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The growth of hypermarkets is likely to kill the small sundry shops. What is your opinion on this?

Discuss with relevant examples.

Introduction According to Armstrong, Kotler and da Silva (2006), a hypermarket is a variation of a superstore which stands for a much larger than a regular supermarket that carries a large assortment of routinely purchased food and nonfood items and services. Hypermarkets are huge superstores, perhaps as large as six football fields. The hypermarkets, with their large size, one-stop-shop, and enormous selection have worked well in Western markets, such as the United States or the United Kingdom (Hawkin and Mothersbrough, 2010). The hypermarket business concept has one very significant characteristic, a very wide floor plan. The floor size varies depending to continent or country for example Belgium, Denmark, Spain, France, Greece, Italy, Luxembourg, Netherlands, Portugal has hypermarket in 20,500 square meters or more while in the United States, 14,000 square meters or more. Another charecteristic of a hypermarket is that it should have at least 35% business space inside selling nonfood items. The examples of hypermarket are United Kingdoms Tesco, Frances Carrefour, Germanys Makro and Hong Kongs Giant. Hypermarkets are already prevalent in many Asian markets in China, Thailand and Malaysia, especially through the participation of large international retailing chains such as Tesco and Carrefour (Armstrong, Kotler and da Silva, 2006). In Malaysia a hypermarket is defined as a business store with a floor size of 5000 square meters and above. The first foreign hypermarket operating in Malaysia was Makro Cash & Carry that opened its first franchise in Shah Alam in 1993. Wikipedia (2011) listed 5 foreign hypermarkets operating in Malaysia, Tesco (United Kingdom), Carrefour (France), JUSCO (Japan), Mark & Spencer (United Kingdom) and Giant Hypermarket (Hong Kong). Locally owned hypermarket that also operating in Malaysia are The Store Berhad that has the chain of Pacific Hypermarket & Departmental Store, Mydin, Bintang Retail Sendirian Berhad and Econsave Sendirian Berhad and Servay Hypermarket. Selvadurai, Moorthy, Lyndon and Er (2011) stated in their research that the sundry and general store refers to small-scale permanent stores offering a variety of merchandise or range of different or unrelated types of goods and services. According to Majid and Yaakup (2008), kedai runcit or sundry shops have been a standard feature of our housing estate landscape ever since there were housing estates. These mom-and-pop operations have been selling to their surrounding residents everyday essentials such as groceries, fresh produce, poultry, toiletries, etc. Their reasonable price and close distance have made them popular among residents of the housing estates in which they are located. Selvadurai, Moorthy, Lyndon and Er (2011) in their latest research have classified sundry shop in the middle-circuit sector within traditional retailing format which entails permanent and formal stores with traditional features such as family, independent and small outlets. In Malaysia one can find sundry shops in almost every housing estates and villages and they normally have a limited catchment area. Malaysian Retail Business (Malaysia Business Online, 2011) stated that foreign hypermarkets such as Tesco, Giant and Carrefour are now dominating retail sector. The retailing sector has undergone remarkable changes in recent times. Back in 1992, the total retail space was only 1.2 million square meters but today, it has shoot up to over 8 million square meters. Of course, retail industry is flourishing in the capital city Kuala Lumpur and Klang Valley areas. Other than that, retail industry is also blooming in Penang, Johor and Ipoh. In the last few decades, people tend to rely on sundry shops located within the neighborhood but today, the retail format has changed tremendously with newer and bigger modern supermarkets and hypermarkets scattered nationwide (Malaysia Business Online, 2011). The hypermarkets are affecting the neighborhood retail (sundry) shop. They affect the sales volume, consumer preference and shopping pattern, and the survival of the sundry shops themselves. I agree with the statement that the growth of hypermarkets is likely to kill the small sundry shops.

