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Hypermarket Retailing Expansion as a Hub of Socio-economic Development in Malaysia

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Hypermarket Retailing Expansion as a Hub of Socio-economic Development in Malaysia
HYPERMARKET RETAILING EXPANSION
AS A HUB OF SOCIO-ECONOMIC
DEVELOPMENT IN MALAYSIA
Hasliza Hassan, Multimedia University, Malaysia
Junainah Mahdee, Multimedia University, Malaysia
Abu Bakar Sade, UCSI University, Malaysia
Muhammad Sabbir Rahman, International Islamic
University Malaysia, Malaysia
The majority of Malaysians prefer to go to a hypermarket to
purchase the basic necessities for their household. Due to the high
acceptance of this modern retailing concept, hypermarket retailing
has had an incredible impact with respect to the overall retailing
industry in Malaysia. This research explores the advantages of
having more hypermarket outlets for the society as a whole. The
research is mainly based on general observations and is supported
with secondary reviews from previous research scholars. It is
expected that those locations that are less developed will
experience a positive impact by having more hypermarket outlets
within the area. This is because the hypermarket is able to
stimulate the overall economic development and, at the same time,
improve the socio-economic level of the society.
Keywords: Development, Expansion,
Malaysia, Retailing, Socio-economic
Hub,
Hypermarket,
Volume 14 (2015)
Hypermarket Retailing Expansion
34
Introduction
The retail industry in Malaysia has developed from the
traditional sundry store to a supermarket and now to the
hypermarket. The hypermarket is a modern retailing store concept
in which customers are able to purchase almost all their basic
necessities under one roof. This concept has made hypermarkets
the main attraction for customers in terms of shopping, especially
to purchase monthly household groceries (Hassan & Rahman,
2012). The introduction of the hypermarket retailing concept,
which is mainly based on self-service within the modern shopping
environment, has gathered considerable momentum for the
retailing industry in Malaysia (Hassan, Sade & Rahman, 2013).
This is strongly supported by the Malaysian culture, in which
shopping is the main pastime. It is found that 89% of customers in
Malaysia prefer to go to a hypermarket to purchase the basic
necessities for their household (Hassan, Rahman & Sade, 2015).
The ambience of the hypermarket, which is enhanced by covered
parking, air conditioning, music, food and beverage area, as well as
a rest area, has become an attraction for the whole family to spend
its time together at the hypermarket, not just for shopping but also
as a place to strengthen family relationships. Thus, the
hypermarket is not just a retail outlet, it also functions as a venue
for “retailtainment.” This research looks into how the existence of
hypermarkets will assist in development of the overall socioeconomic momentum in the Malaysian market.
Hypermarket Retailing Expansion
There are two ways to expand the existing hypermarket
retailing operation: extending the operation locally or
internationally. The hypermarket can add more outlets within
Malaysia through local expansion. International expansion refers to
operating new outlets in other countries. Market concentration that
35
is competitive has led to internationalization (Uusitalo, 2004),
which is due to either scant opportunities or saturation in the
domestic market, as well as international opportunities (Alexander,
1990; Williams, 1992). The internationalization of hypermarket
retailing is dependent on leadership, corporate culture, innovation,
customer focus, community awareness and people’s power
(Arnold, 2002) as an internal corporate strength. To enhance this
capability, the hypermarket retailer also requires a self-established
subsidiary, direct acquisition, franchising, joint venture (Lessassy
& Jolibert, 2007; Quinn & Alexander, 2002), organic growth and
in-store concessions (Quinn & Alexander, 2002) as a support
strategy.
Internationalization is a matter of expanding a business
territory into a new place in another country and manipulating that
particular place. How business people do this is highly dependent
on the available skills and expertise to tackle the particular place.
