19 - 25 April 2001
Issue No.530
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Al-Ahram Weekly On-line 19 - 25 April 2001 Issue No.530 |
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Supermarketing hysterics
Sainsbury's entry into the Egyptian market caused almost as much fuss as its exit just eighteen months later, which is to say a great deal of fuss in a very short time. Quite why so much attention has been paid to the giant British retailer's fortunes in the Egyptian market, though, is a complex question. Certainly it has little, if anything, to do with the actual benefits likely to accrue from Sainsbury's presence in the local market. Sainsbury's was not, after all, involved in reclaiming 100,000 feddans of desert land. Its success or failure was never going to positively impact on the balance of trade figures, or help promote exports. It was not pumping direct investments into the local economy. Why then, one can justifiably ask, all the hand wringing, all these exhortations, and at the most senior levels of government, for the company to stay?
Sainsbury's is, after all, a retailer -- a mega-grocer whose market strategies were developed within an advanced, Western, consumer-orientated economy. And if, in its UK home-base, the group had recently recorded disappointing results, becoming Egypt's largest food retailer almost overnight was never going to turn around the group's domestic travails. What is surprising, though, for an outfit this size, and with such a sophisticated management structure, is that an incoming chairman should express his "dismay" at his company's Egyptian operation. It was not, after all, a negligible enterprise, to take over the running of one hundred stores and open them simultaneously. Presumably the relevant market research had been undertaken before Sainsbury's committed itself to such a large scale investment outside its traditional catchment area. The ensuing roll out must have been carefully planned, though obviously not carefully enough given losses of 10 million sterling within the first twelve months of trading, and the subsequent decision, announced only last week, but rumoured for some time, to completely pull out of Egypt.
So what went wrong?
Sainsbury's chairman pinpointed the "hostile environment" within Egypt's retail sector, though it remains unclear precisely what he was referring to. Certainly established retailers had vociferously opposed Sainsbury's policy of undercutting competitors, sometimes to the extent of introducing loss leaders -- items sold at a price that generates no profit but which attract customers to the store in the hope that they will then purchase other items. And with the outbreak of the Intifada a seemingly well-orchestrated campaign to boycott the group's stores began based on spurious rumours that the supermarket giant was somehow engaged in promoting Zionism.
Perhaps these were the "political considerations" that the British Ambassador, Graham Boyce, did not rule out when discussing the prospects of Sainsbury's withdrawal last month.
There is also the likelihood that despite extensive market research the store group underestimated the differences between Egypt's domestic retail environment and the British market in which it was used to operating. The culture of the mega-store -- which developed in an increasingly consumer led market -- cannot just be grafted on to an underdeveloped retail sector. The company, too, reputedly faced customs related problems and found itself unable to sell imported items at the prices it had hoped.
Perhaps the greatest benefit of Sainsbury's Egyptian sojourn is that for a brief period it shook the Egyptian market out of its lethargy, shocking it into having to contend with an operation premised on offering the consumer choice and low prices. Yet this hardly justifies the extensive press coverage of Sainsbury's withdrawal, and the possible arrival of rival chains such as Carrefour -- both of which have generated sensational headlines that are in danger of bordering on the hysterical.
Yet these much-hyped forays by multinational supermarket chains into the Egyptian market do not constitute a cause for automatic celebration, certainly not for a government pledge to engineering annual growth of eight per cent. Whatever the sums invested in new supermarkets or shopping malls the results are the same. They boost levels of consumerism, not productivity. Hardly a recipe for growth.
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