Home-grown Gulf retailers eye expansion in developed markets
UAE’s Freedom Pizza in talks with investors over UK entry, Dubai’s Al Samadi group expands in London and Paris
Arabian Gulf retail firms are increasingly looking to enter developed markets such as the US and Europe in search of greater economies of scale at a time when Western multinationals are cutting back their own expansion plans in emerging markets amid political and economic uncertainty.
“Many [local] retailers are considering these Western locations, even when they have not yet fully penetrated the regional market,” Adel Belcaid, principal at retail consultancy A.T. Kearney told The National on the sidelines of the Middle East Retail Forum in Dubai on Tuesday. "They do it from a brand expansion point of view. It’s good to be there [in the West], and many of these companies’ founders have spent time in these locations so they want to build on their success and expand somewhere else where they feel comfortable with that other geography.”
A.T. Kearney’s 2017 Global Retail Development Index published in June found that the world’s largest retailers are struggling to manage complex operations amid political instability and disruptive structural changes such as the rise of e-commerce. At the same time, however, local and regional firms are gaining ground as governments pave the way for retail and make it easier for everyone, not just the global giants, to enter new markets.
UAE-based food & beverage (F&B) delivery outfit Freedom Pizza is in talks with investors over plans to set up five stores in the UK within the next 18 months, its chief executive told The National. In parallel Dubai’s Al Samadi Retail – which operates regional franchises for Western brands such as the Body Shop – plans to open a store in London and will expand to Paris next.
Kamal Osman Jamjoom (KOJ) Group, the Dubai and Saudi Arabia-based retail holding company, said it is eyeing expansion in cities across the US, among other markets.
Freedom Pizza, founded in 2015, is in talk to open in the UK, “in a city that is not London”, Ian Ohan said “For the past 18 months we have been studying the UK market and have a tremendous amount of in-depth knowledge of our competitors and their sales, which has really informed our development strategy,” Mr Ohan said.
The company prefers to open a cluster of five stores to achieve ‘proof of concept’, he said. "One store does not fully demonstrate success or otherwise – in an area that makes sense...We are looking at opening in around 18 months’ time and would anticipate a 9 to 12 month break-even period [in those new stores].”
Freedom Pizza owes part of its success to a policy that is against using third party delivery firms – which typically slashes profits by up to 30 per cent, Mr Ohan said.
“We will never use third party delivery [in the UAE] and we intend to replicate that in the UK,” he said.
Mr Belcaid said the consultancy is seeing start-up players and other home-grown regional brands going global just at a time when large multinationals are taking a break and weighing the situation.
Ebreheem Al Samadi, the chief executive of Al Samadi Group, told the forum his firm recently closed a deal to open up a store in Knightsbridge – a top shopping destination in London – and is eyeing an outlet in Paris next with a view to entering the US in the future.
“Personally I think the West – US, Europe – is where we would look to expand, because the retail concepts we have in the Middle East are far more relevant than some of the retail concepts they have in developed markets,” said Stephen Holbrook, board member and clothing divisional director at KOJ. “Rather than come to us, I want to go to them.”
KOJ aims to double its revenues in the next five years and in some cases is looking to enter markets via digital channels, without traditional brick and mortar stores.
As the digital age gains traction in the Middle East, the GCC e-commerce market is set to grow four-fold from US$4 billion to US$20bn in 2020, according to a 2016 A.T. Kearney report. However, Mr Belcaid said that forecast was conservative and the firm has revised its outlook for the regional e-commerce market which will be released next month.
Internet retail makes expansion into developed markets easier for regional players, Mr Belcaid said.
“E-commerce makes it even more global. So it’s almost a level playing field. If you have a new concept and can address customer experience in the right way, entice consumers, then you can have a go – test the concept via e-commerce and it that prove successful then invest in it seriously.
“It’s all about innovation: bringing a concept that clicks and the sky is the limit.”
Updated: December 27, 2017 01:14 PM