Obviously, it is not an easy task to expand a business into a new
place, especially in different countries due to the differences in
culture, business practice, legal, political, economic system,
industry structure, language, value, attitude, behavior, and general
business condition (Dupuis & Prime, 1996; Evans, Treadgold, &
Mavondo, 2000). The mantra of “think globally, act locally” is
easier said than done and many retailers have learned this lesson
the hard way (Perkins, 2001). McGoldrick (1995) highlighted four
key obstacles to internationalization: 1) culture and language
issues, 2) regulatory controls, 3) cost of logistics and
communication, and 4) the competitor environment. Hence, the
road to success will definitely not be easy. Substantial up-front
investment is required and the whole fulfillment conundrum has
yet to be satisfactorily resolved (Perkins, 2001). There are many
hypermarket players that are trying to expand their business
territory to another country. However, not all international
hypermarket retailers are successful. At the moment, retailers from
Volume 14 (2015)
Hypermarket Retailing Expansion
36
Europe and the United Kingdom are the leaders in
internationalization. The first retailer to expand its business
operations in an offshore market was Carrefour in 1969 (Burt,
Davies, Dawson & Sparks, 2008). According to research
conducted by Kamath and Godin (2001), the restrictions of
domestic expansion and legislation forced Carrefour to seek
opportunities abroad. The expansion of Carrefour relies on 1)
simple and clear ideas, 2) developing ideas, 3) universal ideas, 4)
state of mind, and 5) commitment. In Malaysia, there are
combinations of international and local hypermarket players that
keep on expanding their business operations. Wide experience by
international hypermarket players has provided strong pressure for
local hypermarket players to compete and sustain in the industry.
Regardless of international or local players, this research focuses
on the significant of hypermarket retailing expansion as a hub for
socio-economic development in the Malaysian market.
Hypermarket Retailing Expansion Opportunities in Malaysia
The development of the hypermarket retailing industry in
Malaysia is very impressive. This is because the main products that
are sellable in the hypermarket are groceries and basic necessities.
In 2013, grocery retailing in Malaysia outgrew non-grocery
retailing (Euromonitor International, 2014). The five main
hypermarket players in Malaysia are Aeon, Econsave, Giant,
Mydin and Tesco (Hassan et al., 2015). As Malaysia is a
developing country, even though there is an opportunity to expand
the hypermarket retailing operations at the international level,
especially in neighboring countries, there is still an opportunity to
expand the retailing operations domestically. The existence of a
hypermarket outlet in a particular location is able to change the
overall socio-economic level of that particular place. This is
because the majority of Malaysians have a high tendency to go
37
shopping at a modern retail facility as part of their modern
lifestyle. Parallel to this, it provides more opportunities for local
small and medium enterprises, especially new entrepreneurs, to sell
their products and offer services through the hypermarket outlets
as sub-retailers. In an effort to cater to the demands of shoppers,
more employment opportunities are available for those people who
are looking for work either with the hypermarket or sub-retailers in
the hypermarket premise. As a consequence of the employment
and entrepreneurship opportunities, the availability of hypermarket
outlets also assists in stabilizing the socio-economic level among
different regions in Malaysia. This is by reducing the gap of
average monthly household income and population between urban
and rural areas. Therefore, hypermarket retailing expansion can be
considered as a hub for socio-economic development in Malaysia.
The significance of hypermarket retailing expansion, especially in
rural areas, to develop and push the positive socio-economic
development in Malaysia is represented in Figure 1.
Figure 1: Hypermarket Retailing Expansion as a Hub for Socioeconomic Development
Socio-economic Development
Hypermarket
Retailing
Expansion
Opportunities
Stabilization
Employment
Income
Entrepreneurship
Population
Volume 14 (2015)
Hypermarket Retailing Expansion
38
Distribution of Hypermarket Outlets and Population in
Malaysia
Malaysia comprises 14 states, which are clustered into five
main regions: 1) Northern Region, consisting of Perlis, Kedah,
Pulau Pinang and Perak; 2) Central Region, consisting of Kuala
Lumpur, Putrajaya, Selangor and Negeri Sembilan; 3) Southern
Region, consisting of Johor and Melaka; 4) East Coast, consisting
of Kelantan, Terengganu and Pahang; and 5) East Malaysia,
consisting of Sabah, Sarawak and Labuan. Table 1 shows the
distribution of hypermarket outlets and the population in each of
the regions. The distribution of hypermarket outlets based on
region is obtained from the latest information provided by the main
hypermarket players in Malaysia; the percentage of population is
based on the latest data from the Department of Statistics Malaysia
(2013a).
