RIYADH, 8 November 2004 — The consumer is the ultimate winner in the fierce war of price cuts that has broken out among the major supermarkets of Riyadh, with some retailing below cost price, during the run-up to the Eid festivities.
The situation has been further compounded with the arrival in Riyadh at the weekend of Carrefour, described as the world’s hypermarket, whose slogan, “lowest prices and so much more” provides an inkling into the Kingdomwide cut-throat competition which features huge discounts, fabulous prizes of diamond and gold and Japanese and American cars.
A spin-off of the supermarket boom is the Saudization program under which 1,200 Saudis would be employed by Carrefour alone in due course.
Meanwhile, the consumer faces a hard choice as he is bombarded with a massive advertising campaign — whether to go for the one kilo gold bar offer for purchases worth SR200 or above, or fall for the huge discounts offer after being told that part of the sales proceeds would go to support the Saudi Red Crescent Society.
Not to be upstaged, an upscale shopping complex has pitched with a bumper offer of its own — 16 four-wheel drive Japanese cars for “visit and win” contests at 16 of its branches throughout the Kingdom.
Speaking at the inauguration of the first of the planned network of 11 branches in the Kingdom, Eric Poiret, the CEO of Carrefour Saudi Arabia, said five branches would open in Riyadh, three each in Jeddah and the Eastern Province under a phased program by the end of 2008. The first outlet that opened on Khurais Road, Exit 28, spreads over an area of more than 14,500 sq. meters, 9,000 sq. meters of which would be merchandise floor space.
Spelling out the Carrefour strategy, Poiret said: “Our massive buying power and long-term experience in the industry, both internationally and in the Middle East, enables us to source products at the best prices. We pass the savings on to our consumers.”
He said: “We are very focused on developing long-term relationships with the local community. This is done through partnering ourselves with the local producers and manufacturers, offering them new opportunities and distribution channels.”
In the Kingdom, the Saudi Hypermarkets Company/Carrefour is a joint venture between the Al-Olayan Group and the Majid Al-Futtaim Group. The price-cutting war began in all earnest a week before the run-up to the advent of Ramadan with full and half page advertisements announcing bumper sales.
Asked about the impact of the competition, a spokesman of Geant, another major hypermarket from France, said there was room enough for all the new entrants, since the Kingdom, with a population growth of 3.2 percent annually, has a huge market potential for consumer goods. He said sales had increased by at least 10 to 15 percent, since the launch of their promotional campaign.
According to a study conducted by Fahd Al-Deghaither, vice president, Real Estate, Al-Azizia Panda, supermarkets account for only 35 percent of the SR70 billion worth of food consumption in Saudi Arabia. Al-Azizia Panda supermarket, part of the Savola Group, therefore, moved aggressively into the consumer market by opening a 12,000 sq. meter supermarket in the upscale Olaya district in the northern part of Riyadh last month.
With this, the number of outlets belonging to the Al-Azizia Panda hypermarket chain has reached 47, making it the biggest retailer of its kind in the Middle East. The launch of the 47th outlet coincided with the entry of two other major hypermarkets from France-Geant and Carrefour.
“The supermarket business has registered a slow rate of growth — 1.5 to 2 percent annually,” Al-Deghaither told Arab News. According to him, the wholesale food market, including baqalas (small shops) account for 65 percent of the food market.
“Our strategy is to increase our market share by expanding our presence in the Kingdom. Our feasibility study has shown that the Kingdom needs 40 more hypermarkets and 100 more supermarkets between now and 2015, since the Kingdom’s population growth stands at 3.2 percent as a whole and 7.7 percent for Riyadh,” he added.