The aging retail icon has had a major facelift under new owners and hopes to become a much-needed middle ground in a heavily polarized consumer market
Who doesn't love a good department store? A single trip for everything you need, for every family member and room in the house, and a few frivolous purchases to round it off. One-stop, hassle-free shopping is underrated, especially in Cairo.
But with the high-end market cornered by international hubs like Beyman and Citystars and the mid-to-lower end covered by the ubiquitous, anonymous and dusty mall, where will the newly revamped Omar Effendi fit in? Following deep internal restructuring as well as a significant facelift, how will the long-dormant giant position itself within Cairo's polarized retail geography?
Omar Effendi CEO Arnaud Mailhe seems more than confident that a new team, new ownership and new brand image will build on iconic brand recognition to make Effendi a major player in Cairo and beyond.
"Omar Effendi is notorious. The notoriety of the brand is extraordinary. You say Omar Effendi, everybody knows it," says Mailhe. But while the brand might be notorious, "the image is bad," he explains, adding that the brand itself is in for a makeover.
Indeed, everybody in Egypt seems to know about the store, but nobody seems to want to go. Known for dilapidated premises, haphazard displays, mediocre product and disorganized paperwork, the mammoth brand has descended into a murky retail grave.
Since the Saudi-owned group Anwal brokered the privatization of the public company in 2007, Omar Effendi is aiming for a complete overhaul. Anwal finally broke their silence in July 2007 when Sheikh Jameel Al-Gainbit announced the finalization of the contract with the International Finance Corporation (IFC), closing a deal for $40 million in financing for the massive resurrection.
A Rough Start
Established in 1856, Omar Effendi became the largest department store in the country, and today many of its 82 nationwide stores are considered historical landmarks.
While the sale of a national icon to a non-Egyptian and questions over the fate of its iconic buildings caused a major scandal, the current unfolding drama centers around labor relations. Like many private- and public-sector workers weary of roaring inflation and stagnant wages, staff at Omar Effendi (and its suppliers and partners) feared not just cuts to wages and perks, but being declared redundant overnight.
Mailhe says that the first step was making sure all employees wanted to be there. The controversy that followed, he says, was unplanned, and the ensuing backlash prompts him to tack the issue at the beginning of the interview. "We told employees [that Omar Effendi would be] organizing an early retirement program, that whoever wants to apply is welcome, and that whoever wants to stay in the company will stay in the company. We are not forcing anyone to leave, it is [the employee's] choice."
The program would mean that no one's position would be made obsolete, but there were some limitations: Only 2,500 employees (out of 5,400) would be allowed to take advantage of the early retirement program.
Getting the House in Order
The next step was organization, and a lot of it. With his team, Mailhe began to target structural and operational issues, as well as a serious marketing plan, before moving to external renovations.
"Omar Effendi is a prestigious company, a big company, but it was totally disastrous. All you could see were tons of papers, tons and tons of papers. No computers, no email, no internet, just papers, and this [wasn't] including international papers. The warehouses [weren't] even [warehouses]. On top of that, there were so many employees. Disputes and thousands of court cases, lots of bad press and a very bad image in terms of brand." Mailhe contrasts this with the asset of Omar Effendi's sheer number of stores.
"So the question was, how do we do the turnaround? What do we have to do?" Mailhe says the key issue in the industry is a communications system. "Communication between all of the stores, between the warehouses." This included introducing a computer system for inventory, a system between warehouses and stores and training the various departments how to use basic technology to increase efficiency and create a well-oiled retail machine. To this effect they employed the services of international office communication specialists Calynde, which implemented a "whole new system, creating an archive for human resources and accounting."
The aim was a network that would operate cohesively, in contrast to the company's previous system. "We are trying to create an image in the company, what counts in the company is the store and the warehouse. Before, there were two parts of the company: one part was the warehouse, which was totally forgotten, the other was the head office," Mailhe says, pressing that the smooth flow of work and product would be the clinching factor to expand the brand and create this image.
While three original warehouses are still undergoing renovations, activity has been consolidated in a single, fourth warehouse which, according to Mailhe, functions perfectly. Warehouse employees were given specific jobs to do in the newly efficient space.
"In the head office it is a bit more complicated; making accounting and all those elements flow smoothly," says Mailhe. But making the administrative function is well under way, with plans to move the head office to Nasr City.
"Completing this phase cost LE 75 million. On top of that, now that we have seen who wants to work with us, we have to add new blood to make that happen. Omar Effendi has hired about 350 new employees, 120 in the head office, all the rest in the stores," he says. the new hires are either completely trained or in the process.
One of the elements that the Omar Effendi board of directors seems adamant about is the retraining of existing employees, noting that there is no point in adding all the technology if employees don't use it efficiently.
"We do intensive training in most of the functions, from basic things, starting with cashiers. We have to find cashiers. We do training for store managers. In [these] trainings it is mostly internal," says Mailhe. All employees of the department store go through training in accounting, marketing, and the rest of the company. "On top of doing training we are putting rules, procedures, policies for people to start to understand that it is not just a one-man show company. It is becoming a company with jobs, job descriptions, procedures."
