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Al-Ahram Weekly 11 - 17 November 1999 Issue No. 455 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly 11 - 17 November 1999 Issue No. 455
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| Published in Cairo by AL-AHRAM established in 1875 |
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Egypt Region International Economy Opinion Culture Features Profile Travel Books Sports People Time Out Chronicles Cartoons Letters Sainsbury's shopping spree
By Sherine Abdel-RazekSainsbury's, the multi-national retailer with major interests in the UK and North American markets, has been building its presence in the Egyptian market for six months now. In April it acquired a 20 per cent stake in Edge, the Egyptian Distribution Group that controls a retail chain of 93 shops in Cairo, from El-Nasharty.
After using its stake to encourage Edge into fully acquiring the successful abc expo stores, the market was taken aback by last week's news that Sainsbury's was raising its stake to 80 per cent, after injecting LE500 million in investments, making it the largest retail group in Egypt.
It is not just the number of retail outlets that gives Sainsbury's a leading market position. In acquiring a majority stake in Edge, Sainsbury's Egypt -- a joint venture between J Sainsbury's and El-Nasharty group -- also inherited an ongoing agreement with the Egyptian Ministry of Supply and Internal Trade to co-manage 51 of its consumer cooperatives, currently operating under the brand names Al-Ahram 2000 and Nile 2000.
"We have interviewed 3,000 customers so far, in relevant focus groups, in an attempt to ascertain what the Egyptian consumer really wants for his money," said John Rowe, chief-executive of Sainsbury's Egypt.
But what about the other players in the retail market in Egypt? A quick survey of the market furnishes several surprises: not least, that retailers account for just five per cent by volume of the LE90 billion food market.
The retail market is itself highly stratified. A handful of privately owned, small scale operations, typically comprising three or maybe four branded outlets, compete for wealthy customers, mainly by stocking ranges of imported foodstuffs, consumer products, foreign magazines, books and even pet food. Metro, Alpha Markets, Seoudi etc. offer a wide range of services, ranging from home delivery to customer loyalty cards offering discounts, as well as less conventional marketing gimmicks. One chain organises a weekly question and answer session in which customers can meet with the presenter of a popular TV cookery show to have their queries answered.
A second layer of less luxurious but more popular retail chains, including Ragab Sons and Abu Zikri, competes largely on price, with long-running special offers on basic foodstuffs. Service does not enter the equation. State-owned retailers also compete at the lower end of the market.
"There are 1,605 state-owned retail stores around Egypt specialising in particular foodstuffs, of which 215 have been renovated under a plan funded by the Italian government and started three years ago," said Hamdi El-Guindi, an official at the Ministry of Supply and Internal Trade. The refurbished stores in this sector stock a slightly wider range of goods than the others, but the range and level of service remains modest.
The expansion of Sainsbury's, though, is likely to jolt the market on all levels.
"We are seeking to appeal to different social groups," says Sainsbury's Rowe, "and have spent the last six months examining customer needs through focus groups. What we have discovered is that customers want greater competition over prices."
So can we expect the high-profile strategy Sainsbury's has adopted in its UK super-market chains -- an all out price war? This appears unlikely in the Egyptian market, though any increase in competitive pricing can only be of benefit to the consumer. And while the 51 state-owned stores managed by Sainsbury's are likely to extend the range of items stocked, they are never going to compete with the group's largest overseas supermarkets, which now stock up to 30,000 different items.
The remaining government stores, though, are likely to change little in the short to medium term. "We do not have enough liquidity to acquire imported and expensive goods so the strategy in these shops will continue to be based on supplying basic foodstuffs at as low a price as possible," says El-Guindi.
But with Sainsbury's determined to compete on price, and planning an injection of a further LE400 million of investments, the lower end of the market could well be facing its own shake-up. And given the government's plans to privatise up to half of the seven public sector and retail companies by the middle of next year, there is always the possibility that other multi-nationals will be seeking to make inroads into the local retail market.