Hypermarkets Effects on Sundry Shops Malaysias consumer lifestyle has been evolving and changing due in part to rising affluence and education levels. High profile international retailers and the global mass media have also played a hand in shaping consumer-buying behavior. Malaysians are becoming more westernized, sophisticated and cosmopolitan. Since the emergence of the foreign-owned hypermarkets, Malaysians who live in urban areas have become accustomed to shopping for groceries at hypermarkets and supermarkets. Meanwhile rural people continue to purchase from traditional grocers, convenience stores and mini-marts. High and middle-income households spend most of their money at hypermarkets, followed by supermarkets and traditional grocery stores. The high income group has household income of more than RM 3,500 per month. According to Lee (2004), the regulatory climate for FDI in the hypermarket business has changed from an accommodating one to a hostile one in past two years . They have been significant concerns, on the part of the government, that hypermarkets compete with and can replace small neighborhood retail (sundry) shops. Malaysia Business Online (2011) stated in their website, regardless of whether the consumers are staying in rural or urban areas, they picked hypermarkets over sundry shops to get the items and goods needed. This is because consumers can practically get anything in the hypermarkets from groceries to electrical appliances, furniture to toiletries, cosmetics and plenty more. You name it, they got it! With the emergence of hypermarkets nationwide, consumers can purchase the items at a lower price. In certain situations, hypermarkets are also the suppliers to smaller retail vendors such as sundry shops. Therefore, if consumers compare the prices of products between smaller vendors with hypermarkets, they will of course choose to purchase it in hypermarkets/ suppliers (Malaysia Business Online, 2011). The least impact of hypermarkets would be slowing down of business for these neighborhood sundry shops while the worst impact would be closing down of business . One way to measure the impact of a hypermarket on the neighborhood sundry shops is to actually count the number of sundry shops that are in business several years before and after the hypermarket is in operation. With the support of GISs spatial analysis, Majid and Yaakup (2008) have successfully shown the extent of the impact of hypermarkets on the operation of neighborhood sundry shops. As indicated by the decreasing number of sundry shop licenses within areas surrounding the hypermarkets and corroborated by the origins of the customers, their study found that there was competition between hypermarkets and the neighborhood sundry shops that resulted in some of the shops to cease operation. The impact was greatest in the area immediately surrounding the hypermarkets and weakened further away from the hypermarkets. The finding of Majid and Yaakup (2008) research showed that for the area surrounding the Plentong Hypermarket which experienced the increase in the number of sundry shops from 124 to 221 units three years before has then drop to just 94 units of sundry shops four years after the opening of the hypermarket. The areas surrounding the other two hypermarkets too were experiencing a steady decrease in the number of sundry shops in spite of increasing customers from opening of new housing estates. According to the president of Federal Territory Malay Hawkers and Small Businesses Association (PPPKM); Bahrim Abdul Razak, 500 of its member at Pasar Datuk Keramat have seriously affected after the opening of Carrefour and he added that in 10 years, 1,800 small retailers close to hypermarket have closed their businesses. Bahrim says that in view of globalization and the economic slowdown, Malaysian businesses must be protected against global giants who own most hypermarkets (Damis and Poosparajah, 2002). The main effect of the operation of hypermarkets that can be recognized was the shopping pattern of consumers (Roslan, 2007). The change of shopping pattern from traditional retailers like sundry shops and informal market like night market, morning market and weekend market to a modern retailer especially hypermarket. This is caused by the cheaper options offered by the

