Informative Industrial Analytic for Effective Retail Business
Performance: A Case of Emerging Economy
AHMAD LUTHFI KHAIRURRAHMAN1, LILIS SITI BADRIAH1, HERMAN SAMBODO1,
DIJAN RAHAJUNI1, NUNIK KADARWATI1, HARY PUDJIANTO1, OKE SETIARSO1,
DEDI SUPRIADI1, RAKHMAT PRIYONO1
1Department of Economics, Universitas Jenderal Soedirman,
Profesor DR.HR. Boenyamin Street 708, Purwokerto, Central Java,
INDONESIA
Abstract: - This study analyzed the Indonesian retail industry's structure, behavior, and performance in 2018-
2020. It is essential because the potential of the retail industry in Indonesia is one of the most significant
contributors to GDP and employment. Thus the retail industry has a very strategic role in the Indonesian
economy. If a few companies dominate the market, it will become an obstacle for external companies to enter
the retail industry, which can lead to a decline in the level of profits and the overall performance of the retail
industry. This study aims to identify and analyze the structure, behavior, and industry performance of the retail
industry in Indonesia in 2018-2020. This study uses data on public companies listed on the Indonesia Stock
Exchange. The data were analyzed using CR4, industrial behavior, and Price Cost Margin analysis. The results
show that the average value of CR4 in the Indonesian retail industry in 2018-2020 is 60.276%. It means the
structure of the Indonesian retail industry is a tight oligopoly. This condition has led to several behaviors
carried out by industry players in the retail industry in Indonesia to increase profits and expand their market
share. These behaviors include product strategy (product differentiation), price strategy (second and third-level
price discrimination), and promotion strategy. The overall performance of the Indonesian retail industry still
needs to improve because the PCM value of the Indonesian retail industry in 2018-2020 is less than 50%. This
study recommends that companies pay attention to strategies to increase their competitiveness. Government
supervision is needed on business activities that are indicated to be too dominant in their position and make it
difficult for new entrants to the retail industry in Indonesia. Companies also need to pay attention to production
efficiency in their business, not only focusing on controlling market share so that the strategy can effectively
create higher profits.
Key-Words:- Retail Industry; structure-behavior-performance; industrial behavior; CR4; price cost margin.
Received: May 11, 2022. Revised: January 21, 2023. Accepted: February 19, 2023. Published: March 7, 2023.
1 Introduction
Rapid technological developments create
digitization in various fields of activity around the
world. Current digital innovations are undergoing
commercialization processes to serve emerging
sectors, [1]. A country like Indonesia is starting
to accelerate digitization in the industrial sector to
promote economic development, [2]. The
superiority of the industrial sector is caused by
prominent capital factors, labor absorption, and the
ability to create high-added value.
Digital transformation is changing the market
context for almost all businesses. These changes
alter various aspects of the business, not only
business operating models but also how companies
offer products, interact with customers, and obtain
business service resources. Thus, companies must
redesign their supply chain by building a more
connected supply chain network between the
companies involved. Companies are consciously
forced to use interconnected digital devices through
complex websites, [3].
The retail sector undergoes digital transformation
to remain competitive in the market. Retailers
provide consumers with various digital products and
services adapted to digital technology and are
simultaneously influenced by the new forms of
consumption associated with these digital
technologies, [4]. Retail is an essential aspect of the
distribution system of goods. The retail industry is
an industry that offers products and services that
have added value to meet the needs of the
community. The products and services offered are
generally intended to meet household needs.
The emergence of economic reforms has made
globalization a critical matter. Globalization opens
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up opportunities for free trade in goods and services,
capital, intellectual skills, and knowledge among
different countries. This condition offers a wide
range of products and services to the global market.
This market is becoming very heterogeneous and
complex, making competition between global
retailers increasingly fierce. Customer needs, tastes,
and preferences are changing rapidly at a much
faster rate. Producers must be more organized to
survive and sustain a highly competitive market.
Changing customer demands and lifestyles have
given impetus to the globalization of the organized
retail market, [5].
The effects of globalization provide opportunities
for industry to expand its market by exchanging
information, communication, and technology. This
trend changes several aspects of society, including
economic, cultural, social, political, and
technological. In addition, it makes consumers start
paying attention to global brands and products. This
condition can be an opportunity for the industry,
especially the retail industry, to start competing in
the global market.
