The economic impact of liberalization of distribution services in emerging markets : a case study of foreign hypermarkets in Klang Valley, Malaysia

Abstract

Since the mid-1990s, there has been an increasing trend of retail globalization. This phenomenon has led to rapid expansion of large-scale retailers into many countries across Southeast Asia, Central Europe and Latin America. This emerging trend has triggered a number of research interests on the issue of retail globalization and its impact on host countries. This study was initiated after observing an increasing trend in the presence of foreign retailers (especially hypermarkets) in Malaysia beginning mid-1990s. The primary purpose of this research is to investigate the impact of liberalization of distribution services via the presence of foreign hypermarkets in Malaysia on local retailers, consumers and also suppliers. Both quantitative and qualitative methods (survey and interviews) were used to collect and analyze the data. A total of 300 (consumer survey), 135 (retailer survey) and 45 (supplier survey) questionnaires were completed. Three towns – Batu Caves, Puchong and Wangsa Maju- were selected as research locations. Descriptive statistics were computed including frequencies, means, median, modes and standard deviations and cross tabulation. It is generally found that the establishment of foreign-owned hypermarkets has both a positive and a negative impact on the Malaysian retail market. While local consumers were positively affected by the presence of foreign hypermarkets, the impact on local retailers and product suppliers shows mixed results. Majority of the respondents welcome the presence of foreign hypermarkets as these outlets offers cheaper products, wider product variety, improved product quality, longer opening hours and convenient ‘one-stop-shopping. Existing local retailers had mixed feelings about the presence of hypermarkets. Meanwhile findings from the supplier survey reveal a number of interesting points. The general picture is that there does, indeed, exist a fairly substantial relationship between domestic suppliers and foreign hypermarkets. The recommendations and strategies for local retailers, suppliers as well as policymakers were also discussed.