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Malaysian hypermarket retailing development and expansion

Hasliza Hassan

Faculty of Management, Multimedia University, Cyberjaya, Malaysia

Abu Bakar Sade

Global Entrepreneurship Research and Innovation Centre, Universiti Malaysia Kelantan, Kuala Lumpur, Malaysia, and

Muhammad Sabbir Rahman

Graduate School of Management, Multimedia University, Cyberjaya, Malaysia


Purpose – The hypermarket industry in Malaysia has created a huge momentum for modern retailing concepts. The industry has been developing impressively, and the word hypermarket seems in need of a new definition. There is an overlap of the definitions for hypermarket, supermarket and shopping mall. Thus, the purpose of this paper is to focus on recent Malaysian hypermarket retailing developments that could be used as sources for definition. A few expansion opportunities are also emphasized in this paper. Design/methodology/approach – A review of the literature from various research studies in the field was made. In order to strengthen the existing findings, practical implementations on hypermarket retailing within the Malaysian market were also studied in this research. In general, this research focuses on hypermarket retailing in the Malaysian scenario. Findings – Malaysian hypermarkets can be defined using retail developments within the industry as sources for definition works. This industry can also be expanded further through: product brand extension; service experience enhancement; self-checkout technology; coupons promotion; online hypermarket; and one district one industry (SDSI) market intervention program. Originality/value – The definition of hypermarket in this research paper is streamlined further to differentiate it from a supermarket or shopping mall. With the potential expansion opportunities, it is expected that there will be a clearer path to outgrow this industry.

Keywords Hypermarkets, Malaysia, Retailing, Development, Expansion, Business development

Paper type General review

Expansion, Business development Paper type General review International Journal of Retail & Distribution

International Journal of Retail & Distribution Management Vol. 41 No. 8, 2013 pp. 584-595 q Emerald Group Publishing Limited


DOI 10.1108/IJRDM-09-2012-0085

Introduction Retailing begins as a local activity (Severin et al. , 2001), which involves a transaction where the buyer intends to consume a product (Liao et al., 2008). Retail and distribution is the most consumer centric industry, which cover a wide spectrum of different businesses (Macdonald, 1994). There has been an intense transformation of the retailing industry over the past few decades, which has seen consumers making fewer trips and spending less at traditional shops since they are more attracted to modern retailing concepts (Morganosky, 1997). New and huge retail players have threatened and taken away the opportunity of small local grocery players (Gonzalez-Benito, 2005; Hare, 2003) including in suburban areas (Hare, 2003). The modern retail environment offers diverse product labels, quality, price and brands (Burt, 2000). It is also becoming

more diverse and fragmented with an overload of information and alternatives (Liao et al. , 2008). Consumers will perceive a retailer as a whole rather than in isolation (Swoboda et al. , 2007). Retailing is a highly diverse and dynamic sector (Jones et al., 2005) that provides

a supply of most household necessities to the consumer. The importance of retailers to

the manufacturer depends on the number of players in the industry (Collins and Burt, 2003). The retailing industry is one of the biggest contributors towards Malaysia’s gross domestic product (GDP) and also provides employment opportunities (Mui et al., 2003). Weld Supermarket was the first modern retail format that was introduced in Malaysia in 1963 followed by other modern retailers (Kaliappan et al. , 2009). The first hypermarket that was introduced in Malaysia was Makro, in 1993 (Lee, 2004). Hypermarket retailing is one of the forms of modern grocery retailing in Malaysia that is experiencing widespread expansion, and the industry is expected to expand continuously and remain immune to the maturity phase.





Hypermarket retailing In general, the word hypermarket has still not been defined clearly. The definition for hypermarket is also being used for supermarket and shopping mall by some researchers. Consequently, the issue arises of how to differentiate hypermarkets,