The consulting agency A.T Kearney released the
2019 Global Retail Development Index (GRDI) and
explained that Indonesia's retailing industry
positioned number five out of 30 developing
countries, with a GRDI score of 58.7 out of 100,
after China (70), India (69.2), Malaysia (61.9) and
Ghana (59.2). In addition, the retail industry was
also one of the most significant contributors to the
Gross Domestic Product (GDP) in 2019, which is
13.01%, [6]. However, many sectors have been
affected by the COVID-19 pandemic, especially the
industrial sector and the retail industry, due to
policies implemented by the government, such as
the Large-Scale Social Restrictions (PSBB), which
restrict people's movement. This condition can be
seen in the retail industry's contribution to GDP,
which decreased in 2020 to 12.84%, [7].
While digitization is unavoidable and will
continue to advance, that is understood about its
economic and financial consequences in industrial
settings, [4], [1]. Based on the literature, few studies
explore the effects of digitalization on the structure,
behavior, and performance of the retail industry and
the general economy. The analyses indicated that the
triple disruptions could improve the performance of
retail industries, stimulate economic activity, and
increase GDP, [4], [8]. Even fewer studies assess its
implication on retail industries' soundness in
advanced and emerging economies. Most studies
suggested that limited conclusions have been
reached on the relationship between digitalization on
the retail industries' performance, [4], [8].
The industry structure influences the behavior of
every company in the industry. The company's
behavior in taking action determines the company's
strength in surviving in the industry. The actions
taken include product strategy, price strategy, and
promotion strategy. The relationship between
industry structure and company behavior can
determine the industry's performance. Researchers
usually use the concentration ratio (CR4) in
determining the market structure, which is more
likely to be a monopoly when the CR4 value is high
or close to 100%, implying that producers' market
power is higher, [9].
The industry's performance can be determined by
calculating the profit level through the Price Cost
Profit Ratio (PCM). Price Cost Profit Ratio is
obtained by dividing the value added by the output,
[10]. If the industry is concentrated, the company
will increase profits because the concentration of the
industry becomes a barrier to entry for other
companies. If market power is dominated by certain
companies, this will hinder external business actors
from entering and competing in the retail industry.
These conditions will directly affect the
performance of existing industries. The retail
industry's structure, behavior, and performance
usually use the structure, conduct, performance
(SCP) method.
The purpose of the SCP approach to the analysis
of industrial organizations is the existence of a
hypothesis that states that the company's behavior
influences the performance or existence of the
market (or industry) in the market). At the same
time, the company is also influenced by various
variables that make up the market structure, [11].
There are many retail industries in Indonesia.
The Indonesian Retailers Association
(APRINDO) notes that 150 member companies,
both local and national, have a total of 45,000
outlets used throughout Indonesia in 2021. It is
interesting to study the structure, behavior, and
performance of the retail industry in Indonesia. This
study is essential because the potential of the retail
industry in Indonesia is one of the most significant
contributors to GDP and one of the largest
contributors to employment. Based on [7] 2018 was
the peak of the retail industry's contribution to GDP
growth, which rose to 4.99% from 4.30% in 2017.
Then it fell to 4.81% at the beginning of the 2019
pandemic, and the peak fell to -1.30% in 2020 due
to the global economic recession caused by the
prolonged pandemic. Then, the effects caused by the
pandemic have changed the characteristics of
various industries, including the retail industry in
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Indonesia. Thus the retail industry has a very
strategic role in the Indonesian economy. Suppose a
few companies dominate the market. In that case,
this will become an obstacle for external companies
to enter the retail industry, which can lead to a
decline in the level of profits and the overall
performance of the retail industry. Therefore, this
study aims to analyze the structure, behavior, and
industry performance of the retail industry in
Indonesia in 2018-2020. The findings of this study
are expected to provide input for improving the
performance of Indonesian retail.
Research on the Indonesian retail industry has
been conducted by [12]. The difference between this
research and current research is in analytical
methods. The research uses a qualitative descriptive
analysis, and the subject area of the research is an
analysis of the driving forces of competition in the
Indonesian retail industry. Then, research on the
market structure has also been carried out in several
previous studies but differs from current research.
Some of these studies include research on market
structure, conduct, and performance conducted by
[13] in Ethiopia related to beef cattle. The analytical
method used is the Concentration Ratio (CR4),
Hirschman Herfindahl Index (HHI), and Gini-
Coefficient. Furthermore, [14] examined the
banking industry in Nigeria using ROA, CR4, and
CR8 analysis, as well as the Herfindahl-Hirschman
Index. Another research conducted by [15]
examined the fertilizer market in East Java, using
SCP analysis with a sub-sector commodity
approach, and [16] examined the jasmine flower
business in East Java, using an analysis of
calculations of the Market Share, Concentration
ratio-4 (CR4), and the Herfindahl-Hirschman Index.
