
The Jakarta Post, November 23, 2007

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