hypermarkets, great array of items offered under one roof, ample parking space and the more conducive shopping environment. These affect the traditional retailer especially sundry shops. Consumers International Consumer Law and Protection program officer Susheela Nair says that competition law and policies are needed to regulate against monopoly, restrictive and unfair trade practices to protect the interest of consumers and to uphold the principles of ethical business practice (Damis and Poosparajah, 2002). Although competition is healthy for the economy, she says the fear was that hypermarkets could end up dominating the market and abuses that position to the detriment of consumers by predatory pricing, price-fixing by collusion, or refusal to market particular brands. In order to learn about the reasons behind the preference for hypermarkets, Majid and Yaakup (2008) asked the respondents to rank several pre-determined factors that attracted them to shop at the hypermarkets. The top three rankings were availability of various sundry items under one roof, lower prices than at sundry shops and items offered at promotional or discount prices at certain times. Other reasons which were at lower rankings are better product quality at hypermarkets, location of hypermarket is close to his/her residential area, location of hypermarket is close to or is on the way to place of work and excellent supporting facilities at the hypermarket such as ample parking, banking facilities, food courts and clean restrooms. Some of the sundry shops premises especially in Sabah are already worn out. This usually happened to the shops that are already owned by the proprietors. They do not have the drive to do changes because they already have enough. Many sundry shops have been forced out by hypermarket, and the few that survive are struggling to keep going. Loyal patrons and the personalized service that they offer have helped to keep them afloat (NCCC, 2009). Maggie Lim, a sundry shop owner in Bangsar, said business was not like it used to be 30 years ago. They are losing out to hypermarkets. Customers only walk into their shop when the customer needs one or two items. However they still have some loyal customers, who prefer their family-run store to supermarkets. "We still sell things that you cannot get anywhere else, like biscuits by the kilograms, oil lamps and wooden backscratchers." Maggie said one of the drawing points is the "the element of personal touch", which has enabled her customers to remain loyal. Supermarkets and hypermarkets continually reduce prices to remain competitive, something which sundry shops cannot afford to. "We can't reduce our prices like the hypermarkets as we don't buy in huge numbers from suppliers," said Maggie. Rising prices of goods, some sundry shop owners fear, could further erode their business. Roslan (2007) stated that the action by the Ministry of Domestic Trade, Co-operatives and Consumerism to freeze opening of a new hypermarket over 5,000 square meters wide in Klang Valley, Johor Bharu and Penang has caused the retailers to venture to other locations like the major east coast towns of Peninsular Malaysia such as Kuantan, Kuala Terengganu and Kota Bharu, and also Sabah and Sarawak. Giant for example already opened four hypermarkets in Sabah with three in Kota Kinabalu and one in Sandakan and also one more in Kuala Terengganu. These branches were the first hypermarkets in Sabah and East Coast of Peninsular Malaysia. Other than that, these foreign retailer also actively opening supermarket branches with floor size less than 5,000 square meters usually 400 to 2,000 square meters. Giant is very active in exploring and opening new market by opening small size store branches in the area with low density of population especially in small cities. These will brings new competition for the already established traditional retailers in the potential expansion of hypermarkets. According to Lim, Badarulzaman and Ahmad (2003), modernization and urbanization has impacted our nation retail landscape, replacing the small and traditional mode of retailing with large shopping complexes and hypermarkets, which not only offer better shopping but also better facilities and entertainment. Their paper also shows that even though shopping complexes and hypermarkets have mushroomed in this country but this type of development has contained itself within the urbanized area and/or areas with a higher rate of urbanization. In the capital of Malaysia, Kuala Lumpur, where urbanization has reached 100%, shophouses (sundry shops) are losing out to shopping complexes and hypermarkets.

