When the city of malls makes entrepreuners dizzy

Alvin Darlanika Soedarjo ,  The Jakarta Post ,  Jakarta   |  Sun, 10/12/2008 9:48 AM  |  Mosaic

The extensive rapid development of shopping malls has made food and beverage entrepreneurs worry because choosing the right location for expansion is like shooting ducks or playing Russian roulette. Malls in Jakarta, some reckon, have overexpanded and there are signs of a slowdown.

Location, location and location. That is the mantra of the food and beverages business, considered as one of the toughest niche markets to compete in all over the world, as restaurants can easily lose cash once there are leftovers or they fail to maintain fresh ingredients.

According to property consultant, Knight Frank, the retail market projects to be completed this year include Plaza Indonesia 2, Mall Pejaten Village, Blok M Square, Thamrin Nine and Seasons City.

In 2009, the projects to be completed include Jatinegara Lexy Square, Epicentrum Walk, Plaza Emporium CBD Pluit, Gandaria Main Street, Mall of Indonesia, Kota Kasablanka, Central Park at Tanjung Duren, Kemang Village and City Lofts Gajah Mada, reported Knight Franks's latest report for the first half of 2008.

The report indicates overall occupancy rates will decrease in the light of the large volume of new supply coming on stream by the end of 2008.

More than twenty new malls are due to be opened in greater Jakarta by 2010, if all their permit procedures go well. Business people like Izzi Piza's owner Robert Eskapa criticizes the phenomenon as "oversupply".

"We don't know where to go and where to open our next store. The new malls aren't packed with visitors as the anchor customers will not increase. Also, the restaurant or food and beverage businesses are already oversupplied," said Robert.

He added: "My job is to open restaurants while making good returns for my shareholders. With this oversupply scenario, it has become almost impossible to know where to open the next restaurant in Jakarta."

Eskapa, who came from England, added that in order to succeed, F&B businesses inside shopping malls need a high density of visitors.

"About a decade ago, there were only a handful of busy malls like Pondok Indah Mall, Plaza Senayan, Plaza Indonesia, Taman Anggrek Mall and Bintaro Plaza. Now just look at the newly built malls, they are dead."

Izzi Pizza already has 16 outlets, and they are planning to expand outside Indonesia.

Dani Wanandi of Jaddi Holdings, the parent company of D'Crepes, said that there's no guarantee that the new malls would be successful.

"(When it comes to) choosing the right location, first of all we are not in a hurry to open new outlets especially in the new malls, better to first make sure that the malls work."

Dani added that they always survey the market concerning the target groups and whether they fit their target markets, both the passing traffic as well as the anchor tenants.

The target market for D'Crepes is teenagers, both male and female from age 15 to 24. "But at the same time we welcome any customers who love our products." The light food business now already has 70 outlets in eight big cities in Indonesia.

The way Jaddi Holdings looks at the oversupply of malls in Jakarta is quite simple and straightforward. "It is survival of the fittest at the end of the day. Whoever can give the best attractions and service will win the visitors."

While good surveys and competitiveness are the key to success for Dani, other entrepreneurs choose caution as their watchword. Poke Sushi co-owner Toar Christopher said that they are very careful when it comes to business expansion.

Out of four Poke Sushi outlets in Jakarta, two are operating inside malls, in Pondok Indah Mall 2 and Grand Indonesia.

"We will only expand in the malls that are already well-established. If there is a tenant who decides to leave, then we may take their place. Well-established malls are always packed with people. Or we will choose a mall that is unique, which makes people want to go there at least once."

Some F&B business people now choose to open outlets in the central business district (CBD) rather than in regular "community malls" in order to attract potential customers from nearby offices. But the existence of more than one mall in the CBD has forced mall entrepreneurs to be creative in designing their developments.

Lukman Azis, spokesman of the Ancol Beach City (ABC) project, said that the success of a mall depends on what kind of attractions it will have.

"We design our places as a lifestyle destination rather than just a place to meet consumption needs," said Lukman, adding that the indoor ABC, which will have its own huge auditorium to hold events, has the beach as the major attraction.

"The view of the beach does not exist in other malls here. Maybe in Bali it's familiar, but not in Jakarta."

Ancol Beach City can also count on potential visitors from nearby residential areas and regular Ancol guests. "There are about 50,000 to 100,000 Ancol visitors on a daily average. If five percent of them visit Ancol Beach City, then we already have quite a large number of visitors.

Albert Lim of Procon retail leasing said that in the next two years the F&B business will still be the 'prima donna'.

"It is easier to do the F&B business compared to any other. Many entrepreneurs choose the franchise route and many of them are young people from affluent families," he said.

Albert reckoned that many newly constructed malls may look empty of visitors, but the restaurants and food stalls within them will still be more packed with visitors than, for instance, fashion boutiques, which attract clients on a more seasonal basis.

"That's why branding is important. The businesses with strong brands get many customers as they become the destination. For example, many developers want to include a Duck King restaurant inside their malls as this restaurant is always packed everywhere."

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