21 - 27 December 2000
Issue No.513
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Al-Ahram Weekly On-line 21 - 27 December 2000 Issue No.513 |
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| Published in Cairo by AL-AHRAM established in 1875 | Current issue | Previous issue | Site map | ||
Clearing its shelves?
By Niveen Wahish
First it was thrilling that such a huge retail chain was setting up shop in Egypt. Once it opened, visiting it was considered an outing for the entire family. An added attraction was the availability of staples such as flour, cooking oil, rice, sugar and milk at very low prices. In fact, the low prices guaranteed a constant stream of customers at the first and, at that time, the only outlet which had opened on Pyramids Road which was so packed that one could hardly set foot in it.
But along with the customers, Sainsbury's discounts brought complaints from local retailers.
They objected to its strategy of offering goods at prices lower than wholesale. In fact, 20 local retailers formed a company called Masriyatna to do for its members what Sainsbury's is able to do by virtue of the volume of products it deals with: purchase in large quantities at low prices.
Today Sainsbury's is again in the news. Rumours are flying that the British chain intends to close its stores in Egypt. However "this is not definite" according to Lindsay Muir, press officer at J. Sainsbury's in the UK. She pointed out that as the company's interim results for 2000/2001 show, losses were higher than expected. The interim results show that Sainsbury's Egypt, whose investments top 100 million sterling, recorded an operating loss of 10.2 million sterling during the first half of the fiscal year.
During the same period, its sales reached 40.5 million sterling. In the words of Sainsbury's report announcing its results, "[We are] concerned about our investment in Egypt." Moreover the announcement said that "although this market may have attractive longer-term growth opportunities, we are cutting back our development programme further and reviewing all strategic options for reducing our financial exposure to this region."
According to Lindsay Muir, the options under consideration include entering a joint venture, cutting back developments or an outright sale of its assets. However, while the company examines its options, Muir said "we are not committing ourselves to anything at the moment." She added that at this stage the company has nothing further to announce.
While a cloud continues to hover over the future of Sainsbury's, speculation continues concerning the reasons for its poor performance in Egypt. Its report on interim results attributes the higher than expected losses to delayed store openings due to local licensing difficulties. Another reason mentioned is the "deterioration of the trading environment in the Middle East." Following the outbreak of Al-Aqsa Intifada, many Egyptians boycotted Sainsbury's as an expression of popular support for the Palestinian Intifada, on the premise that the British chain's Jewish owners were ardent Zionists who donated large sums of money to Israel, to which the local company responded with an advertising campaign in which it asserted that it is 100 per cent Egyptian-owned.
One of Sainsbury's competitors suggests that its marketing strategy was inappropriate for Egypt. He explained that only 20 to 30 products carried by the retailer are in demand by price-conscious customers while the market for higher-priced items is extremely limited.
But not all supermarket investors have had negative experiences with the Egyptian market. Karim Zaki, marketing manager for the rival chain Metro, part of the Mansour Group, says that his company's performance has been in line with its projections. Since starting its operations mid-1998, Metro has opened around 10 branches and three Metro Express stores -- the operation's mini-supermarkets.
In comparison, in the span of approximately one year, Sainsbury's opened more than 100 branches. Included in this number are the stores formerly owned by EDGE. These acquisitions increased Sainsbury's involvement in food retailing to the extent that in some areas there are now four Sainsbury's stores within a radius of one kilometre.
"Changing consumer habits should be a gradual thing," said Zaki, explaining why his company has opted for a less hurried approach in increasing the number of its branches. His company's strategy is to encourage consumers to shop for everything they need at one store.
In this regard Sainsbury's presence has helped increase public awareness of "one-stop shopping" and thus impacted on individuals buying habits.
These new stores, which are similar in layout and marketing strategies to Western supermarkets, have influenced other retailers who have caught on to the idea of offering promotions as a way of maintaining customers and attracting new ones.
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