Thus, the difference between the current research
and previous studies is in the subject area and some
of the analytical methods used.
2 Problem Formulation
The Indonesian retail industry has a strategic role in
supporting economic growth and employment in
Indonesia. However, in its development, internal
dynamics such as industrial competition and
external conditions such as the occurrence of the
Covid-19 pandemic can affect changes in industry
characteristics, structure, behavior, and
performance. This condition is reflected in
indicators of changes in the retail industry's
contribution to Indonesia's economic growth,
especially in 2018-2020. Therefore, the research
questions are:
1. How is the structure of the retail
industry in Indonesia in 2018-2020?
2. How is the behavior of the retail
industry in Indonesia in 2018-2020?
3. How is the performance of the retail
industry in Indonesia in 2018-2020?
3 Problem Solution
The type of this research is descriptive quantitative
research which is carried out by collecting and
compiling data and then analyzing and interpreting
the results of the analysis. The object of this
research is a public company in the retail industry in
Indonesia that was listed on the Indonesia Stock
Exchange (IDX) in 2018-2020. This research uses
descriptive quantitative research methods—the
descriptive method is used to analyze the behavior
of the retail industry. The quantitative method with
the SCP approach was used to analyze the structure
and performance of the retail industry in Indonesia.
Data processing was carried out with Microsoft
Office Excel.
This study uses secondary data from the Central
Statistics Agency (BPS) and the Indonesia Stock
Exchange (IDX). Several variables used in this
research are (1) industrial structure, which can be
identified using the concentration ratio indicator
(CR4). (2) Industry behavior can be identified using
descriptive analysis of product differentiation,
second and third-level price discrimination, and
promotion strategies applied by companies in the
industry. (3) Industry performance, which can be
identified using the Price Cost Margin (PCM)
indicator, and (4) Concentration Ratio (CR4),
measured by adding up the market shares of the four
most prominent companies. (5) Price Cost Margin
(PCM) is measured by the added value ratio to total
output.
3.1 Data Analysis Technique
3.1.1 Industry Structure Analysis
To analyze the industry structure use the
Concentration Ratio (CR4). The Concentration
Ratio is the percentage of the total output of the
largest company in the industry. The number of
companies usually used as a calculation is four,
known as CR4, [17]. The CR4 formula is:
(1)
Information:
MS = Company Market Share
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According to [18] if CR4 = 0, the market is
perfectly competitive. It is a monopolistic market if
CR4 ranges from 0-40 or (0 < CR4 < 40). It is a
tenuous oligopoly if the CR4 number is between 40-
60 or (40 CR4 < 60). If CR4 is greater than or equal
to 60 or (CR4 ≥ 60) is a tight oligopoly or dominant
firm with a competitive fringe. The market is close
to a monopoly if CR4 is greater than or equal to 90
(CR ≥ 90). If CR4 is 100%, the market is included
in the monopoly category.
3.1.2 Industrial Behavior Analysis
According to [11] industrial behavior is a strategy
and adjustment by industry players in a competition
to achieve goals. The purpose of descriptive analysis
of industrial behavior is to obtain information about
the behavior of companies in the industry. Industry
behavior analyzes the company's activities and
implementation of strategies to expand market
share, gain profits, and get rid of competitors. This
analysis was conducted because behavior is
qualitative and difficult to measure. Show behavior
can be seen from the product strategy, such as (1)
product differentiation. (2) price determination,
whether second and third-level price discrimination
is carried out. (3) promotion strategy, namely
through advertising to increase or maintain market
share.
3.1.3 Industrial Performance Analysis
According to [19] industrial performance results
from industry reactions caused by competition
between companies to dominate the market. To
analyze the industry's performance using the
calculation of Price Cost Margin (PCM), a rough
estimate of industry profits to measure industry
performance using the added value of companies in
the industry. Therefore, higher added value will
make industrial performance more efficient in
minimizing production costs so that industrial
profits will increase. The PCM formula is as
follows, [10]:
(2)
Price Cost Margin (PCM) criteria, namely, if the
PCM value is below 50%, it is included in the low-
profit level. It is included in a high-profit level if it
is equal to or more than 50%, [16].