Since there is a great possibility of gaining ample benefit
from local consumers, it would be advisable for the hypermarket
retailers to consider local expansion rather than international
expansion. Currently, slightly more than half, which is 58.09%
(201 hypermarket outlets), of all the hypermarket outlets in
Malaysia are located in the Central Region. Parallel to this, the
population in the Central Region is the highest, with 28.96%
(8,762,700 population), compared to the other regions. This is
followed by the Northern Region, in which 15.32% (53
hypermarket outlets) of the hypermarket outlets are located in the
area, with 21.23% (6,424,400 population) of the overall Malaysian
population staying within the area. Approximately 15.03% (52
hypermarket outlets) of the hypermarket outlets are located in the
Southern Region, with a population of 14.52% (4,393,300
population). The distribution of hypermarket outlets in east
Malaysia and the East Coast is only 6.65% (23 hypermarket
39
Table 1: Distribution of Hypermarket Outlets and Population
Regions
Northern Region
(Perlis, Kedah, Pulau Pinang and
Perak)
Central Region
(Kuala Lumpur, Putrajaya,
Selangor and Negeri Sembilan)
Southern Region
(Johor and Melaka)
East Coast
(Kelantan, Terengganu and
Pahang)
East Malaysia
(Sabah, Sarawak and Labuan)
Total
Number of
Percentage of
Hypermarket Hypermarket
Outlets
Outlets
Population
Percentage
of
Population
53
15.32%
6,424,400
21.23%
201
58.09%
8,762,700
28.96%
52
15.03%
4,393,300
14.52%
17
4.91%
4,415,300
14.59%
23
6.65%
6,265,900
20.71%
346
100%
30,261,600
100%
Volume 14 (2015)
Hypermarket Retailing Expansion
40
outlets) and 4.91% (17 hypermarket outlets) with 20.71%
(6,265,900 population) and 14.59% (4,415,300 population) of the
total population, respectively. The percentage of population in the
Central Region is higher than in any other regions. Many
youngsters have migrated from other regions to the Central Region
to gain a better standard of living. Due to this, the density of
population is expected to be more stabilized if there are more
hypermarket outlets in other regions. This is because the
hypermarket has the capability to become a hub for the societies to
earn more income for living. Parallel with this, hypermarket outlets
are also functioning as hubs for the societies to spend their income
for their household necessities.
In general, hypermarket retailers are more attracted to
locations with a high population and, hence, establish their outlets
in these regions. However, the ratio of the distribution of
hypermarket outlets to the distribution of the population is not
consistent. This shows that there is still an opportunity for the
hypermarket retailers to expand their retailing operations to the
Northern Region and East Malaysia, because these two regions
have a relatively high population. It would also be an added
advantage to expand the hypermarket retailing operation to the
Southern Region, especially Johor, because its location is close to
Singapore, which allows Singaporeans to cross the border to Johor
over the weekend to shop for their basic necessities. The addition
of Singaporean consumers to the local consumers will definitely
contribute positively to the economic benefits of the Southern
Region.
Based on Table 1, the majority of the Malaysian population
is located in the Central Region. The employment opportunities
provided by hypermarkets outside the Central Region will
discourage local people from moving to the Central Region and, at
41
the same time, motivate those people who have migrated to the
Central Region to return to their hometowns. Indirectly, this will
reduce the population density in the Central Region and stabilize
the human resource ratio in the other regions. The continuous
effort by the hypermarket retailers as well as the strong support by
the government is expected to assist the development of all regions
to become more consistent. Although some people might perceive
that the existence of hypermarkets will have a negative impact on
the surrounding small grocery shops, the positive impact of having
a hypermarket in a particular place has constantly overruled the
negative impact.
