Discount retail gets a big push in UAE
INDUSTRY GETS A EUROPEAN FLAVOUR AS APPAREL GROUP PICKS UP RIGHTS TO DUTCH LIFESTYLE OPERATOR HEMA
‘D iscount” seems to be the new theme rippling through the UAE’s brickand-mortar retail scene. And with European-themed discount stores as the main flavour.
The Dubai-based Apparel Group — known for its Tim Hortons and Nine West franchises — has picked up the Gulf-wide rights to the Dutch lifestyle store brand Hema.
The first stores are to open in Dubai and Abu Dhabi by July, taking up more than 4,000 square feet apiece. The Ibn Battuta Mall will have one of these, while negotiations are on for a suitable one in Abu Dhabi.
Over the next five years, the plan is to have 60 locations across the Gulf territory.
Hema’s main merchandise will be built around apparel, cosmetics, back-to-school offerings, and chocolates.
There will not, however, be any fresh food offerings.
“In very simple terms, we offer the feel of an Ikea but without the furniture,” said Tjeerd Jegen, CEO of Hema, which in Europe has more than 750 stores. “And because the majority of our merchandise is designed inhouse, we have strict control on the price points.
“Our UAE stores will have identical price levels to those sold through our UK locations. There will be no additional surcharge over the UK pricing. I think that will make us competitive here.
“We will take certain categories and look at the competition in this market. For example, with a competitor like H&M, we want to be 30-40 per cent cheaper. That’s how we operate in Europe.”
Wholesale changes
In recent weeks, the “discount” space in UAE retail has been seeing some wholesale changes.
No longer will the word only be associated with the “1-5” or “1-10” outlets that were such a trend in the marketplace but now seems to be in relative decline. These were basically owned and operated by small businesses and with limited reach.
Instead, the current discount momentum has got leading retail groups behind it. Landmark, which owns Splash and the Max brands among others, ventured into the supermarket line, through its “food discount” concept Viva.
750 Hema stores spread across Europe 60
stores eyed in Gulf region in next 5 years
And, in parallel, there is strong speculation that the German discount giants, Aldi and Lidl, could have some sort of presence in these markets.
In every new territory they have ventured into, the two have had the kind of impact along the lines of what Amazon has managed to do in online.
Moreover, when consumer taxes are being rolled out across GCC markets, there will always be a pool of consumers wanting to shop for value.
And if retailers can provide formats and prices that go against the trend, they have a better chance to gain traction.
For Hema, the first-mover advantage could count for a lot, says its CEO.
“We believe the value retail concept can have big opportunities in the Middle East… without a doubt,” said Jegen. “All the products that you need for daily life — that’s the promise we offer and deliver at a discount.”
The CEO insists that the stores will only stock its own labels. It’s a strategy that Jegen will not budge on. “We get a lot of questions from big suppliers and brands who want to work with us. We believe we should stay really faithful to our own brand and not share the brands. In a world with online and Amazon making retail really transparent, unique concepts will survive — and Hema is a unique concept.
“The moment you dilute your brand with others, you dilute your strength.”
This is the first time that Hema has signed up for a master-franchise agreement covering multiple markets. Of its current network in Europe, including the UK, the company owns most of the stores while having franchise agreements in individual locations.
“The Apparel Group had been asking us to come to the Middle East for a number of years — they clearly saw this opportunity for value retail,” said Jegen. “Plus, this will also be a great starting point for further expansion into the East — India, Thailand or Malaysia could be fantastic next stage of expansion for us.”
Our UAE stores will have identical price levels to those sold through our UK locations. There will be no additional surcharge over the UK pricing...” Tjeerd Jegen (above) | CEO of Hema