The Effendi Gets a Makeover
After tackling the inner workings, the more fun and obvious changes have been made to the actual store sites, taking the Omar Effendi network from weak to chic in record time. Mailhe likens the transformation to the glamorous makeover of a grand diva, a point he illustrates with photos: of legendary Egyptian bellydance star Fifi Abdou and international superstar Beyonce Knowles.
"For the store itself, we split the renovations into four and said we are going to renovate all the stores. We have a plan that has started now [to be completed by January 2008], where we will have finished the entire facade of the company, from store to warehouse," says Mailhe. This basically means that everything affiliated with the Omar Effendi name, from the warehouses to the uniforms, will be aesthetically clean and pleasing to the eye.
"At the same time, the second part, we have started the renovations of the back of the store. Things that customers cannot see, but counts for me: AC, plumbing, electricity," continues Mailhe.
"The third phase is the preparation of the store [itself]: flooring, walls, electricity, painting, toilets. This started in September and will be totally done by the end of March 2008.
"The fourth phase, which has started in some stores, is the display. How are we going to display the clothes in the stores? This phase has [recently started] and will be done by March 2008. This includes all the display units, from cashiers to shelves for televisions, to spaces for clothing and apparel."
The redesign is most definitely on the right track. At the Adly branch Downtown, gone are the big buckets filled with clothes, the haphazard and unsightly looking masses of technological gadgets thrown on top of one another. In their place are clean hardwood shelves displaying recorders, mp3 players, stereos, televisions and other gizmos. The ceilings are high, the walls eggshell white and the floors are clean and structured lightwood parquet. The sales assistants sport uniforms in the electric blue that is now the signature color of the store.
The second floor, which displays the furniture, is still being renovated, but until then, the ground floor displays three couches and a section dedicated entirely to clothes. The clothes are hung up according to size and style. It is organized and clean, a far cry from a few years ago, when it was impossible to find what you needed, and when the assistants were incomprehensible and inept when queried. This time they were nice, efficient and polite, pointing me in the right direction when I asked for an item.
While physical renovations take place, the team is also thinking of the conceptual and marketing plans needed to create an esteemed and respected brand that people can relate with quality and affordability. No small task considering the store is targeting everyone, from all social standings, ages and a wide demographic that covers most of Egypt.
"We have to invest in the concept brand. What is Omar Effendi? What do we want to give as an image and whom do we want to target? We have to be the number one retailer in Egypt," says Mailhe. Mailhe has lofty aspirations of becoming a huge retailer, in the line of multinational giants like Virgin Megastores. Branding concepts, which he notes should be "in each and every element in the store" include plans for a new clothing line designed by a French designer.
The Goods
Products sold at Omar Effendi are about "70-80% made by Egyptian producers, while about 25% are imported," says Mailhe. "Our job is to look for the best products for our stores. We have three options as retailers. [First] we can just buy and sell, with about 60% of the products. Or, when we find there is a better player, we don't buy and sell, we will bring someone into the stores," an approach recently taken in a deal with i2 and Etisalat. Mailhe says that his company is not an expert in mobile technologies, so it will instead work with businesses that are to ensure that their costumers get the best.
Finally, Omar Effendi will also attempt to push the smaller Egyptian retailer into a competitive market. "The third way of doing business, we have some suppliers that we could sell in all the stores, but they don't have enough capacity to supply all the stores. We will do the job with them in three or four stores. We will work to help them increase capacity, and as they grow, they'll go to seven stores and then 10 stores.
"I want to be sure that whatever I am selling will be affordable. Even if we are selling a flat screen television, in Omar Effendi you will find the best price for that. Wide range, excellent price and reasonable availability of all brands," says Mailhe.
Each store will be servicing its specific clientele. "In the Ahmed Orabi store, I will have international brands; in Naga Hamadi, we're going to sell a hand washing machine, because there is a market for that. In each of the stores we have to understand what is the need of that market. But certain things will remain the same [in each outlet], such as the decoration and the way people are dealt with in the store," says Mailhe. "
Finding out what each store is going to require is a major aspect of the renovations. A marketing team of more than 20 employees is doing just that, analyzing buying patterns and determining what clients want and expect from each store location. Additionally, Mailhe is planning on extending the 82-branch network to include outlets in Sixth of October City and Qattameya.
With 350 new employees and over LE 350-400 million spent bringing the store into the twenty-first century, so far the new Omar Effendi has moved beyond all expectations. Profits have risen, and expected revenues for March 2008 are LE 30-45 million in sales, and "more than double that each month in the coming two years," according to Mailhe.
The fresh face of Omar Effendi may well become our very own Target or Wal-Mart: a convenient, standardized shopping center with affordable and stylish goods crafted mostly right here. If oamr Effendi manages to find its niche in the market, shopper might have a middle option. And there is no such thing as too many places to go shopping.
By Hassan Hassan
© Business Today Egypt 2008
