A little bit different

Geant promises a hypermarket with a difference when it opens its first UAE store this month. Mazher Papar, director of Retail Arabia, holder of the Geant franchise rights in the Eastern Gulf, explains why.

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By  David Ingham Published  March 12, 2005

|~|mazher.jpg|~||~|What is Geant?

Mazher Papar: Geant is the hypermarket brand of Groupe Casino, which is today amongst the leading international retailers. They cover all store formats, starting from the small convenience stores, to smaller supermarkets, larger supermarkets, hypermarkets and discount stores. They encompass the entire spectrum of food retailing. They’re Euro 34 billion in terms of turnover, they operate in something like 15 countries and the total number of stores is over 8500 in a variety of formats. Our association with them brings the latest in international retailing to this part of the world.

What are Groupe Casino’s key brands and where does Geant fit in?

The key brands they have are Geant in hypermarkets, Monoprix as an upper end supermarket, Casino supermarkets, then they have Spar, Smart and Fine. They have a variety of different formats in different brands for different countries.

They also have their own label [household and grocery] products, which are spread across a spectrum of product ranges. If you’re selling Ariel [washing powder] for example, there will be two Casino brands. One of those is the equivalent quality to Ariel, but the price is a certain percentage lower, and the other would be the entry level equivalent in that product segment.

Why do they want to come into the Middle East and why have they chosen your company as a partner?

From our group perspective, our objective was always to get into the hypermarket business. We operate a variety of retail concepts, including discount stores and supermarkets, in our home market of Bahrain.

With hypermarkets, we had two options. One was to develop it ourselves, or go and get an international franchise. After detailed discussions, we decided to get a franchise because there was no point in reinventing the wheel.

We approached a variety of people and at that point in time Groupe Casino had no plans for coming into the Middle East. We showed them what the Middle Eastern retail market was all about, they visited the Middle East and saw potential in the market. This was about six years back. Then there was a competitive tender and we came out in terms of our ability to manage it.

There is a now franchise agreement in place with our parent company, which is Retail Arabia. Then we have operating entities in every country, which are called fu-com.

Retail Arabia owns shares in every operating entity in the region. We started off in Bahrain [and] Retail Arabia owns 100% of fu-com Bahrain. In Dubai, [fu-com is] a joint venture between Retail Arabia and Abdullah Al Ghurair.

Obviously, there are lots of hypermarket and supermarket brands already in the market. Where does Geant come in?

If you look at the market, there’s one major international hypermarket operator here [Carrefour]. Then you have the local hypermarket and supermarket chains.

In every market where hypermarkets operate, these brands [Geant and Carrefour] compete head to head. It’s just a question of time before the other entrant comes into the market. If Casino is the first, the other comes in later. If the other comes in first, Casino comes in later.

Whenever you enter a market, you analyse it first and what we believe is that the growth of the market and its size are adequate to warrant multiple players. The growth in the economies of the Middle East has been solid for some years and with the high oil prices, it is expected to continue for some time. We think there’s enough room for another player to enter the market and we have some unique features that will differentiate us from other players in the market.

What’s unique about Geant?

If you go to most hypermarkets, they just put the products on the shelves. What Casino has done is upgrade the hypermarket concept to make it more aesthetically pleasing. When a customers comes into Geant, he not only has the benefits of hypermarket mass merchandising, promotions and pricing, but he gets it all in a much better shopping environment than what he might be used to. In addition to that, the own brands of Casino are a major point of differentiation between us and the rest of the competitors.

So are you saying that your hypermarkets are a little bit more attractive than others?

It’s more customer friendly. In terms of product range, it stocks 65,000 items, which most other hypermarkets do. The key element is in the way you drive your pricing and promotional strategy. Our promotional strategy is going to be very aggressive, which is the basis of a hypermarket operation, and that, combined with what we feel is a superior format, is going to drive the competitive distinction between us and the rest of the market.

Do you think success in this market comes down to brand perception, location or pricing?

I think in the hypermarket business, there is no one element that is a guarantee of success. It’s a combination of a variety of elements that make the hypermarket successful.

The flavour of the week here is that anyone who opens a big outlet calls it a hypermarket. Size is only one of the attributes of a hypermarket. Size is important; location is very critical; especially in a place like Dubai where you have traffic problems; your marketing strategy is very critical; your promotional strategy is very critical.

All these components can only be put in place if you have a good operational strategy and a good management team. If you have one of these elements missing, you may not have a successful hypermarket.

What about pricing?

I think we will be very competitive. It’s not a question of cheaper, it’s how you approach the market, how well you market your products and how unique your promotions are. Today, if my competitor reduces price, I can match it. If we reduce price, they can reduce price. The key thing is to offer unique promotions that are not available elsewhere in the market.

