Home-grown shops are looking to take market share from hypermarkets by locating near consumers.
Grocery stores take on retail giants
DUBAI // New home-grown grocery stores are looking to cash in on the growing market by catering to smaller communities and marketing their outlets as close and convenient. SouqExtra!, a line of small shopping and community centres featuring a grocery store and services such as dry-cleaning and fast-food outlets, has 10 projects being developed, with the first opening in Dubai's Ewan Residences as early as May. Near Buy, a chain of small convenience grocery stores, has opened 25 outlets since it launched in June last year. "These big hypermarkets are not the big thing any more," said Saleh Lootah, the managing director of SouqExtra! "People don't want to search for parking, drive on the highways. They don't want to wait in a line for a short [shopping] list. This is our aim, to be closer to the consumer." Supermarket sales in the Emirates are forecast to increase more than 80 per cent by 2013, according to Business Monitor International (BMI), a research firm based in the UK. This forecast is driven partly by people cutting back on restaurant dining during the economic downturn, but it is mainly due to a switch to higher-value foods. BMI also expects per capita food consumption to increase 18.8 per cent by 2013. "People still have to drink water, drink milk," said Rajeshwar Prasad, the chief executive of RAK Holding, the company behind Near Buy. "Grocery stores won't be affected by the economic meltdown." Near Buy had planned to open 500 outlets by the first quarter of this year, but Mr Prasad said vendors did not yet have the infrastructure to deliver to numerous small outlets. Near Buy has started building a warehouse, which should be ready in a month, to streamline the supply chain. The company was likely to spend between Dh100 million (US$27.2m) and Dh150m to reach 500 outlets in the next two years, Mr Prasad said. "We want to be as close to the customer as possible, to deliver to their doorstep. It's a niche that is difficult for the hypermarket to achieve." Mr Lootah, who is also the chief executive of Al Islami, a halal food producer, said SouqExtra! was targeting small residential communities that have emerged during the past three years. Centres already under way include locations in Al Quoz in Dubai and Al Batheen in Al Ain. "The demand for it is there," said Naeem Ghafoor, the chief executive of Skyline Retail Services consultancy in Dubai. "And as more and more of these [residential] areas open up that don't house huge malls, this kind of thing is required." However, Mr Ghafoor said the success of these ventures depended on how the products were tailored to the needs of the community and how dense the population was. If the community was congested, he said, then a centrally located grocer would blossom. Mr Lootah said that before a SouqExtra! centre was planned, the community was surveyed and the mix of retail and services was based on residents' wish lists. As well, the company hopes to lure shoppers by providing families with gathering spaces, which are in short supply. SouqExtra! would spend about Dh300m on the first 10 stores, Mr Lootah said. The company later plans to expand throughout the region. "We are looking to four areas which we see a lot of potential and we've been in dialogue with different investors: Saudi, Qatar, Jordan and Oman," he said. firstname.lastname@example.org