supermarkets and shopping malls. Most products in hypermarkets are based on fast moving consumable products, and the majority of departments in hypermarkets are selling basic household necessities, for example, food, vegetables, kitchen materials, and cleaning materials. In supermarkets, there are more departments that sell durable products. For example, we can get more varieties or brands for clothes, shoes and electrical products. A shopping mall is a retail concept where there are many sub-retailers within one roof. Usually more than half of the overall layout in the building is being rented to sub-retailers. The layout of the building is purposely designed to be rented to other sub-retailers to earn revenue from rental. According to Basso and Hines (2007), the way consumers define retailing and how the quality and service level is perceived depends on price, store appearance and image, which is communicated through commercial medium. However, the perception will fade upon maturity. The concept of everything under one roof, self-service, discount price and free parking have invented a new word in the industry – hypermarket (Kamath and Godin, 2001). A hypermarket can be defined as a modern household retailing concept that sells

a combination of department store merchandise and groceries in wide assortment,

within a store of more than 2,500 square meters (27,777.7 square feet) to over 8,000 square meters (86,000 square feet) (Malaysian Magazines, 2003), which includes a free and large parking area and other services. Based on a combination of perspectives from various authors, a hypermarket is mainly based on self-service (Swoboda et al., 2007) that sells a variety of retailer product brands, manufacturer product brands and generic products (Esbjerg and Bech-Larsen, 2009). Intangible assets, such as product brands, retail formats and managerial technology are features of the retailing sector (Doherty and Quinn, 1999). All of these are offered by almost all hypermarkets. Nowadays, hypermarkets could be considered as a modern retailing format that provides everything under one roof. Although this concept is similar to the existing shopping center, hypermarkets focus more on fast moving consumer products.




The first hypermarket was introduced in 1963 (Cliquet, 2000) by Carrefour. Carrefour was established in 1959 as a supermarket and then converted to a hypermarket to compete in the retail industry (Liao et al., 2008). The hypermarket format that was introduced by Carrefour emphasized three key elements (Dupuis and Prime, 1996):

(1) one-stop shopping in large premises; (2) large parking lots; and (3) everyday low prices.

Carrefour strengthened the brand name by utilizing a multiple format strategy in addition to hypermarket to expand in the international market where there was an opportunity for discount retailing (Colla and Dupuis, 2002). Competition from the European retailers affected the local market (Myers and Alexander, 2007). This large format retailer or “big box” concept becoming familiar in the 1990 s (Arnold and Luthra, 2000). The industry has developed extensively and impressively within a short timeline since the consumers have been aggressively pushing this industry into another level. Today, there are many international as well as local hypermarket players in Malaysia. New retail concepts enhance the industry’s competitiveness (Arnold and Luthra, 2000). Hypermarkets are part of the grocery retailing industry and constitute one of the main distribution channels for products (Kaliappan et al., 2009). It can also be considered as a normal retailing industry that sells in huge amounts and offers a wide variety within one outlet. Many consumers prefer to purchase household products at hypermarkets (Arnold and Luthra, 2000). This is because it is more convenient to purchase different categories of products at one place (Dellaert et al., 1998). This modern retailing (Knee, 2002) is based on:






fixed prices;

no obligation to buy;


entertainment; and


The “one-stop” and “all-under-one-roof” concept that was introduced by international hypermarkets has attracted a positive market in Malaysia (PricewaterhouseCoopers, 2004/2005). Thus, hypermarket is a common industry to everyone since it covers a wide spectrum. Consumers usually have more than one preference of retailer to choose for grocery shopping (McGoldrick and Andre, 1997). Consumers usually prefer to go to large-scale retailers for major purchases to gain a better assortment, price, discount and special offers. They will go to smaller retail stores for fill-in trips (Reutterer and Teller, 2009). Consequently, small independent retailers have been replaced in the market by a small number of large retailers through sales, market share and profits. Modern retailing provides better service, value, variety, safety, cleanliness and a more advanced shopping environment than traditional retailing (Alexander and Myers, 1999). People prefer to go to the hypermarket to purchase fresh products such as dairy, fine meat and

