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1 CHAPTER 1 INTRODUCTION 1.1 History of Modern Grocery Stores In 1 CHAPTER 1 INTRODUCTION 1.1 History of Modern Grocery Stores in U.S.A. and Indonesia 1.1.1. The History of Modern Grocery Stores in U.S. As modern concept of grocery shopping, a self-service grocery store is the prototype of today gigantic hypermarkets, using the same principal of the self-serving experiences and organized products according to its categories, supported with sanitary of the facility and products hygiene. A self-service grocery store has evolved through decades by adding not only dry-goods (daily products with long expiration period), but also daily farm products, such as: meats, milk, fruits, vegetables, and breads to the varieties of the goods. According to the U.S. Patent #1242872 (http://patft.uspto.gov/netacgi/nph-Parser?patentnumber=1242872) Piggly Wiggly is the first grocery store which implements the concept of self-serving from customers and the use of bar-code (Patent #2612994) in United States of America. The first acknowledged grocery store that operates professionally to serve customers was patented by Clarence Saunders in 1917. In the early start, one Piggly Wiggly store serves customers, majority of housewives, located in Memphis, Tennessee, U.S.A. Soon after the public found that the new way of shopping their daily needs turns out to be easier, faster, and offer wider options of dry-goods with tagged price in each item, at the end of 1930s there were over 2,600 stores across the US as the prove of stores’ success story. 2 Promising growth of Piggly Wiggly is noted as the start of the chain store explosion, especially in 1920s. Small regional chain of self-serving grocery stores such as Kroger, American Stores, National Tea, A&P, and others began covering more territory and operating over 10,000 of its “economy stores” by the end of the decade (http://www.groceteria.com/about/history.html). The supermarket was a phenomenon of independents and small regional grocery chains. The first supermarket in U.S.A. was established by Michael Cullen, a former executive of both Kroger and A&P, opened his first King Kullen store in 1930. Based on the situation, larger volume of a store creates enough possible space for the owner to provide many different product categories in one establishment resulted in considerably lower prices because the early stage of grocery stores often put additions to certain product to attract customers coming to their stores (in supermarket, the need of giving add-on is eliminated because without granting it, customers still come). Eventually, the large chains improved the concept, adding a level of sophistication that had been lacking from the simple stores of the early 1930s. In the late 1930s, A&P began consolidating its thousands of small service stores into larger supermarkets, often replacing as many as five or six stores with one large, new one. In 1962, Meijer Thrifty Acres as the first hypermarket was established also for the same reason as the beginning of supermarket era; the growing demands, higher standards, and convenience reason. As the solutions, Meijer Thrifty Acres provide products from larger grocery divisions and general household merchandises and/or appliances, sectors that supermarkets could not cater for the space limitation. 3 In Europe, the notable name in the industry is Carrefour, which was established its first store in 1963 at Sainte-Geneviève-des-Bois (France), despite the fact that records illustrate large-sized supermarkets cannot be implemented ideally, like in the U.S., because of the geographical conditions in which many European cities are already high populated and packed with buildings. Traditional grocery stores and supermarkets chains are more common to these areas. As the designed solution, Carrefour began to operate globally, started in 1972, with the focus of reaching more strategic areas, such as: few European countries (Spain (1972), Greece and Italy in 1990s), Southern America (Brazil (1977), Argentina (1982)) North America (Mexico and U.S.A.) many more in Asian nations (Taiwan (1989), Malaysia, China Thailand, Korea, Hong Kong in 1990s (in Indonesia since 1998)) (http://www.carrefour.com/cdc/group/history/). 1.1.2. The Development of Modern Grocery Stores in Indonesia Supermarkets are common for Indonesian customers as the place to do their frequent shopping since 1970s. Started in 1970s, Hero chains as one of the oldest names in the history of modern grocery stores in Indonesia. Hero Group originally runs the business in supermarket only. After the acquiring of Daily Farm International Holdings (a retail company in Asia, established in Hong Kong with a Headquarter in Bermuda.) in 2005(http://www.hukmas.depkeu.go.id/kliping/NRC200500096.asp?kdprg=9&kdmedia =NR C&nourut=200500096In), they also began to expand the business in hypermarket sector. Under the name of “GIANT”, Daily Farm International Holdings manage to open 4 hypermarkets and 15 supermarkets in Jakarta (until January 2008). 