Own labels dominate sales in Europe, but they don’t appear to have made any impact here. Why is that and how can you change that?

Critical mass is the key reason why own labels haven’t taken off. Also, the market wasn’t developed to the extent where people needed to introduce them — people were making money on international products.

Own labels come into play when the market gets competitive and people are trying to find a differentiation point. I think we’ll get there over a period of time after major chains expand, volumes pick up and the market gets more competitive and you need to have more differentiation points between you and the competitor.

Do you agree that Middle Eastern consumers are very brand conscious?

I don’t think so. It’s just that people haven’t had too many options and if a suitable option is given to the consumer, I’m sure it could be successful.

Suppliers are nervous about hypers, and their bulk buying power and ability to dictate payment terms. What do you say to them?

I think suppliers have realised that to do business with a hypermarket, you’ve got to work on volumes rather than absolute profitability on a particular product. I think the market is quite well versed with that concept.

As far as our interaction with suppliers, suppliers are really happy to have competing hypermarket chains [because] reliance on one large customer is diversified. We have found suppliers being very positive about our entry in the market. Yes, you do have tough negotiations with suppliers, you bring down prices because you want to offer value to your customers, but when suppliers see that you have a professional setup and see that you will move the volumes you promise, they want to go along with you.

Will your suppliers be local or outside the region?

Given the regulations here where you have agency laws, you would necessarily need to work with the local market. We have a policy where we would work selectively. At the same time, our reliance would be mostly on the local market.

Will you stock local brands?

We will make our product range as extensive as possible. The hypermarket caters to the entire range of customers, from someone who earns maybe AED3000 to someone who earns AED50,000 per month. Each customer has a specific requirement and you cater to all of them. We will have local brands, international brands, a 21 inch TV for AED500 and the 63 inch plasma TV that sells at AED40,000. Whatever the local market wants, we will carry it.

Will you ever consider sourcing the own label brands locally?

At a later date, probably. At the moment, we source from wherever Groupe Casino sources.

Are you targeting all income groups, and how is it possible to do that?

A hypermarket typically attracts people from all segments. It appeals to someone looking for price, someone looking for variety and anyone looking for a good shopping experience. There are two parts to food shopping. One is where you have a weekly or fortnight shop, and the other is shopping for special items, something that is unique to your country and is imported specifically for certain sectors.

Typically, the consumer would do the fortnightly or weekly shop at the hypermarket. You would do your day to day shopping at your nearby supermarket, purely from the point of view of convenience. That’s the way it works all over the world.

Hypermarkets sell food and beverages, but how much do they do in electronics and clothing?

The non food element is a fairly significant part of the hypermarket business. Typically, that’s one of the advantages of the hypermarket: you shop for food and realise you need something else. The hypermarket doesn’t stock anything exotic, it carries pretty standard products.

Tell me about your long term plans for Geant in the Middle East?

We started in Bahrain in 2001 and this is our second hypermarket. The way we see it is that we will not stop here. We are in active discussions with various people in the UAE and a couple of other countries in the GCC, except Saudi Arabia. In the next five years, we should have a presence in all countries except Saudi Arabia [where there is a different franchise holder.]

How developed is this business and what’s the overall potential?

I think we’re probably halfway there. As markets develop and get more organised, the larger format retailers pick up business from the unorganised sector and I think there’s still a very large unorganised sector operating in the GCC. It’s competitive, but there’s adequate market potential here. Casino would not come into the market otherwise.

Why did you choose this location here [the Ibn Battuta Shopping Mall]?

From our perspective, you never look at the short term. You look at what a location can do over a period of time. We looked closely at the planned development of Dubai and we liaised closely with government representatives. It was two years ago and if you look back there was virtually nothing in this area.

However, we saw the plans and Dubai has a track record for delivering what it promises. We feel this is a very promising location in the main corridor of growth in Dubai. We feel this will develop into an alternative city centre, with the airport, the new waterfront and other developments happening.

I think it’s also a phenomenal mall and local residents will find it very convenient to come here. I think it will also be a tourist attraction, because it’s been positioned as a very unique structure, from the name to the design and the detailed work that has gone into it.

Are there too many malls on this stretch of road and too much construction going on?

I think that in the whole of Dubai there is too much construction. But there does seem to be a co-ordinated strategy: tourism is being developed, free zones are being developed and even though you see the supply of real estate increasing, there is still a shortage. There will be competition, but if Dubai continues to grow as expected, there is enough of a market for everyone to survive and to be successful.||**||

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