Household Monthly Income in Malaysia
Even though there is a continuous increase in the cost of
living, the government has been trying to constantly enhance the
disposable income of the people (Euromonitor International,
2014). The effort is proven by the increase in the average monthly
household income in Malaysia from RM 4025 in year 2009 to RM
5000 in year 2012. Parallel to this, the percentage of hardcore
poverty in Malaysia has been reduced from 0.7% in 2009 to 0.2%
in 2012, while the level of poverty has been reduced from 3.8% in
2009 to 1.7% in 2012 (Department of Statistics Malaysia, 2013b).
With higher average monthly household income, the societies will
have more chances to have a better lifestyle through a better
purchasing power. The overall economic development in the
particular region will definitely be enhanced through higher
circulation of money among the societies. This momentum will be
further stimulated with the availability of hypermarket retailing
outlets as a hub for the societies to spend their money for their
daily household necessities.
Table 2 shows the average household monthly income by
Malaysians based on the regions as per the latest data from the
Volume 14 (2015)
Hypermarket Retailing Expansion
42
Department of Statistics Malaysia (2013b). The highest average
household monthly income in 2012 is in the Central Region, with
RM 7,071.50 per month. This is followed by East Malaysia (RM
4,874.33), Southern Region (RM 4,708.50), Northern Region (RM
3,891.50), and, finally, the East Coast (RM 3,626.67). In general,
the average household monthly income for Malaysians from 2009
to 2012 has increased and it is expected that this momentum will
be maintained for the next few years. This will definitely enhance
the consumer purchasing power, especially for basic household
necessities that can be purchased from a hypermarket.
Table 2: Average of Household Monthly Income
Regions
Northern Region
(Perlis, Kedah, Pulau Pinang and Perak)
2009
RM 3,125.00
2012
RM 3,891.50
Central Region
(Kuala Lumpur, Putrajaya, Selangor and
Negeri Sembilan)
Southern Region
(Johor and Melaka)
East Coast
(Kelantan, Terengganu and Pahang)
East Malaysia
(Sabah, Sarawak and Labuan)
Malaysia
RM 5,434.25
RM 7,071.50
RM 4,009.50
RM 4,708.50
RM 2,944.00
RM 3,626.67
RM 3,696.67
RM 4,874.33
RM 4,025.00
RM 5,000.00
Socio-economic Development through Hypermarket Retailing
Expansion
The Central Region has been the most well developed
region in Malaysia for the past few years and the momentum of the
development is expected to be maintained over the next few years.
This is because Kuala Lumpur, which is the capital city of
43
Malaysia, is located in the Central Region. The momentum of
development in the Central Region tends to be more intense,
because the center of government administration is located in
Putrajaya, which is also within the Central Region. The main
development in Kuala Lumpur and Putrajaya has led to Selangor
and Negeri Sembilan sharing similar benefits, because the states
are located nearby to each other. As a result, the Central Region is
the region with highest percentage of hypermarket outlets, 58.09%
(201 hypermarket outlets), and highest percentage of population
with 28.96% (8,762,700 population). Parallel to this, the average
household monthly income in the Central Region is also the
highest in 2009 (RM 5,434.25) and 2012 (RM 7,071.50). Due to
the rapid economic development, Central Region should become a
benchmark for other four regions in Malaysia.
The development of the Northern Region, Southern
Region, East Coast and East Malaysia is at a slower pace than the
Central Region. This can be seen by the average household
monthly income in 2009 and 2012 in which the overall average
household income for these four regions is lower than that of the
Central Region. The development of the Northern Region and East
Coast seems consistent from 2009 to 2012. However, the
development in the Southern Region and East Malaysia has
fluctuated. Parallel to this, the percentage of hypermarket
distribution outlets within these four regions is between 4.91% (17
hypermarket outlets) and 15.32% (53 hypermarket outlets) with a
percentage of population between 14.52% (4,393,300 population)
to 21.23% (6,424,400 population). It is highly expected with the
availability of more hypermarket outlets in these four regions, the
number of population throughout the regions in Malaysia will tend
to be more consistent since the societies do not have to depending
too much on Central Region to have a better socio-economic
living.