3.2 Results
3.2.1 Indonesian Retail Industry Structure
The retail industry that is the object of research is
the modern retail industry with industry players,
namely, public companies listed on the Indonesia
Stock Exchange. Overall, 25 modern retail public
companies, and five of them are companies with the
highest market share competing for the top four
positions, namely:
1. P.T. Sumber Alfaria Trijaya Tbk is engaged in
the retail of household materials.
2. PT Erajaya Swasembada Tbk is engaged in
electronic retailing goods, especially gadgets.
3. PT Mitra Adiperkasa Tbk is engaged in various
retail sectors, including household materials,
food and beverages, fashion, and sports.
4. P.T. Hero Supermarket Tbk retails household
materials, health, beauty, furniture, and
electronics.
5. P.T. Midi Utama Indonesia Tbk is engaged in the
retail of household materials.
The structure of the Indonesian retail industry
can be calculated using the concentration ratio of the
four largest companies (CR4). Table 1 shows the
result of the calculation of CR4 in the Indonesian
retail industry. Based on Table 1, the Indonesian
retail industry from 2018 to 2020 has an average
CR4 value of 60.275%. The CR4 value in 2018 was
60.2%. In 2019, it was 58.14%, and in 2020 it was
62.5%. In 2018 and 2019, the market share of P.T.
Midi Utama Indonesia Tbk was not included in the
four most prominent companies. However, in 2020
the company has a larger market share than P.T.
Hero Supermarket Tbk, which is 4%. Thus, for
2020, P.T. Midi Utama Indonesia Tbk is included
among the four most prominent companies.
Based on Table 1. it can be seen that P.T.
Sumber Alfaria Trijaya has the highest market share
consistently during the study period. This company
has a business name Alfamart. The large market
share owned by P.T. Sumber Alfaria Trijaya is
because Alfamart sells many household products
(daily necessities). Besides that, the company's
marketing reach has almost spread to various
regions in Indonesia. The location of Alfamart
stores in each area is close to residential areas so
that consumers can easily reach them. This
explanation is also supported by data from the
Indonesian Retailers Association (APRINDO),
which shows that the number of Alfamart outlets
throughout Indonesia in December 2020 was
recorded at 15,102 units, an increase compared to
January 2020 of 14,430 units. Alfamart is also one
of the minimarket outlets that was relatively able to
survive during the Covid-19 pandemic. Likewise,
P.T. Midi Utama Indonesia Tbk, a subsidiary of P.T.
Sumber Alfaria Trijaya, is engaged in relatively the
same business sector. The company is also
overgrowing, so in 2020 it has a relatively
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increasing market share in line with the many
minimarket outlets that were forced to close due to
the impact of the Covid-19 pandemic. One of the
businesses that closed due to the pandemic was PT
Hero Supermarket Tbk, where the Giant
hypermarket outlets were closed due to the
pandemic.
The average CR4 value of 60.276% means that
the Indonesian retail industry from 2018 to 2020 has
a tight oligopoly industrial structure because the
CR4 results of the retail industry from 2018-2020
are more than 60%. According to [18], if the CR4
value is between 60-100%, then the industrial
structure is a strict oligopoly.
There is an inverse relationship between
competition and the level of concentration. If the
concentration level is high, the competition will
decrease. In this condition, it is difficult for
competitors to enter the Indonesian retail industry
because of the high CR4 value and forming a tight
oligopoly industry structure.
Table 1. CR4 Calculation Results for the Indonesian
Retail Industry, 2018-2020
3.2.2 Indonesian Retail Industry Behavior
The market structure in the retail industry in
Indonesia, which is a tight oligopoly, has led to
several behaviors carried out by industry players in
the retail industry in Indonesia to increase profits
and expand their market share. These behaviors
include product strategy (product differentiation),
price strategy (second and third-level price
discrimination), and promotion strategies.
The product differentiation strategy is carried out
through the variety of products offered. Apart from
their primary product offering, they also sell other
products. Retail industry players include P.T.
Sumber Alfaria Trijaya Tbk (Alfamart); apart from
selling household products, they also offer a
payment system for electricity tokens, pulses, and
transportation tickets. Then, PT Mitra Adiperkasa
Tbk, apart from selling household products through
department stores (Debenhams, Louts, Seibu, and
Sogo), is also engaged in food and beverage
(Starbucks, Burger King, Cold Stone, Domino's
Pizza), Fashion (Calvin Klein, Giorgio Armani, Dr.
Martens, Zara), Kids (Kidz Station, Barbie), and
Sports (Adidas, Planet Sports, Planer Station). P.T.