Sundry Shop Persistence NCCC (2009) posted Jothee Mini Market in Butterworth, Penang is one of the sundry shops that continues to do well. Proprietor P. Gunasegaran @ Kumar said sundry shops would be around for a while yet as they could provide some items that the hypermarkets and supermarkets cannot. At sundry shops, the customers are at liberty to check the goods they are buying, and Jothee Mini Market packs the goods according to their needs and wishes. Mr. P. Gunasegaran also said supermarkets and hypermarkets, fast moving goods are sold slightly cheaper whereas slow moving goods cost slightly higher than their prices. In their kind of business, customer satisfaction is the magic word. Once they have faith in shop and are happy with the quality of the goods sold, they will come back over and over. Customer loyalty is the key of survival for sundry shops. The findings of Selvadurai, Moorthy, Lyndon and Er (2011) revealed that the persistence of traditional retailing can be characterized by family business and the stability of sole proprietorship, coupled with the prevalence of independent outlets. Damis and Poosparajah (2002) stated a member of the Indian Chamber of Commerce, Citra Spice Mart (M) Sdn Bhd entrepreneur K.S. Komaghan, whose shop is in Brickfields, Kuala Lumpur, agrees that the competition has affected small shops. From 1997 onwards, his shop has suffered a drop in business of between 20 and 25 per cent a year because of hypermarkets and supermarkets. "It's not just the pricing. Hypermarkets are foreign-owned and can throw money around. Money talks," says Citra consultant K.S. Ramalinggam. However, hypermarkets can't compete with Citra in terms of items offered like the wide range of indigenous products such as pickles and spices. The saving grace of Komaghan's store is that it caters to a niche market. Therefore, the only alternative is for it to open more outlets in order to increase turnover and set up shops in residential areas going to the customers, instead of them having to go all the way to the shop. Hence having items that customers need and find it easier to buy in sundry shop is important to attract customers and keeping them. This rings true for myself where whenever I want to buy ingredients to cook curry or any other dishes that use spices, I will not buy it in a hypermarket or supermarket but from a local sundry shops. Retail Group Malaysia director Tan Hai Hsin feels that small businesses do have a role to play in the retail industry, catering to quick and small impulse buys (Damis and Poosparajah, 2002). A consumer, for instance, would not go to a hypermarket to buy a packet of curry powder, especially when it would take a long time to drive to the hypermarket, find a parking, walk around the large shopping area, queue up to pay, and then walk back to the parking lot. This, then, is the strength of small businesses. Stores located near hypermarkets are less likely to do well, but those a distance away and close to high-concentration residential areas can still thrive. To help the survival of sundry shops, Government has formulated a set of guidelines for those who intend to establish new superstores or hypermarkets in the country. Effective from April 2002, the government has approved a new set of guidelines for applications to open new hypermarkets in Malaysia: The minimum capital requirement has increased from MYR10 million to MYR50 million; Applications to build outlets should be submitted two years in advance; New hypermarkets cannot be built within a 3.5kilometer radius of a housing area or a city center; Operations should be free-standing, which means hypermarkets must operate in their own buildings and not as part of any other complexes; A socio-economic impact study has to be conducted by the local authorities in the proposed area before any application is considered. The cost of the study would be borne by the applicants; Applications will only be considered for locations with a population of 350,000 or higher; Floor space should not be less than 8,000 square meters and a counter must be set up in every 1,000 square meters; Applicants should provide a business centre for interested traders with reasonable rentals.

With effect from January 1, 2004 to January 1, 2008, the government has declared that it will disallow any new foreign-owned hypermarket development and construction in Klang Valley, Johor Baru and Penang; and From April 2004, the Government has standardized operating hours for all hypermarkets 10am to 10pm on weekdays and 10am to midnight or 1am on weekends.

According to Bernama (2011), 240 traditional sundry shops across the nation will be modernized through Program Transformasi Kedai Runcit (Tukar) in the effort to enhance their competitiveness in the competitive environment of retail business. Minister of Ministry of Domestic Trade, Co-operatives and Consumerism, Datuk Seri Ismail Sabri Yaakob said that the Ministry is projecting 500 traditional sundry shops to involve in Tukar program by the end of the year, to achieve the goal of 5,000 units by 2020. The minister said that they will not only changing the physical of the sundry shops but also changing the management and thinking of sundry shops proprietor so that they will be more systematic and organized so that they can compete with hypermarkets like Giant and Tesco. According to Damis and Poosparajah (2002) Consumers International Consumer Law and Protection program officer Susheela Nair said Malaysia is in the process of drafting a competition policy and a Fair Trade Practices Act. Conclusion