Racing for convenience

The growth of the Middle East’s convenience store channel in recent years has been vastly overshadowed by hypermarket and supermarket choices, typically ensconced in the larger cities. However, RAK Holding’s pronouncement of its plans last month catapulted speedy business opportunities into the limelight.

His Highness Sheikh Tariq Al Qassimi, chairman and head of the group, says it push to revive the small grocer market will involve opening up to 500 stores by next year, driven hugely by franchising, “in some cases creating partnerships with existing grocery stores that may be in need of financial assistance.”

The man behind the Ras Al Khaimah-based behemoth says its Near Buy chain will focus on establishing shops within 500m of almost every home within the UAE, with an estimated 2000 stores required to reach into every neighbourhood in the country. The company’s website will provide a facility for ordering from home, whilst a toll-free hotline and SMS service for shopping and deliveries.

Margaret Whyte, retail manager for Dubai-based National Trading & Developing Est. (NTDE) has witnessed the phenomenal success of its News Centre concept, fuelling its ambition to secure locations across the emirates’ major developments, including the Dubai Mall, Mall of Arabia, Jumeirah Beach Residence and Qamaradeen in Dubai, Safeer Mall in Ras Al Khaimah and Bawadi Mall in Al Ain.

The chain was first launched at Deira City Centre in September 2003, designed as mini supermarkets for people on the move.

“We noticed this big gap in the market. In the UK, there are newsagents on every corner yet there are none here. News Centre started out in 2003 as an alternative for shoppers to go to instead of hypermarkets to buy their newspaper, a bar or chocolate or a newspaper.

When you go to supermarkets, even if you have 10 or less you still have to queue up,” she explains.

“We are located at Deira City Centre close to the taxi queues. People who come to us don’t have time to wait in big queues to buy one item, they’re on the move.”Located in high pedestrian traffic areas within malls, the nine existing stores offer convenience products such as confectionery, soft drinks, chilled juices, in additional to local and international newspapers and magazines.

The existing stores, ranging between 100-250m2, are positioned at prime retail and business environments including Mall of the Emirates since November 2005, Sahara Centre in Sharjah since May 2006 DIFC since March last year, Business Square since January and its move into Muscat at Express Corner in April.

Upcoming malls, rising emirates including Ras Al Khaimah and Al Ain and office locations where the potential for magazine and newspaper deliveries is high, are top targets in the company’s expansion strategy, Whyte reveals.

Many of the stores have been renovated recently or set for revamps, particularly those which are three or four years old, and the company has opted for strategic locations with high footfall including one next to a drop-off point at the Dubai Mall.

The company will undertake a colossal recruitment drive to staff its upcoming Smokers Centre and News Centre stores. “We have 180 members of staff, but we will need another 50 or 60,”she says.

A distinctly European concept resembling train station kiosks, News Centre’s modern stores act as a showcase for and an ideal opportunity maximise the distributor’s consumer confectionery brands such as Cadbury chocolates, Vitaene C drinks chillers, POKKA juices, cigars, cigarettes and smoking accessories, building on the success of NTDE’s Smokers Centre outlets.

Although the stores serve as an ideal platform for its products, she stresses that a choice of brands must be available, for example News Centre offers bottles of its Fiji Water as well as Masafi, and its Cadbury range alongside Galaxy.

Faisal Jawad, chairman and CEO, Jawad Business Group says its chains have taken a similar approach. The Manama-based firm currently operates 29 c-stores under the 24 Hours Markets and Jawad Express fascias. The templates encompass anywhere between 800-8000ft2 stores, with layouts and product offering varying largely between locations and target communities.

In a dramatic effort to tap into convenience’s promising future even further, Jawad reveals the company will expand its 29 store-strong portfolio to around 40 by the end of this year and to 50 by the end of next year.As a major distributor of several market leading brands in Bahrain, Jawad views the c-store format as a natural extension of its FMCG distribution business, particularly for impulse lines such as crisps with Frito Lays, beverages with KDD, Libbys, Snapple, Highland Spring water and SPA water, confectionery with Ferrero, Perfetti Van Malle, Ritter, Hersheys and Gulliyan, and biscuits with Bisca and Americana. “We aggressively promote these brands in our stores.”

News Centre’s Whyte admits that prices in the convenience store are typically higher than the powerful formats in the region, yet customers are willing pay slightly more for pleasurable and personalised shopping experiences.

“We maximise our own brands within stores, such as the POKKA juice range, Vitaene C drinks, Fiji Water, Häagen-Dazs, Al-Rabie juices, and cigarette brands including Davidoff We are slightly more expensive than hypermarkets as the customer is getting service, but that does not affect our sales at all.

“The other convenience stores coming into the market are more food-led convenience such as canned foods and vegetables. We are going for the basics.”

