Dubai-based retail group Landmark has launched the first four stores in a planned chain of new discount supermarkets.

The stores, known as Viva, were launched on Wednesday just two months after a new value-added tax (VAT) has been introduced at a rate of 5 percent on almost all food products and beverages sold in the United Arab Emirates.

Landmark, the parent company behind several famous retail brands such as fashion chain Splash and homeware retailer Home Centre, opened two of the stores in Sharjah, one in Dubai’s Deira district and one in Ajman. The group’s officials said they plan to open 11 more branches in the UAE, but did not say when.

“We have seen (a) rise in prices, obviously the five percent (VAT) have been completely handed over to the consumer,” Georg Fischer, Viva CEO, told reporters on the sidelines of a press conference at one of the two new Sharjah stores.

Fischer said all of the food and beverage products offered in Viva supermarkets will be 50 percent lower than products offered by competing supermarket chains. He said that this would help customers to save money and lower the impact of inflation caused by VAT.

However, both Fischer and Landmark chairperson and CEO Renuka Jagtiani said the decision to launch Viva was first discussed three years ago, long before VAT plans were announced and was based on studies of global trends. The pair declined to disclose the amount of capital invested in the chain, or the timeline for it to breakeven.

“We are focused to make shopping cheaper by providing high quality exclusive brands (at) a significant lower price… We are a discounter,” Fischer said during his speech at the press conference.

He said the chain would offer a variety of the most frequently-purchased food items. The Sharjah store featured a selection of vegetables, fruits, juices and chocolates, along with other goods.

Landmark Group vice-chairperson and CEO Renuka Jagtiani argued that the VAT impact on retail is temporary.

She said that customers would get used to higher prices felt as a result after VAT after a “settling period”.

“We have all seen a great December…and you will see a settling in time,” Jagtiani told Zawya on the sidelines of the launch event. “From whatever we have seen in other parts of the world, it is three-to-six months,” she said.

The UAE and Saudi Arabia introduced VAT from January 1. As yet, they are the only countries from the Gulf Cooperation Council (GCC) states that have brought in VAT. In 2016, all six GCC states agreed to introduce VAT as a mean to diversify their sources of income.

For more on  the introduction of VAT to the GCC, click here.

(Reporting by Yasmine Saleh; Editing by Michael Fahy)
(yasmine.saleh@thomsonreuters.com)

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