groceries (Verhetsel, 2005). There are many varieties of products in hypermarkets with diverse quality and price, which has made hypermarkets the most attractive place to shop, especially for grocery products. Consequently, small retailers that target for fill-in trips should not compete with large scale retailers in non-service aspects, such as price and product quality that aim for bulk purchase from the consumers. However, these small grocery retailers should be able to compete with large hypermarkets in terms of service through a better personal relationship with the consumers (Reutterer and Teller, 2009). How the retailing concept is perceived is dependent on individual perception. The price of products in hypermarkets is slightly cheaper than those in a supermarket. All hypermarkets provide free parking for consumers as a basic service. Most supermarkets and shopping malls do not provide free parking except for certain locations or by certain players. From another perspective, many hypermarkets enhance the outlet as a shopping mall by providing more space for sub-retailers within and outside the main building. The layout is purposely designed to be rented to other sub-retailers. For example, Tesco is usually designed as a double storey building. The first floor and part of the second floor are rented to other sub-retailers, while Mydin at Ayer Keroh, Melaka, Malaysia rented indoor space as well as space outside the building to other sub-retailers. Sometimes, there is also an exhibition in the outlet. This concept is almost similar with shopping mall. Thus, sometimes it is a bit tricky concerning how to differentiate one retailing concept from another. Some retailers might operate as both a hypermarket and supermarket at the same time in different locations. For example, Giant can be considered as a hypermarket since they have their own building and the parking is free for the consumer, whereas Giant supermarket is located within a shopping mall. Usually, supermarkets do not provide free parking for the consumer. AEON, previously known as Jaya Jusco, can be considered as both supermarket and shopping mall depending on how the layout is designed. If AEON is dominating more than half of the layout in the building, it is considered as a supermarket, whereas, in certain places, it can also be considered as a shopping mall since more than half of the layout is rented to other sub-retailers. The burden to manage a store solely by the main player can be reduced by renting part of the layout to sub-retailers and earn a constant rental income. However, the investment cost at the beginning will be high since the size of a shopping mall is usually bigger than supermarket. Mydin is an example of a retail player that operates in three retailing concepts – mini mart, which is also known as MyMydin or MyMart; supermarket, which is also known as Mydin Wholesale Emporium; and hypermarket, which is also known as Mydin Wholesale Hypermarket.





Hypermarket retailing in Malaysia The basic components of normal traditional retailing involve: price driven, service delivery and time saving (Sparks and Findlay, 2000). The traditional grocery retail shops have been replaced by supermarkets and subsequently by hypermarkets (Chabaud and Codron, 2005; Hassan and Rahman, 2012a), which have dramatically changed both the market structure and the regulatory policy (Gonzalez-Benito et al., 2005). Greater floor space, modern display format and selling in large varieties and quantities give value added to hypermarkets (Business Monitor International, 2007). In general, smaller markets usually have fewer international retailers (Myers and




Alexander, 2007). The opportunity for Malaysian hypermarkets to expand domestically is still on-going. Mydin Mohamed Holdings Berhad (Mydin) is one of the local players that keep expanding their business operation from selling cost effective Muslim clothes, apparel and prayer materials to a wide range of different goods. The localized concept of halal (permissible) by Mydin, targeting a certain religion or race, provides strong competition to other well-known players such as Tesco, Carrefour and Giant (Zain, 2008). Malaysian foreign direct investment inflow (FDI) has been stabilized and improved. The major contributing sectors are from wholesale and retail (PricewaterhouseCoopers, 2004/2005). The development of a new economy leads to improvement (Kotler et al., 2003) in:






buying power;

variety of available goods and services;

amount of information;

interacting, placing and receiving orders; and

an ability to compare notes on products and services.

The revolution of the grocery retailing industry is more impressive than any other industry. Sometimes, it can be perceived as automatic development that is beyond control. The high number of emergent retailers and the competition in this industry has made this industry highly competitive. Competition in the retail industry has led to an improvement in efficiency (Barros, 2006). Since 2006, Tesco, Carrefour and AEON have made significant investments to develop a competitive network in Malaysia (Business Monitor International, 2007). Privatization guidelines which require 30 per cent of private equity to be held by Bumiputra (Lee, 2004) have given an opportunity for local people to be more involved in the industry. There is also an opportunity for local people to get involved in the industry through operational expansion of hypermarket retailing in Malaysia.