Hero Supermarket Tbk, apart from selling premium
and imported household products (Hero and Giant),
also offers Health and beauty products (Guardian) as
well as furniture and household electronics (IKEA).
P.T. Midi Utama Indonesia Tbk (Alfamidi) sells
household products and fresh fruit, and they also
offer a payment system for electricity tokens, credit,
and transportation tickets. In addition, PT Erajaya
Swasembada Tbk is engaged in electronics and
gadgets (Erafone, IBox).
Another strategy carried out by Indonesian retail
industry players is a pricing strategy. In setting
prices, industry players apply second and third-level
price discrimination. Companies as "price makers"
in a tight oligopoly market need to consider doing
second and third-level price discrimination to get
higher profits.
By implementing price discrimination,
companies can maintain consumer loyalty to the
products they sell and take some consumer surplus
into producer surplus. According to [20] second-
degree price discrimination or non-linear pricing is
different pricing by companies for consumers who
buy similar products with different volumes. The
company will lower the price to consumers who buy
a larger volume and charge a product unit price to
consumers who buy a smaller volume. Meanwhile,
third-degree price discrimination is setting different
prices for various consumers for the same goods.
One group of customers is charged a higher price,
while another is charged a lower price.
Meanwhile, to increase company sales, it is
necessary to carry out promotions to create brand
awareness in the community. Promotions carried out
in the retail industry use print and electronic media.
Print media can be in the form of brochures,
advertisements in newspapers or magazines,
banners, and others, meanwhile, through electronics,
namely social media, online shopping applications,
and others. In addition, the company does big-day
promotions, procuring memberships, and shopping
vouchers.
Company
Market Share (%)
2018
2019
2020
PT Sumber Alfaria
Trijaya
30,2
30,4
34,5
PT Erajaya
Swasembada Tbk
15,7
13,7
15,5
PT Mitra Adiperkasa
Tbk
8,5
9
6,8
PT Hero
Supermarket Tbk
5,9
5,1
-
PT Midi Utama
Indonesia Tbk
-
-
5,8
CR4
60,3
58,1
62,5
Source: IDX processed data
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3.2.3 Indonesian Retail Industry
Performance
This study uses Price Cost Margin (PCM) to analyze
industrial performance in Indonesia. The PCM value
is obtained by comparing the added value with the
total output. Table 2 shows the results of PCM
calculations.
Table 2. Indonesian Industrial PCM Value in 2018-
2020
Year
PCM (%)
2018
24
2019
23
2020
21
Source: IDX Processed data
The average PCM value during the 2018 to 2020
research period continued to decline, namely by
24% in 2018, 23% in 2019, and 21% in 2020. World
oil prices can explain this condition. The highest
increase in oil prices in 2019 increased input costs
for the production process. This condition affects the
production process of retail industry players, which
results in a decrease in the ability to create added
value and a decrease in efficiency. In addition, in
2020, there was a Covid-19 pandemic which caused
a decrease in the level of public consumption due to
mass layoffs and government policies to suppress
the spread of the virus through the Large-Scale
Social Restrictions policy. Market performance is at
a low level if the PCM value is <50% and is at a
high level or has a relatively high profit if the PCM
value is ≥ 50%, [16]. Because, based on the
calculation results, the average PCM value of the
retail industry is less than 50 percent, the retail
industry's performance is still at a low level.
However, when viewed based on individual
company data, the average value of PCM is
relatively varied. This condition can be seen in
Table 3. Based on the PCM value between
companies, the two companies have a PCM value of
more than 50 percent, even though these companies
are not included in the four companies with the
largest market share.
For a company that offers daily necessities, P.T.
Sumber Alfaria Trijaya Tbk has a PCM value of
20%. This condition happened because of the
difficulty of increasing profits from selling
necessities. The product categories have many
substitutes, so the company cannot influence the
selling price. P.T. Midi Utama Indonesia Tbk, also
engaged in the same field, has a higher PCM value
of 25%. The difference is due to differences in
product qualifications; they sell products with
imported quality and target middle and upper-class
people. The location of this company is in a
relatively large city, so the community's reach is
relatively limited, even though, according to
consumption theory, middle and upper-class people
have a smaller marginal propensity to consume
compared to people with limited income, [21]. Even
though the consumers are middle- and upper-class,
the PCM is similar to PT Alfaria Trijaya because
basic household goods have an inelastic demand.
For companies that offer clothing products, P.T.
