Closures of small groceries leave gap in retail market
MUSCAT: The Sultanate of Oman, a tiny Gulf country with a population of just about 2.5 million expatriates and Omanis, is witnessing a sudden boom in retail business as a new breed of multinational and local hypermarkets is expanding at an unprecedented level.
Generally the retail sector’s status offers an indication of economic health in any country. But in Oman, despite economic stagnation in other areas due to declining oil production, a number of new multimillion-dollar hypermarkets are coming up with big plans to tap an expected future market growth. The process started with the entry of two leading UAE-based retail chains, the LuLu Center and Carrefour, and appears to be accelerated by their expansion plans and the entry of new players. The main target is the retail market left by the closure of several thousand grocery shops previously owned by expatriates. The focus of new hypermarkets is the million-strong population of Greater Muscat and Batinah regions. The population in Seeb-Batinah is about 800,000. Oman’s population is growing by 2 percent per year.
Leading retailer LuLu, of India’s Emke Group, is constructing two major hypermarkets in Oman. While the LuLu hypermarket in Al Ghubra a residential and industrial area will be ready in the second half of 2004, the group has announced plans for its second hypermarket near Darsait, a prominent residential area. The UAE-based Emke Group of Companies, with markets in the UAE, Qatar, Kuwait and Oman, claims that it is making the biggest Indian investment in the Gulf region. LuLu is the company’s branded retail outlet.
The group made its foray into Oman in 1999 with LuLu shopping center in Salalah, hoping to become the country’s No. 1 in retail business. A group spokesman did not disclose future investment plans or other project details, but observers say that at least $15 million is required for one hypermarket. If the plan is to match what Carrefour has in Seeb, the EMK group will be investing tens of millions of dollars for its two hyper market projects.
LuLu has long-term plans to expand retail outlet networks in a number of places in the interior where “Omanization” (replacing expatriates with nationals) is in progress. Emke Group has already identified many interior cities to set up its retail chain of supermarkets, department stores, exclusive concept stores and shopping malls, the group announced recently. The hypermarkets in Darsait and Al-Ghubra will be one-stop shops for all the family requirements, including foodstuffs.
The Sultan Center (TSC), the first leading Kuwait supermarket chain to enter the Omani retail market, plans to construct its second hypermarket in Al Khoudh near Seeb an up-market residential area. The proposed new hypermarket bigger than the Qurum outlet will be located near the now defunct Sultan Shopping outlet. TSC, with 11 major hypermarkets in Kuwait, is also planning to utilize the new opportunities emerging from the closure of expatriate-run small and medium supermarkets in the interior by constructing a chain of 30 medium to large supermarkets in various wilayats.
The new chain of 30 supermarkets, which is intended to fill part of the vacuum created by the departure of expatriate-run groceries, and interior supermarkets will be opened in 2005, says Loay M. Mustafa, Marketing Manager, TSC, a leading supermarket chain in the Middle East currently expanding in other Gulf countries too. Recently it acquired seven outlets of Safeway in Amman, Jordan.
According to Mustafa, the new outlets will be positioned between the Sultan Center hypermarket and the convenience stores like Select and Shell attached to filling stations. TSC is the first hypermarket in Oman established five years ago. Mustafa claims that other chains like Carrefour and LuLu Center followed the Kuwait-based chain, creating strong competition in the retail market. The new Sultan Center hypermarket in Al-Khoudh, due to open next year, will introduce warehouse shopping a new concept in Oman’s shopping business. “We expect more potential in this market. We have a very positive outlook about Oman’s retail and wholesale sectors. Sultan Center is investing in new outlets due to the long-term business prospects in the Sultanate,” Mustafa says.
Oman’s fast-moving hypermarket chain Carrefour entered the Sultanate in 2002. A joint venture of the Majid al Futtaim and Carrefour France, Carrefour changed the face of retailing landscape in Oman. More than 2 billion people worldwide shop with the group every year, and the hypermarket is promising over 100,000 items always in stock. In order to attract Omani customers in Seeb, the group has selected a convenient location with easy parking facility.
The Carrefour outlet in City Center attracts nearly 100,000 customers a week, said its manager Said Ibrahim al-Khasim. City Center, with a 44,000-square-meter shopping floor, was constructed with an investment of more than $20 million.
The Al-Bourj Hypermarket was started by the Royal Guard of Oman in the immediate vicinity of City Center. Al-Safeer, another hypermarket from Pick and Save group of the UAE, has also started recently. Spinneys, a leading player in Oman’s supermarket business, left two years back but has staged a comeback. Similarly, the Choithram group of the UAE, which managed the Al-Fair Chain of supermarkets, sold its retail division to Mattrah Cold Stores, which is running the Al-Fair and Spinneys outlets.
Despite the hype about hypermarkets, many malls are not generating enough income to maintain huge overhead cost. The big question now, according to industry analysts, is how many new hypermarkets and retail chains will remain profitable in a saturated market like Oman.
V. M. Sathish Special to The Daily Star
© The Daily Star 2003
