Community planning

Saleh Lootah reveals plans for a new one-stop shop chain, set to shake up retailing formats in residential zones in the region.
Community planning
Nine SouqExtra! centres are scheduled for completion by 2009, Lootah revealed.
By Administrator
Mon 05 Nov 2007 04:00 AM

Widely regarded in the FMCG industry as the sharp CEO at the helm of halal phenomenon Al Islami Foods, Saleh Lootah now promises to revamp neighbourhood shopping in the Middle East.

When Lootah reflects on the inspiration for the multimillion-dirham chain SouqExtra! he says he simply wanted to find a new concept with convenience and high standards of hygiene at its core, which was neither a grocery nor a hypermarket.

The concept responds to Dubai’s crying need for neighbourhood convenience stores, as it saves residents trips to big supermarkets to buy day-to-day items.

"The influx of hypermarkets in the UAE has affected the retail industry dramatically, yet travelling to these outlets is very time-consuming, and many of the small groceries are not taking care of merchandising and often stocking out-of-date produce," he says.

"Standards are so low within many of the small groceries now that you will not find any locals inside.

"If I want to do some shopping, I could be driving for up to half an hour."

Such failures prompted the blueprint for SouqExtra! set to incorporate both daily shopping and community services, such as salons, pharmacies, banks, play areas and entertainment activities.

The company joined forces with Abu Dhabi-based research company Ventures Middle East to gauge consumer demands, and Lootah believes the supercentres will "answer Dubai's crying need for neighbourhood convenience stores."

The fight for the region's lucrative development areas continues to heat up, and Lootah is conscious of the fact the company does not have control over the size of land.

"The centres will all have a different angle and look, yet we have identified the most important elements depending on the neighbourhood, for example gyms require a lot of space so they cannot be taken everywhere.

"The atmosphere and appearance will be the same across the chain, however, and most will offer important services such as fast food restaurants, cafés and playgrounds."

Central to every centre will be Extra! Supermarkets, in which a strong focus will be placed on fresh produce, including fruit, vegetables, seafood, cheese and dairy, meat and baked goods at the "high end" stores.

"We choose the green colour scheme for all of the stores as want to reflect the business and the priority we will giving to fresh products and divisions including the bakeries and butcheries."

The supermarket will comprise 65% of the total area, with the remainder split into integrated services.

Four centres are currently under construction at Ewan Residences, Al Barsha, Muhaisnah and Al Quoz in Dubai and scheduled to open simultaneously in the third quarter of 2008, while further locations are already being finalised at locations including Ras Al Khaimah, Al Ain, Abu Dhabi and Al Warqa.

"The demand is coming very strong, particularly within the GCC, and we are looking solely at residential areas for these standalone buildings. SouqExtra! Centres will not require a huge amount of building time, so there is a lot of opportunity to build more of them."

Lootah reveals that there are nine centres scheduled for completion by 2009 backed by an investment of AED100 million (US $27.2 million), and more than 20 will be operational within five years.

"This is the seed of our capital, and the whole project will amount to AED400 million ($109 million)," he reveals.

Although the venture is significant, Lootah intends to create an intimate, personalised approach to customer service at the chain.

"The concept is essentially community centres, so we have to reflect that it is not about mass but rather we will ensure staff call customers by name and welcome them on arrival."

According to Lootah, the ideal space for the centres is 100,000ft², however in an effort to counter the shortage of development openings in the region, the team has ensured the prototype is flexible.

"When we get a location, we define what is needed there, typically including 35% of space for landscaping and parking. At Al Quos, we have overcome the challenge of having 22,000ft² in total by taking the 35% underground and keeping the same elements," says Irfan Saraaf, concept & commerce, SouqExtra!

"One of the biggest centres we are building currently is 90,000ft² in Ras Al Khaimah," he adds.

The chain will be slightly more expensive than hypermarkets in the Middle East, Lootah says, and the company is in the process of finalising the brands that will be present at the centres. He responds to questioning on Al Islami Foods' presence in the venture that it will be treated as a normal supplier to the supermarkets.

Is building success in the region's retail industry easy? Emphatically not: companies must deliver innovation to tackle escalating rivalry, he says.

The process of planning a future community stands almost in parallel with Lootah's objectives, such as shaping plans and layout in an organised manner, and in the same way taking into account such considerations as convenience for its inhabitants, social requirements, recreational facilities and aesthetic design.

"We have studied the retail proposition and delivered this concept of the efficient and easily accessible one-stop shop, which has witnessed huge demand from Qatar, Oman and Saudi Arabia, yet we are now scaling it at GCC level," he says.

"This concept will deliver the right standard of modern hygiene, with the expediency everyone is looking for, as well as the necessities such as clinics."
In a bid to prioritise elements for community needs, Lootah says he has looked for major players with standards such as "modern, professional and appealing."