Matahari Department Store Tbk has a PCM value of
62% in 2018, 58% in 2019, and 60% in 2020. Such
conditions also occur in P.T. Ramayana Lestari
Sentosa Tbk, with a PCM value of 44 % in 2018,
45% in 2019, and 43% in 2020. This value is higher
than other companies operating in the same field and
controlling a larger market share, such as PT Mitra
Adiperkasa Tbk, which controlled a market share of
8.5% in 2018, 9% in 2019, and 6.7% in 2020.
Meanwhile, P.T. Matahari Department Store Tbk
only controlled a market share of 4.6% in 2018,
4.3% in 2019, and 2.2% in 2020. The difference in
the target market, brand awareness, and the ability to
reduce production costs cause PCM's high value.
In electronics and gadgets, PT Erajaya
Swasembada Tbk had a PCM value of 9% in 2018
and 2019, then increased to 10% in 2020. The
difficulty of increasing profits is also due to the high
production cost of gadgets, which makes selling
prices high. P.T. Electronic City Indonesia Tbk has
a higher PCM value, which was 16% in 2018, 18%
in 2019, and 17% in 2020, even though P.T.
Electronic City Indonesia Tbk has less market share
than PT Erajaya Swasembada Tbk. These
phenomena prove that the large market share owned
by a company differs from the level of profit
obtained.
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Table 3. PCM Value among Indonesian Retail
Industry Companies in 2018-2020
Source: IDX processed data
3.3 Discussion
Based on the results of the CR4 analysis, it is known
that the market structure of the Indonesian retail
industry is a tight oligopoly. This condition means
four Indonesian retail industries have joined and
control a more than 60% market share. Following
Microeconomic theory, if there is a merger of
companies, the company can determine the selling
price of the product, and demand is inelastic. This
condition can cause economic distortion [22], so the
government needs supervision.
Another research finding is an inverse
relationship between competition and concentration
level. If the concentration level is high, the
competition will decrease. In this condition, it is
difficult for competitors to enter the Indonesian
retail industry because of the high CR4 value and
forming a tight oligopoly industry structure. This
result is in line with [23] regarding the beverage
industry in Indonesia in 2006-2009, which explains
that a high CR4 level above 60% or a tight oligopoly
will make competition less competitive. [24]
research on the structure of the airline industry in
Indonesia from 2007 to 2011 also found a tight
oligopoly market structure with a CR4 value of
more than 60%.
The condition of a tight oligopoly market
structure will encourage the behavior of companies
in the retail industry to maintain and even expand
their market share so that it will have an impact on
increasing company profits.
Product differentiation is one of the behaviors of
the retail industry. Product differentiation can be
said for a new product. [25] found a significant
positive relationship between the success rate of
new products and product differentiation measures.
The entry of new products into the market will shift
customer choices from old products to new
products. [26] examined the influence of new
products on the impact of choosing behavior. The
entry of a new product with specific characteristics
(new brand entry) has a specific impact.
This behavior will benefit the company,
including maintaining consumer loyalty so that it
can also determine the selling price of the product
and increase its profit. This condition is in line with
[27] which stated that the pricing of the bank
products influences achieving competitive and
product cost differentiation significantly influences
achieving competitive advantage.
The company's behavior is also in the form of a
pricing strategy. In conducting price discrimination,
companies must consider some internal and external
factors, [28]. Internal factors include (1) marketing
goals, generally, survival, maximizing current
profits, market share leadership, and product quality
leadership; (2) marketing mix strategy, the company
will pay attention to price along with all other
marketing mix elements when developing marketing
IDX
PCM (%)
Company
2018
2019
2020
PT Sumber Alfaria Trijaya
Tbk
20
20
20
PT Erajaya Swasembada Tbk
9
9
10
PT Mitra Adiperkasa Tbk
48
48
42
PT Hero Supermarket Tbk
28
28
27
PT Midi Utama Indonesia Tbk
25
25
25
PT Matahari Department
Store Tbk
62
60
58
PT MAP Aktif Adiperkasa
Tbk
45
45
40
PT Ace Hardware Indonesia
Tbk
48
48
49
PT Ramayana Lestari Sentosa
Tbk
44
45
43
PT Electronic City Indonesia
Tbk
16
18
17
PT Sona Topas Tourism
Indonesia Tbk
59
60
57
PT Matahari Putra Prima Tbk
14
18
19
PT Supra Boga Lestari Tbk
25
27
26
PT Catur Sentosa Adiprana
Tbk
15
16
16
PT Duta Intidaya Tbk
45
34
37
PT Kokoh Inti Arebama Tbk
14
11
11
PT Optima Prima Metal
Sinergi Tbk
14
10
12
PT Distribusi Voucher
Nusantara Tbk
4
3
2
PT Global Teleshop Tbk
7
5
7
PT Trikomsel Oke Tbk
7
8
6
PT M Cash Integrasi Tbk
3
2
2
PT NFC Indonesia Tbk
2
2
1
PT Mitra Komunikasi
Nusantara Tbk
3
2
2
PT Kioson Komersial
Indonesia Tbk
2
2
1
PT Damai Sejahtera Abadi
Tbk
-
8
9
WSEAS TRANSACTIONS on SYSTEMS
DOI: 10.37394/23202.2023.22.16
Ahmad Luthfi Khairurrahman,
Lilis Siti Badriah, Herman Sambodo,
Dijan Rahajuni, Nunik Kadarwati,
Hary Pudjianto, Oke Setiarso, Dedi Supriadi, Rakhmat Priyono
E-ISSN: 2224-2678
176
Volume 22, 2023
programs; (3) cost, the company will set a price that
covers all costs incurred to produce, distribute and
sell the product and return the effort and risk it bears
at a moderate level. Total costs consist of fixed and
variable costs; (4) organizational considerations.