Volume 14 (2015)
Hypermarket Retailing Expansion
44
The overall socio-economic development is expected to be
stimulated with the availability of hypermarket outlets within
particular locations by providing an ample of employment and
entrepreneurship opportunities to the societies. In order to reduce
the gap of average household monthly income among regions in
Malaysia, more encouragement should be given to the hypermarket
retailers to operate their business at East Coast. This is because,
East Coast is ranked as the lowest in the average household
monthly income than any other regions in Malaysia. The average
household monthly income of people in East Coast is just slightly
more than half of what people who are staying in Central Region
earning in 2009 and 2012. Currently, there are only 17
hypermarket outlets operating at East Coast. The number of
hypermarket retailing outlets should be added to provide more
opportunity for the societies to enjoy economic development.
Following by East Coast, it would also be an advantage to have
more hypermarket retailing outlets at Northern Region, Southern
Region and East Malaysia to stabilize the existing socio-economic
gap with Central Region. In line with this, the ratio of hypermarket
retailing outlet distributions should be parallel with the number of
population in each region.
The availability of hypermarket outlets in a particular
location will stimulate the economic development within that area.
This is because, other than offering a variety of basic necessities,
the hypermarket also provides opportunities for local small
medium entrepreneurs to sell their products in the hypermarket by
renting a place or space within the hypermarket as a sub-retailer. It
also provides more employment opportunities for people to work
either with the hypermarket or with the small medium enterprises.
The development of a hypermarket outlet near a tertiary school or
university in suburban or rural areas will also assist in enhancing
the socio-economic level of the society. The availability of the
45
hypermarket will provide employment opportunities for students
who are seeking part time employment during their college or
university trimester breaks and at weekends. Due to this, the
availability of hypermarket retailing outlets in particular locations
will assist the societies to earn more income for living by
providing employment and entrepreneurship opportunity and at the
same time will become a main hub for the societies to spend their
income to purchase their household necessities.
Most hypermarket retailers will tend to focus on areas
where there is high density of population to grab more customers
and at the same time it is much easier for the hypermarket to find
manpower for their daily operations. Due to this, most
hypermarket outlets are usually operating at urban areas. As an
alternative for urban areas, there is also a chance to earn high
investment return by locating the hypermarket outlets near to
tertiary education centre. The high number of students with the
surrounding societies will assist to generate a better socioeconomic development momentum for long-term. This is further
supported with Malaysian culture where the societies tend to spend
more time for shopping as a modern lifestyle. Currently, there are
20 government universities, 69 private universities and 8 overseas
campus universities operating throughout Malaysia (Ministry of
Education Malaysia, 2012). This gives a positive hint for the
hypermarket retailers to grab the opportunities to expand their
operation locally.
Conclusion
In summary, there is always an opportunity for
hypermarket retailers in Malaysia to expand the business
operations either internationally or locally. The hypermarket
retailing operation is still not saturated in Malaysia. Hence, it
would be an added advantage for the hypermarket retailers to
Volume 14 (2015)
Hypermarket Retailing Expansion
46
consider local expansion opportunities. The existence of a
hypermarket in a particular place will assist in altering the socioeconomic landscape and raising it to a better level. The
development of particular areas especially in rural areas will be
enhanced through a huge employment and entrepreneurship
opportunities that is provided by the hypermarket outlets. As a
consequences of this, the expansion of hypermarket retailing to
other regions than the Central Region will help to stabilize the
population density and human resources for the overall socioeconomic development. This will also assist to reduce the huge gap
in the household monthly income between the Central Region and
other regions. With the stabilization of the socio-economic level,
more people will be able to share the benefit together.
As a hub for socio-economic development, hypermarket
retailing brings with it a modern and more productive market
transaction operating system. Overall, this will eventually
influence the standard of hypermarket players within the region in
particular the rural regions where markets tend to be largely
fragmented. In regions where markets are well established,
hypermarket retailing will lead to more innovations such as the
introduction of self-service technology (Hassan, Sade & Rahman,
2014). Although it can be seen that the availability of a
hypermarket in a particular place is able to improve the landscape
of the local community, empirical research must be undertaken as
a path to explore how far a hypermarket can change the socioeconomic development within a particular place. Thus, such
research is expected to become a path for theoretical development
to further enhance the findings on hypermarket retail expansion.
47
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