4 Another big name in the industry is PT Alfa Retailindo Terbuka, which was established in 1989. The group’s principal activities are supermarket operation and general trading including distribution (wholesale), dealership and grocers. The Group operated 32 supermarkets under the name of Alfa Supermarket and 29 outlets of 'Alfa Toko Gudang Rabat' – for hypermarkets. These supermarkets and hypermarkets operate across the island of Java, Bali, Sumatra and Sulawesi. Carrefour Indonesia consolidates its position as a leading food retailer in the country through their acquisition for Alfa Group stakes ownership. Carrefour Group has signed a Share Purchase Agreement on 21 January 2008 with PT Sigmantara Alfindo and Prime Horizon Pte. Limited to acquire a 75% majority stake in PT Alfa Retailindo Tbk, (“Alfa Retailindo”) for a total equity consideration of IDR 674 Billion (€49.3m) - (http://www.indonesiaretail.com/?p=53). This acquisition forms part of Carrefour’s strategy to reinforce its presence in key growth markets through a locally adapted multi format approach. As one of the oldest supermarket in Jakarta, Tip Top still survives through decades. Tip Top was established in the business form of mini-mart in Rawamangun, East Jakarta in 1979. Along with Hero as one of the oldest names in the history of moden grocery stores in Indonesia, Tip Top expanded its concept of a self-service grocery store to supermarket and department store in 1985 by adding not only dry- goods, but also daily farm products, such as: fruits and vegetables to the varieties of the goods. Caught in fire accident in June 1991, the store quickly regained and re-opened for business few months later. The steady growth of its company was noted as the installment of the second store, located in Ciputat, Tangerang. Until last year (2007), Tip Top has managed to increase the number of stores to six stores 5 (http://tiptop.co.id/profil.php). The diversity of products range caters categories of foods, household appliances, clothes, electronics, fitness attributes, and furniture. The promising growth of retail industry in Indonesia attracted Wal-Mart once to open the first hypermarket in Sarinah, Jakarta. Reported by New York Times (http://query.nytimes.com/gst/fullpage.html?res=9C04E3D81F3DF93BA25752C1A96F 958260&sec=&spon=&pagewanted=all), the company and Lippo Group signed an agreement to open Indonesia's first Wal-Mart store in early 1996. Suffering a year loss, Wal-Mart failed to survive and closed the only store in 1997. One of the reasons for Wal-Mart’s failure in Indonesia was its failure in adapting its merchandising mix and practices to local tastes and customs. This condition did not hold Carrefour and another French chain, Promodes, which have been successful in Indonesia despite the country's severe economic crisis, started in late 1997. Carrefour Indonesia delayed the plans to open as riots began in Jakarta in May 1998 and began its history in October 1998 by opening the first store in Cempaka Putih, Jakarta. At the end of 1999, Carrefour International and Continent (Holder Company of Promodes) agreed to merge their businesses globally for $16.6 billion. The integration of both names generated the world’s 2nd largest retail commerce under the name of Carrefour. Carrefour offer shoppers a greater variety of products at prices lower than those at traditional markets. In the end of 2007, Carrefour has 31 hypermarkets in Jakarta, Bandung, Surabaya, Denpasar, Yogyakarta, Semarang, Medan, Palembang and Makasar. Carrefour’s operations in Indonesia consist of 37 hypermarkets (29 in 2006). Carrefour in Indonesia recorded €627m sales in 2006, up 14.4% over the first nine months of 2007. Few other names of the business are considered excessively 6 undersized and have fewer impacts to the existence and the development of grocery stores in Indonesia. 1.1.3. The Development of Store Brand in Indonesia As one of the early provider of store brands in Indonesia, HERO sell private label products, from foods (snacks, rice, breads, spices, mix spices (for rendang, gulai, kari), jam, noodle, dried foods) to household daily goods under single brand of HEROSave (tissues, cotton buds, mopping cleaner, hand cleaner, detergent, naphthalene). After acquired by Daily Farm International Holdings, GIANT hypermarket also produce private label under the name, “GIANT”. Based on the observations, the suppliers of products for HERO and GIANT store brand products are the same, for example: the most noticeable supplier in food, especially in most of the types of snacks and some types of spices of both groceries’ private labels are produced using single supplier. In varieties of products, GIANT hypermarkets have wider selection of store brands products that HERO supermarkets do not provide, such as: photocopy paper, syrup, and soy sauce. Carrefour and Alfa have their own store brands (Carrefour use the logo or the name itself for all of the store products, including electronics, while Alfa have three store brands; Alfa (mainly for foods, such as: rice, breads, snacks, sugar and spices, and other dried foods), Rp V (for detergent, floor disinfectant), and Pasti (for tissues, diaper, cottons).
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