The success of the upcoming super centres and its eventual regional presence seem almost inescapable when one contemplates its director's powerful portfolio and his recent string of winning deals.

The concept is essentially community centres, so we have to reflect that it is not about mass but rather we will ensure staff call customers by name and welcome them on arrival.

Founded in 1981 by Dubai Co-operative Society, Al Islami Foods announced a 49% local and 120% sales growth across the globe for the year at the end of July.

In September Al Islami Foods set up its European hub, after signing a strategic joint venture with UK-based foodservice distributor 3663 First for Foodservice. The deal will incorporate catering to clients in Britain, Germany, Belgium, the Netherlands, and Luxembourg.

More importantly, the overall market for halal food appears to be growing strongly, and is estimated to be worth US $16 billion ($58 billion) in Europe alone.

The company has established its processing unit - set to produce up to 600 tonnes of fresh and frozen meat monthly - in Manchester, scheduled to start production in November this year. Sales of AED293.8 million (US $80 million) in 2008 have been predicted, and AED2.2 billion (US $600 million) in the next five years.

In a move intended to lure higher numbers of young people to the FMCG industry, the company launched its franchise model The Cart, a business concept providing items including microwave ovens, hotdog grills and counter display chillers to young entrepreneurs. The scheme - already rolled out in the UAE, Egypt, Iran and Malaysia could spell a breakthrough for the retail sector, as it appears that the greatest discrepancy between entrepreneurial desire and fear of failure is typically among the young.

Lootah's ability to adapt the company's concepts into new markets has been influenced considerably by his travels, and he credits the US - where he graduated from California State University an MA Business Administration - for lending him the idea of establishing the community retail concept.

In fierce efforts to inject momentum into sluggish revenue growths and cash in on the rise of consumer spending in the sometimes cut-throat world of retail, major shifts are underway among retailers in the Middle East into new formats, which has created new patterns of competition.

The emergence and growth of supercentres in the US market is notable, as firstly many of the players are companies with expertise in general merchandise discount retailing rather than grocery retailing such as Kmart, Target and Wal-Mart, and secondly they pose an increasingly greater threat to supermarkets lacking non-food divisions.

Arkansas-headquartered Wal-Mart, the world's biggest retailer, has announced plans to have 28 supercentres across Canada by early 2008. The supercentres - deemed a serious profit threat to Canadian supermarket operators such as Loblaw Cos., and Metro Inc - are said to respond to "growing demand for selection, value and time-saving solutions for the busy Canadian consumer."

The centres - ranging from 101-205,000ft² are typically 30% bigger than the 270 existing Wal-Mart discount stores, and in addition to a full line of groceries they stock expanded inventories of apparel, household goods and electronics. Wal-Mart has revealed that every supercentre creates about $20 million (AED 73.4 million) in investment, 200 construction jobs and up to 500 openings for in-store associates.

SouqExtra! will be positioned as the first supercentre concept of its kind in the UAE, however similar concepts are operational in other parts of the region.

Saudi Arabia's Watani supercentres are located in Makkah, Riyadh and Jeddah, and further stores are tipped to open in 2008.

Featuring a full range of food products and sections for its full bakery delicatessen, fresh produce, meat and seafood, Watani also specialises in general merchandise, clothes, electronics, toys, appliances, hardware, household and electrical products, and boasts more than 90,000 SKUs.

Designed to allow the community to meet its daily needs without having to drive to malls and supermarkets, however, targeted services would go the extra mile and could include community halls available to rent by residents for parties and activities for the neighbourhood.

"With the launch of Phase 1, we will be adding 500,000 ft² of retail space in UAE and will appeal to all consumers, as our core positioning is about Convenience, Freshness, Quality, Family and Community.

"Families will not have to commute through congested roads just for their daily needs and spend their quality time on roads while trying to reach shopping centres," Saraaf says.

The potential for shopping within reach could well be a winner in Dubai's changing retail landscape as residential developments - Lootah's prime target - continue to emerge.

"We plan to take SouqExtra! to all of the emirates and across the GCC in the coming months," he says.

Dubai Properties, for example, recently announced at Cityscape that it would build its AED 40 billion (US $10.9 billion) residential community within Dubailand, a move that would result in colossal footfall for fortunate retailers that secure space. The Mudon mega-project will house approximately 50,000 residents in five zones built to resemble the Arab cities of Baghdad, Beirut, Damascus, Cairo and Marrakech.

Interest in SouqExtra! is growing, but Lootah hopes new agreements he is about to sign could be the key to speeding up the expansion drive.

The team has been deluged with enquiries from landlords, real estate developers and government bodies with commercial plots for long-term investment, while negotiations are underway with its partners in the GCC.

"Developers of residential townships in Dubai have shown great interest in the supercentre concept, as such a facility represents a value added proposition to everyone," Lootah says.

"Our model is flexible enough to make room for the required conveniences, after taking into consideration the demographic profile of the community we operate in."

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