Management must decide who in the organization
should set the price. For small companies, it is
usually determined by top management from the
marketing and sales department. In large companies,
pricing is done by divisional or product line
managers. In industrial markets, salespeople may be
authorized to negotiate with customers within a
specific price range. External factors include: (1) the
nature of the market and demand. This factor
depends on the type of market for the product to be
marketed and the law of price on supply and
demand, as well as the price elasticity on demand.
Suppose the product is unique, high quality, and
difficult to find substitutes. In that case, the demand
will be more inelastic to price changes and the more
excellent the opportunity for sellers to increase
prices. (2) Competition and other environmental
factors (economy, traders, government).
According to [20] price discrimination is two- or
second-degree, or non-linear pricing, a different
price-setting made by companies for consumers who
buy similar products with different volumes. The
company will lower prices for consumers who buy
in greater volume and charge the product's unit price
to consumers who buy in less volume. Meanwhile,
third-degree price discrimination is setting different
prices for different groups of consumers for the
same goods. One group of customers is charged a
higher price, while another is charged a lower price.
That is price discrimination. Price discrimination
often occurs in household goods, such as sugar, oil,
milk, coffee, and others. This condition is in line
with the results of research by [29] and [30] that
consumers have a perception of value reflected in
the prices of products. It also shows that
competitors' prices affect the purchase of products
and that online pricing informs and affects purchase
decisions.
The subsequent behavior is promotion. Intensive
action in promotion taken by companies in a tight
oligopoly market is product marketing that raises the
advantages of each product and reduces the price
war strategy. Companies must be more sensitive in
reacting to the strategies of their competitors. This
study's results align with research by ([31] and [32]
that in a tight oligopoly market structure, several
dominant companies apply efficient strategies to
determine prices other companies then follow. The
benefits of promotion strategies are also confirmed
by [33], that export promotion increases sales,
value-added, employment, and added value per
worker. For small firms, summing expenditures on
export promotion, subsidies, and tax distortions, the
gain in added value is roughly three times higher
than the direct costs of export promotion.
Based on PCM calculation results, the retail
industry's performance is still low. Companies will
tend to ignore efficiency in conditions of low
competition, such as in a tight oligopoly structure,
[22]. In other words, production costs become
relatively higher, affecting the company's profit
value. This condition is in line with the results of
research by [13], who examined the Market
Structure, Conduct, and Performance of Beef Cattle
in Ethiopia. Their research results show that the
commodity market structure is a tight oligopoly,
indicating that the commodity market is
uncompetitive and inefficient.
However, based on individual company data
(Table 3), the average value of PCM is relatively
varied. Two companies have a PCM value of more
than 50 percent, even though these companies are
not included in the four companies with the largest
market share. P.T. Matahari Department Store is
engaged in the retail business for several types of
products such as clothing, accessories, bags, shoes,
cosmetics, household appliances, and management
consulting services. The products traded by the
company include normal goods that are elastic to
changes in income. Matahari Department store also
offers product differentiation which is an attraction
for consumers. Besides that, the company is also
very aggressively promoting price discrimination
policies. The two combinations of these behaviors
attract consumers at relatively affordable prices to
provide large profits for the company. Furthermore,
PT Sona Topas Tourism Indonesia is engaged in
selling airplane tickets, especially domestic ones,
travel documents, hotels and tours, and operating
duty-free shops (luxury goods). In developing its
business, they are implementing a cost-efficiency
strategy of all operational costs, both marketing and
general company costs, diversifying products, and
improving the quality of service to customers.