She says that although the company is “wary of copycat retailing in this region, we feel we’ve been here a long time, the chain has been around for five years and NTDE has been going since 1970. Our USP is brand loyalty and the company’s longstanding presence in the region.”

In its quest to capitalise on its established leadership in the market, the company will turn to ideal store sizes of between 200 to 250m2 and an extension of its product portfolio into batteries and lifestyle books.

“It depends on the location. Here [City Gate at Dubai’s City Centre Mall] we would have maps whereas we have corporate books at Dubai’s Business Square. We are also looking to expand into the other side of Dubai Festival City, but it depends on rents,” she reveals.

When asked what will ultimately drive the triumph of the convenience sector, Whyte is adamant in her response: personal service.

“Our employees get to know customers and we would like that air of familiarity to be our trademark. Some of the smaller outlets know what the customer usually buys and have it ready for them. Customer service is seriously lacking in the Middle East.”

In her observations on industry standards in general, Whyte points out that key failures in some chains include communication. “Language barriers are quite bad, people don’t know how to communicate and don’t give eye contact. It’s nice to know when you walk into a shop that you have that ‘local’ feel. Bigger supermarkets have too many customers and the product knowledge is lacking.”Ashraf Ali M.A., executive director, Emke Group recalls its longstanding position in the convenience channel, since the opening of its Emirates General Market in Abu Dhabi in the early nineties. The 11 stores are, on average, between 10-15,000ft2 and located in residential areas.

The company also recently launched its Lulu Exress brand of convenience stores chain with the inaugural store at Al Raha Mall on the Abu Dhabi – Dubai Highway, driven by the emirate’s attractive demographics.

“As the real estate sector here is witnessing a phenomenal boom time, we see great potential for small to medium format stores primarily focusing on the grocery and fresh food categories,” he says.

“These will be most suitable for the new suburban townships and gated communities coming up across the UAE. We also plan some of these stores on the highways. These will be typically 20-30,000 ft stores with easy checkouts and convenient parking,” he says.

The retail giant’s own labels have been launched across the stores and “the response has been tremendous. We see the sector growing strongly across the region in the coming years and we will be opening at least 10 new stores by the end of 2010 in the UAE.”

David Derrick, retail general manager for Abu Dhabi’s Abela admits the company sees “enormous potential for convenience store retailing,” however he is critical of standards within older stores, excluding recent and ongoing developments across the emirates.

“The existing, older type convenience stores lack any defined operational strategy, presentation or merchandising standard and operate under dubious health, hygiene and safety standards. Most of these stores are individually owned and operate on restricted cash flow which is why they are rapidly falling behind the Supermarket and Hypermarket sectors,” he says.

He explains that within the UAE’s distinct food retail sectors – hypermarkets, supermarkets, convenience stores and forecourt retailing – Abela currently falls into the supermarket category and “we pride ourselves on the depth of food range, in-store standards and presentation, customer service and our fresh food departments, particularly our in-store bakeries.”

“Abela made a conscious decision a number of years ago that we would not compete in the hypermarket sector but be extremely selective on our Supermarket Trading locations. We identified the need for quantity convenience Stores and this is the area we, like others, will be extremely active in over the next few years.”He reveals that c-stores must consist of various  models to suit new developments, sized between 500m2 to 1000m2, while the second model would need to fit stores between 200m2 to 500m2 “and the third model, which is our identified segment for immediate and rapid growth, is any size up to 200m2  which covers the existing ‘older’ type convenience store.

Derrick estimates that the breakdown of market share is split between hypermarkets at 55%, supermarkets at 20%, convenience stores at 20% and forecourt retailing at 5%.

“Accepting that this estimated breakdown is correct, it is then fair to assume that up to 20% of the total marketplace is operating at a standard well below acceptability. We are currently developing our own instantly recognisable brand, which will convey standards, quality and service.

The growth of the c-store sector in Bahrain is the result of the ever-expanding communities across the island and the stress involved in commuting from one area to another, according to Jawad Group’s chief.

“A c-store in the neighbourhood, offering your daily needs, is the answer to this. We continue to innovate as we expand and the plan is to tweak the format and the offer every time we see a distinct community which needs to be served.”

The convenience sector is a natural extension to Jawad Group’s supermarket business, he says, which has been trading for more than 40 years and he attributes its solid presence in the c-store sector to a combination of acquisitions and organic growth.

He believes, “the Middle East c-store format is still in its infancy compared to the Western and far Eastern markets and the key challenges would be cost effective logistics, trained human resources and increasing rentals.

“We have experienced significant growth in the c-store sector and the format’s flexibility allows us to penetrate areas where perhaps the standard Jawad Supermarket format may not lend itself to execution,” he says.

Emke Group’s Ali adds with conviction that, “while large format hypermarkets will continue to see double-digit growth, c-stores will fit in as the daily destination for perishable goods.”