Prioritise local retail players, urges hypermarket boss

PETALING JAYA: The boss of one of the country’s largest hypermarket chains has urged Putrajaya to prioritise local retailers by enforcing existing guidelines governing foreign participation in the retail industry, following the government’s statement that hypermarkets will not be allowed to operate in interior areas.

Domestic Trade and Consumer Affairs Minister Saifuddin Nasution Ismail had said this was part of the government’s efforts to help small sundry shops operate in fringe and interior locations.

Ameer Ali Mydin.

However, Ameer Ali Mydin, the managing director of hypermarket giant Mydin, told FMT that local players should be allowed to grow and move into areas where they see potential.

He said in general, he agreed that hypermarkets should not encroach into rural areas. Even if they were allowed to do so, he added, it was unlikely that they would given the business model which required large populations.

“But I would like the minister to go a step further and follow the existing guidelines, particularly the Guideline on Foreign Participation in the Distributive Trade Services Malaysia.”

This included conditions such as the allowance of one hypermarket for every 250,000 residents, he said.

In Nilai, he added, two foreign hypermarkets were already operating despite the population requirement not being met.

And although the guidelines prohibited foreign involvement in the mini market sector, he said, just two years ago a popular Japanese mini market had been allowed to set up, purportedly under the guise of franchising.

“There is no way your typical mini market can compete with this Japanese mini market,” he said. “To my knowledge, the only foreign mini market franchise allowed to operate here is 7-Eleven, and even then only because it came to the country before the guidelines were drawn up.

“The ministry has not been following its own guidelines, so I hope they will start doing so.”

Universiti Tun Abdul Razak economist Barjoyai Bardai said with small grocery stores, people usually had to pay higher prices since smaller volumes of goods were brought in.

He added however that it was not viable for hypermarkets to enter such areas due to the lack of customers.

He suggested a “win-win” solution where hypermarkets are allowed to open “mini hypermarkets”.

“Essentially, this will see small-time entrepreneurs opening up shops and working with hypermarkets. The entrepreneurs would provide the venue and workers while the hypermarkets would supply goods to the mini hypermarkets on a consignment basis.”

With this arrangement, he said, the entrepreneurs would become franchisees while getting a cut from the hypermarkets they worked with.

“This is more viable. The mini hypermarket can enjoy lower prices of goods from the hypermarket and sell the items more cheaply than a regular mini-market in such areas.”

Barjoyai added that mid-sized chains like 99Speedmart would likely have a bigger impact in fringe and interior areas in the near future.

“These chains meet basic needs, and if you look at the items they sell, they are mostly dry goods. So they can meet the needs of the people who would then only need to get their fresh food from the market.”