Omar Effendi bows to the times
Don't be surprised if you go to Omar Effendi and find Metro or Carrefour, Sahar El-Bahr reports
Omar Effendi, the Egyptian retail giant that dominated the market in the 1960s and 1970s, is renting its floors to other retailers and hypermarkets.
Visitors to Omar Effendi's branch located in Makram Ebeid Street in Nasr City found that about 700 metres of the ground floor, out of a total store space of 6,000 metres, have been rented to Metro supermarket. Further steps to rent space in all Omar Effendi branches nationwide will follow.
Hossam El-Mestikawi, Omar Effendi's deputy managing director, said that among the companies that are in the process of renting floors are Carrefour, Metro and Kheir Zaman. He emphasised that only spaces or floors will be rented, not whole branches.
El-Mestikawi added that negotiations are being conducted with other companies, restaurants and cafés. "Carrefour and other companies will only sell products that are not sold in Omar Effendi. This strategy aims at providing a comprehensive and complete service to our customers," El-Mestikawi noted.
According to Sherif Sabri, head of Omar Effendi's financial and administrative sector, Carrefour is set to rent spaces in most of Omar Effendi branches by the end of the current month. He stressed that the purpose of the new strategy is to strengthen the competitive capacity of Omar Effendi through providing comprehensive services.
"We are now negotiating with a number of the biggest retail companies and restaurants. Our target is to provide consumers with convenient mini shopping centres or mini malls nearby their homes, where they can find all they need. We make use of the huge space of the branches, which vary from 4,000 to 100,000 square metres," explained Sabri. He added that the renting strategy is part of the company's three-year development plan.
Asked about the fact that Omar Effendi has lost LE82 million in the past nine months, whereas its total losses last year were estimated at LE54.9 million, Sabri replied: "This is normal because of the financial crisis and the expenses of renovating and developing our branches. We renovated almost 70 branches. And we display better quality products." He added: "Because Omar Effendi's branches have greatly developed, we could successfully negotiate the rental of space. We are looking forward to making profit by June 2011."
Ever since it was announced that Omar Effendi had been sold in February 2006 to a Saudi investor for around LE600 million, controversy over the privatisation deal has been ongoing. The renting deal has triggered renewed criticism in the Egyptian media.
Sabri stressed that the renting of space inside Omar Effendi's branches is legal, contrary to what has been claimed by some public sector officials. "Even before the privatisation of Omar Effendi there was a supermarket in the Murad Street branch in Giza. And many of the branches, including that of Abdel-Aziz Street, which is an antiquity, were wholly rented."
He further stressed that workers in Omar Effendi will not be harmed by the new renting deals: "on the contrary, the companies will hire tens in new labour."
Ahmed El-Sayed, head of the Holding Company for Construction, the former legal owner of Omar Effendi, refused to comment on any issue concerning the company. El-Sayed said that he is not authorised to comment because of the pending lawsuit being looked into by the Cairo Centre for Judging (CCJ), which will give its final decision concerning the dispute between the Holding Company for Construction, which owns 10 per cent of Omar Effendi, and Anwal, the Saudi company that owns 90 per cent.
Currently, the CCJ, an international arbitration centre specialised in commercial arbitration, is examining a law case filed by Anwal in March 2008 over an "outstanding account" of LE60 million, or 10 per cent of the value of purchasing. "The account is in the National Bank of Egypt," said Sabri. "According to the contract, the account should be released only with the acceptance of both partners. And Anwal has been demanding its right to the outstanding account," said Sabri.
Omar Effendi is likely to remain a controversial issue for the coming years. For Egyptians, the company is not just a series of retail departments: it is an icon that should be preserved.
The first store was established in 1856 by the name of Orosdi. It stood in the same historic six-floor building on Abdel-Aziz Street in downtown Cairo where the Omar Effendi branch remains today. Orosdi was a Hungarian businessman and established other similar stores in Baghdad, Beirut and Istanbul.
In 1900, Orosdi had established almost 60 branches nationwide. In 1920, the branches were sold to a Jewish businessman who changed the name of the stores from Orosdi to Omar Effendi. At the time these were the first retail megastores of their kind in the Middle East. In 1957, Omar Effendi stores were nationalised.