UK retailers appear hell-bent on entering the UAE market. But at what risk? Retail News scrutinises waitrose's plans.
UK retailers appear hell-bent on entering the UAE market. But at what risk?Retail Newsscrutinises waitrose's plans.
In April this year, Spinneys' supermarket in the Meadows area of Dubai will be transformed and emblazoned with the Waitrose fascia.
Two brand new Waitrose stores will later be opened at Marina Mall and the Burj Dubai Mall, and the brand's first branches outside the UK will be positioned at some of the emirate's prime retail developments.
UAE-based supermarket group Spinneys, a subsidiary of Albwardy Investments, has signed a licensing deal for the Waitrose brand from John Lewis Partnership to open the UK's sixth biggest grocer.
Spinneys described the move as "bold, but nonetheless plausible", and it was one that certainly sent shivers through the region's industry last month, as the chain is set to open 20 stores under the Waitrose brand in the UAE by 2010.
Waitrose said the "significant milestone" was the first step towards building an international business worth AED5.8 billion (US $1.6 billion), in a bid to double the chain over the next decade, a move that would see turnover rise to AED58.3 billion (US $15.8 billion). Richard Hodgson, commercial director, said global operations could account for 10% of total turnover by 2018.
Its debut will follow the path taken by other big names including Marks & Spencer, Mothercare, Monsoon, Debenhams and Alliance Boots, which have all built store networks overseas through franchises.
Although Waitrose's own label products have been available in Spinneys' stores in the UAE and Oman for the past four years and the potential within the booming retail sector is undeniable, UAE shoppers' have yet to deliver their verdicts on the 104-year-old British favourite.
Waitrose supermarket ranked number one last month in a customer satisfaction survey by Which? Magazine. The company - which currently operates 187 branches in the UK having tapped the niche for food specialist supermarkets - scored 87% in the poll of 77 firms who were rated on the quality of their convenience, customer service, experience, pricing and products.
The chain's triumph could indeed concern existing players in the market as they anxiously await its arrival, yet international expansion has also witnessed some of the UK's renowned retailers come crashing down in spectacular fashion.
Marks & Spencer recently announced a new push into India and China on the back of better-than-expected results and its CEO Stuart Rose proclaimed that "substantial opportunities" were up for grabs in major emerging markets.
However, ten years ago the chain publicised a similar strategy and the ambitious plans failed. M & S was forced to sell off stores in continental Europe and its US-based Brooks Brothers chain after its profits slipped. Rose said: "Just because you have a car crash when you go into your car, it doesn't mean you shouldn't ever get in your car again. Otherwise we'd never progress, would we?
Rose's gallant attitude is, of course, the safest in the ever-changing and increasingly cutthroat FMCG industry, while it also points to the fact that an all-singing, all-dancing British powerhouse's popularity does not equate with grand profits in every market.
However, in contrast, Tesco's success with its first branded stores in Japan and its Fresh and Easy stores in the US could well have triggered a chain reaction.
After cementing the deal, Spinneys released a statement to Retail News Middle East, describing the agreement as the onset of an exciting period for the company, which would enable it to build on its reputation for providing the city's increasingly cosmopolitan population with high quality merchandise and an enjoyable shopping experience.
And it is indeed what shoppers want from their shopping experiences that will ultimately determine the UAE's frontrunning retailers of the future. Although there is considerable demand for gourmet, fresh products in our supermarkets, retailers are simultaneously under escalating pressure to deliver value for money.
It would seem that consumers in the region have abandoned regular shopping trips and replaced them with bargain-hunting swoops, a trend driving the growth of the hypermarket format.