Hypermarkets are popping up all around the city. Eman Youssef finds out where this trend is taking the Egyptian market Before the end of the year the top Lebanese supermarket chain, Spinneys, will open a branch in Nasr City's CityStars compound. The $10 million outlet is housed in an area totalling 13,500 square metres. According to Nelly Amin of the Marketing Department for Golden Pyramids Plaza, the company which owns CityStars, there are clear opportunities arising from the region's rapidly increasing young population and a noticeable shift in consumers' attitudes towards shopping. The opening of Spinneys comes in the wake of several other hypermarkets which have opened in Egypt over the last two years. The trend originally started with Carrefour, which now operates three stores and is in the process of opening a fourth. The locally-owned chain, Hyper One was also opened earlier this year. The decision by the Majid Al-Futtaim Group of Dubai (MAF) one of the Gulf's most reputable retailers, to launch a French hypermarket in Egypt, just a year following Sainsbury's withdrawal from a similar project, came at a time when launching a foreign chain locally was considered risky business. "Carrefour is focussed on Egypt's middle- income families as its target customers." said Herve Magidier, regional manager of Carrefour Egypt. Carrefour thus sets itself apart from chains such as Metro and Alpha Market, which cater to high- income families. Yet regarding long-term success, the combination of Carrefour's size and its commitment to competitive prices raises questions of sustainability. How will the hypermarket, which employs around 420 personnel, maintain those competitive prices and generate enough sales to justify its size? According to Magidier, "there is a misunderstanding that providing low costs leads to losing money." MAF Carrefour makes available all kinds of products at competitive prices by reducing the profit margin and selling "value for money products," explained Magidier, who added that Carrefour has executed this strategy successfully throughout the Gulf, and therefore Egypt should not be an exception. MAF Misr, the Egyptian subsidiary of the Dubai-based Majid Al-Futtaim Group, is preparing to expand the number of Carrefour hypermarkets in Egypt. One more Carrefour hypermarket remains to be opened. It will be the last in a series of four such facilities the company is setting up in Egypt in association with France's Carrefour. Total investment is approximately LE1,250 million ($208 million) and is part of MAF Misr's long-term LE2,644 million ($440 million) investment programme in Egypt. The first three Carrefour shopping complexes, which introduced a new shopping culture to the Egyptian consumer are located in Maadi, Alexandria and before the Cairo-Alexandria toll station. So far, they have been successful in terms of both profitability and turnover. The new complex will be opened along the Cairo-Suez Road, in close proximity to the Ring Road near Nasr City. The new location is expected to be as large as 8,500 square metres. Noting that MAF has allocated LE2 billion for the project, with one billion already spent, Magidier stated that, "MAF has been keen to invest in the Egyptian market because of our strong belief in the Egyptian economy." He also added that, "in the coming 10-15 years, MAF will expand tremendously in Egypt." MAF's intended expansion is based on development projects supported by the Egyptian government. Magidier explained that MAF hopes to work with Egyptian businessmen "in some sort of consortium with Gulf investors to create local developments that will push the economy forward and create jobs for young Egyptians, as well as help to develop new residential zones." The location chosen for Maadi's City Centre is an example of the undeveloped type of area targeted by the group's development scheme. With the government's support, and through these projects, MAF aims to promote new communities. The development initiative which began with the establishment of the City Centre will continue to progress. Following the opening of a much larger Carrefour in Alexandria, the group is now talking of "a very interesting project coming soon in Heliopolis." "Egypt has yet to see hypermarkets catering to limited income groups," says Federation of Chambers of Commerce member Youssef Abul-Hagag. "What we really need, is to see more of this kind of shopping pattern making goods available at accessible prices in, for instance, the new communities." And this is exactly what is beginning to take place. The opening of Egypt's first Carrefour in Maadi was soon followed by the opening of Hyper One in Sixth of October City. Hyper One, owned and run by Egyptian retailer Mohamed El-Hawari, is the first 100 per cent Egyptian-owned hypermarket, costing around LE100 million and extending over a 40,000 square metre area. This area includes the two-story 10,000 square metre hypermarket and additional space for 20 shops, a food court and a children's entertainment space. "I think that Egyptian customers are now ready and welcome the hypermarket concept," said Elhami Rashed, Hyper One PR manager. People finally began to accept that large stores selling affordable goods can be a profitable venture. The British retailer, Sainsbury, may have failed because it tried to do business in Egypt "the British way", and did not adapt its management to the local environment and local needs. "We benefited from the experience of our competitors to better adapt ourselves to the Egyptian consumer," Rashed added. He also emphasised that Hyper One could act as a booster to local production. According to Rashed, competition is very good for consumers. "In Carrefour, when you're investing millions of dollars, you're not doing it for a two-year quick hit, you're doing it for the long run," said Magidier adding that government legislation and bureaucracy can still be frustrating for retailers wanting to set up business in Egypt. However, under the Ahmed Nazif government, the business atmosphere seems to be easing up. Carrefour is not concerned about direct competition, citing the newness of the hypermarket arena. And more competition is on the way.