Expansion through product brand extension Nowadays, consumers have borderless product varieties to choose from. Thus, brand is important (Ilonen et al., 2011) to sell any type of product. The extension of an existing hypermarket corporate brand to a new product by using the same brand is known as corporate brand extension (Keller and Aaker, 1998). Consumers can easily choose any place to shop since almost all hypermarkets are offering the same products. The only way to differentiate is by offering hypermarket corporate brand extension products that are only available in a particular hypermarket outlet. Corporate brand extension products by hypermarkets increase the variety or assortment on the shelves. This is not just for the sake of display but can also be used as a strategy to attract people to purchase more at a cheaper price (Anchor and Kourilova, 2009; Uusitalo, 2004). In general, although most hypermarkets seem to be extending the corporate brand to product brand, there are still some hypermarkets, especially local players, that have still not extended the existing corporate brand since they are still not clear concerning the significance of such a strategy (Hassan and Rahman, 2012b). As a stepping stone to look at the significance of hypermarket corporate product brand extension, it would be beneficial to focus on factors that could impact on the brand extension (Story and

Loroz, 2005) or feedback concerning the impact on diverse product categories within real environmental settings (Thorbjørnsen, 2005). The importance of brand extension leads to investigation concerning how far the brand could be stretched (Meyvis and Janiszewski, 2004) and deeper investigation concerning the factors that could enhance the elasticity (Ahluwalia, 2008). There are very few findings concerning the main driver and assessment of brand extension elasticity (Ahluwalia, 2008; Burt, 2000). Thus, further research is needed concerning the effect of the success in brand extension by the corporate entities (Keller and Aaker, 1998).





Expansion through service experience enhancement The scope of a service is very wide. Service involves an intangible product (Heizer and Render, 2004) or any activity that supports sales. Service is complex and involves mixture levels of environmental, consumer and variables of service provider (Varca, 2004). A planning base on “solution selling” is important for service differentiation (Arnold et al. , 2009). Although service is complicated to measure and most consumers evaluate it according to the corporate image, it would be interesting to study the differences in service and product brand (Pina et al., 2006). Shopping is not just about purchasing products from shelves. It also involves shopping experience (Beldona and Wysong, 2007; Brun and Castelli, 2008). The shopping experience can be stimulated through a sensory experience. This sensory experience can be enhanced by giving free sample products for the shoppers to experience (Beldona and Wysong, 2007). There is a lack of further findings concerning the ways to design and enhance service consumption experience, such as the effect of music, consumption time, waiting time, physical environment, service provider, consumer assessment, purchase intentions and behavior (Bolton et al., 2007). While previous marketing research only focused on minimizing costs, the current marketing research is now moving into branding and the experience of the consumer (Parment, 2008). However, most of the existing findings mainly focus on shopping experiences in shopping malls instead of hypermarkets (Ahmed et al. , 2007). Thus, it would be worth looking into consumer shopping experience at hypermarkets since most people purchase basic household necessities from hypermarkets.

Expansion through self-checkout technology The checkout operation is crucial for all hypermarkets to determine the flow of the products. It gives a hint to the management concerning the stock availability and product preferences. The products will only flow – going in and going out – from the hypermarket’s stock if there is an exchange between the hypermarket and the consumer. This exchange will only be realized through the electronic bar code scanner and payment transaction medium at the checkout counter. Hypermarkets will order directly from the supplier when the cashier scans the bar code of a product. Thus, modern technology, such as an electric scanner will monitor sales performance (Jamieson, 1996). Systems, such as point-of-sales scanning and electronic data interchange (EDI) (Larson and Sijbrands, 1991), promise even better data collection opportunities for syndicated suppliers in the future (Segal and Giacobbe, 1994). The productivity of product flow is crucial at the checkout counter of hypermarkets. Technologies, such as scan-ahead system and traffic monitoring, are able to reduce checkout queues (Jamieson, 1996). The consumer is often alone in a crowd while




shopping. Modern technology, such as self-check-out systems, persuades the consumer to shop and do everything by themselves (Esbjerg and Bech-Larsen, 2009). The checkout counter is a one-stop place for an exchange or transaction between the consumer and the hypermarket to happen. Due to the nature of the operation of hypermarkets, the checkout counter can be interpreted as the only spot where the consumer is being purely served by the hypermarket. The other sections in the hypermarket might be considered to be self-service areas where the consumers have to shop by themselves. For the time being, there is still a lack of research concerning the Malaysian market, especially concerning the checkout operations between the consumer and the hypermarket.