This condition shows that the company's
performance differs from the dominance of a
significant market share. This study is in line with
the hypothesis of [15] that company profits are not
only influenced by market share control. There is no
guarantee that a business with a large market share
will also get a large profit. However, benefits can
also be obtained from reducing production costs
such as raw materials, rental/electricity, and labor
costs. Thus, to achieve higher profits, companies
WSEAS TRANSACTIONS on SYSTEMS
DOI: 10.37394/23202.2023.22.16
Ahmad Luthfi Khairurrahman,
Lilis Siti Badriah, Herman Sambodo,
Dijan Rahajuni, Nunik Kadarwati,
Hary Pudjianto, Oke Setiarso, Dedi Supriadi, Rakhmat Priyono
E-ISSN: 2224-2678
177
Volume 22, 2023
must pay attention to aspects of production
efficiency and control a larger market share.
4 Conclusion
The conclusions of this research are as follows.
First, the structure of the Indonesian retail industry
in 2018-2020 is a tight oligopoly, so it is not
competitive. Second, the behavior of companies in
the Indonesian retail industry is related to the
industry's structure and can be demonstrated through
product differentiation, second and third-level price
discrimination, and promotions. Third, the retail
industry performance still needs to improve.
Company performance is not necessarily in line
with market share control.
Based on the conclusions, the implication of this
research is as follows. Retail market conditions in
Indonesia (based on public companies) are
increasingly concentrated or uncompetitive. In this
condition, government supervision is needed for
business activities that are indicated to have too
dominant a position and make it difficult for new
entrants to the retail industry in Indonesia.
Companies need to pay attention to production
efficiency in conducting their business, not only
focusing on controlling market share so that the
company's strategy will effectively achieve higher
profits.
This study has limitations: the company data
used are only from publicly traded companies, and
research data in 2020 is data from the COVID-19
pandemic. Therefore, for further research, using
broader data from retail industry companies, not
only those that go public, and using a more extended
year, as well as adding other variables as calculation
components to increase validity in determining the
SCP of the Indonesian retail industry.
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Dijan Rahajuni, Nunik Kadarwati,
Hary Pudjianto, Oke Setiarso, Dedi Supriadi, Rakhmat Priyono
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Contribution of Individual Authors to the
Creation of a Scientific Article (Ghostwriting
Policy)
Ahmad Luthfi Khairurrahman, Lilis Siti Badriah,
Herman Sambodo has created the conceptualization
of the topic research and responsible for the
methodology used
Ahmad Luthfi Khairurrahman was responsible for
the statistics
Lilis Siti Badriah, Herman Sambodo was
responsible for the validation of the research
Hary Pudjianto, Dijan Rahajuni has conducted the
formal analysis
Herman Sambodo, Nunik Kadarwati has conducted
the investigation
Dijan Rahajuni, Rakhmat Priyono has provided the
research resources
Herman Sambodo, Rakhmat Priyono has conducted
the data curation
Ahmad Luthfi Khairurrahman has prepared the draft
Lilis Siti Badriah, Dedi Supriadi has review and
edited the finished paper
Oke Setiarso, Nunik Kadarwati has visualized the
table and graph of the paper
Lilis Siti Badriah, Herman Sambodo,, Hary
Pudjianto has supervised the writing process of the
paper
Dijan Rahajuni, Kadarwati was responsible for the
project administration
Oke Setiarso has contributed for the funding
acquisition.
WSEAS TRANSACTIONS on SYSTEMS
DOI: 10.37394/23202.2023.22.16
Ahmad Luthfi Khairurrahman,
Lilis Siti Badriah, Herman Sambodo,
Dijan Rahajuni, Nunik Kadarwati,
Hary Pudjianto, Oke Setiarso, Dedi Supriadi, Rakhmat Priyono
E-ISSN: 2224-2678
179
Volume 22, 2023
Sources of Funding for Research Presented in a
Scientific Article or Scientific Article Itself
No funding was received for conducting this study.
Conflict of Interest
The authors have no conflicts of interest to declare
that are relevant to the content of this article.
Creative Commons Attribution License 4.0
(Attribution 4.0 International, CC BY 4.0)
This article is published under the terms of the
Creative Commons Attribution License 4.0
https://creativecommons.org/licenses/by/4.0/deed.en
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