Coupon as a major promotion expansion One of the ways to obtain discount from hypermarkets is by using coupons. Consumers can easily obtain the coupons from a newspaper. The way cashiers interact with the consumer will influence the consumer to either redeem or not to redeem the coupon. Consumers will redeem the coupons if they are made to feel welcome and confident by store personnel. Metaperceptions or the feel of perception by cashier, such as poor or cheap will demotivate the consumer from redeeming the coupon. However, if the consumer feels that the cashier perceives using a coupon is smart, the consumer might redeem it accordingly. Lower socio-economic people might feel embarrassed to use coupons, but still have to use it because the usage of a coupon is strictly driven by economic need (Brumbaugh and Rosa, 2009). The findings prove that consumers who often use coupons are those who have a higher income and higher education level then those who seldom redeem it. The intention to use coupons depends on the ability to read, accessibility to media, perception of store policies, product categories and brands (Bawa and Shoemaker, 1987). The usage of coupons is still not widely practiced in Malaysia. It was recently started by Carrefour. Due to this, there is always space for researchers to discover new knowledge concerning consumer acceptance towards coupon redemption. The findings could be extended to real practice for the benefit of both the hypermarket and the consumers.

Online hypermarket expansion With intense competition and high population in certain areas, especially in urban and suburban areas, electronic hypermarkets could become an alternative for those who prefer to stay away from stressful congestion. Although electronic hypermarkets have been introduced and accepted by consumers in certain countries, especially in the Western countries, this concept has not been implemented in Malaysia. In fact, there has been no research made on the Malaysian market concerning how consumers will behave towards purchasing basic fast moving consumption necessities and products through the internet. Thus, this new strategy could be a new gap for both practitioners and researchers to explore in the Malaysian market. To ensure that all implementation efforts are successful, it would be better to prioritize the research findings concerning how the consumer will behave (Hassan and Rahman, 2012a).

One district one industry (SDSI) market intervention expansion Satu Daerah Satu Industri (SDSI), also known as the One District One Industry program, was introduced to encourage local entrepreneurs to produce at least one or

two products or services at the district level and to compete at the national and international level (Johor State Federal Development Department, 2008). Through on-going training, guidance and financial support, the program assists in developing the overall local products and services in the market (Sarawak Economic Development Corporation, 2011). As a public-private-partnership approach, the hypermarket channel is a platform for all new local entrepreneurs to introduce new products and services to the market through this program. There is also an opportunity to share experiences with participating hypermarket players, such as Mydin, Tesco and Carrefour, concerning how to improvise the existing products and service quality as well as enhancing the marketing strategy (Melaka International Trade Center Sdn Bhd, 2007). Since the majority of Malaysians purchase basic necessities and household products at hypermarkets, this SDSI program is expected to assist local entrepreneurs to create brand awareness for potential consumers through the hypermarket channel and generate an impact on brand momentum. On the other hand, it becomes new sources of supply for the participating hypermarkets.





Recommendation and conclusion Hypermarket retailing is highly accepted by Malaysian consumers as the main channel to purchase basic household necessities. In general, the development of hypermarkets has been far more aggressive than supermarkets and shopping malls. This offers plenty of room to work on definition. It can also be expected that the definitions for supermarket and shopping mall will be adequately explained through other research to prevent an overlap of definitions and confusion among the retailing concepts. Moving forward, it is expected that hypermarket retailing in Malaysia will continuously develop with more innovative ideas through collaboration between practitioners and researchers with the consensus of consumers. Retailers should “delight” and “surprise” consumers (Knee, 2002), and should limit consumers sovereignty and persuade them to act in particular ways (Esbjerg and Bech-Larsen, 2009). Instead of listening to what consumers need and desire, nowadays, retailers tend to come out with new changes that influence consumers to adapt to the modern retailing styles. Although the way hypermarkets manage the retail operations should be according to the consumers preferences (Uusitalo, 2001), the successful original ideas for retailing come from the retailer and not the consumer (Knee, 2002). Thus, an innovative strategy is expected to boost the hypermarket brand momentum (Hassan and Rahman, 2012c). In line with this, there should be more research conducted to fill all existing gaps and discover potential paths for expansion of the industry. However, the research outcome will only be fully useful if there is strong collaboration with the practitioners who are interested in implementing new innovative ideas.

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