Carrefour isn't ceding even a yard to Spinneys in the hard-fought retail game
A tiff that looked like it could turn into a cafeteria food fight has fizzled out into a schoolyard football match, and Carrefour Country Director Herve Majidier says he will be the one scoring the goals, leaving the competition short of breath.
Last month, Majidier called Business Today Egypt to respond to comments Spinneys Managing Director Michael Wright had made about Carrefour in the magazine comments he believes to be inflammatory and untrue. Like a proud politician who has just found himself in the midst of a negative campaign, Majidier, a plain-speaking Frenchman with a cordial manner, prefers to refer to the competition with pronouns or says, "I don't even want to mention the name."
"I am not going to reduce my level and get into the special and small details," he says. "It is not for me to tell the people, 'I am the best, because we are very important people.' We are nothing. We are nothing."
What surprised Majidier most was that a new player would ruffle the feathers of locals so early on in the game. Although he did not say it, the history here is reasonably clear: Britain's Sainbury's never admitted it, but insiders say its souring of relations with its local suppliers contributed to its ignominious exit from the local market in 2001.
"We never have to underestimate any competitor any competitor," he says. "No one can tell me right now I disrespect any competitor. Who is he? What is his location? What is his size? No. One competitor is one competitor."
Majidier tipped his hat to big retailers including Mansour Group, Alfa Market and Radwan Ogeil, among others.
He suggested that rather than entering a new country trying to teach its competitors about business, Spinneys would be better served by trying to learn something.
"[Other retailers] were here before [Spinneys], and they will be after them, for a long time," he says. "So they don't need someone to come in here and say, 'Hi, I am here and listen to me, I am teaching you A, B, C, D. Your location is not good. My range is good. My marketing is better than you.' No, please. Please, just wait. The future will talk."
Retailing Locally
Rather than offering direct criticism of his competitor on the record, Majidier chose to use this forum to extol the virtues of his own company, its contribution to the economy, and to suggest how a new company should operate in a new environment. While his claims of assisting the national economy are a bit inflated, he did give a nod to the Nazif government for creating an atmosphere that has allowed Carrefour to flourish.
Majidier says that by buying and selling huge volumes of products, it has helped keep inflation rates low and prevented less scrupulous companies from fixing prices. Moreover, Majidier's research says the average Egyptian family is now making more money, which translates to more customers for him.
"There are a number of people in the 'C' category changing year after year by becoming 'B,'" he says. "How?
If two years ago only one person in the house was working, now two people are working."
He also says Carrefour has helped unemployment by keeping more than 99% of its staff Egyptian, although it only operates four stores and employs about 2,000 people. By helping maintain and sell an inventory of more than 50,000 stock-keeping units (SKUs), those 2,000 staffers have helped keep prices lower across the nation, he says.
Meanwhile, Carrefour is working to export more products from Egypt to its other outlets in the region, including Oman, Qatar, the UAE and, soon, Jordan. Majidier has also exported expertise: He has sent about 180 Egyptian managers to other regional branches. In terms of exporting goods, Majidier says Carrefour's relationship with suppliers in the market for the last four years allows it to export better than a new company not mentioning any names.
"This is the role that some category of competitor cannot pretend to be able to do it, in this way, in this short period of time," he says.
Not that Spinneys is known for importing everything. One of its greatest strengths has been the promotion of its in-house brand, from cleaning products to foods that bear the company name and logo. Traditionally, most of these products have come from local manufacturers, unless the national market lacks the capability, although it would be hard not to find an adequate local maker of soap or spaghetti.
What Majidier says Carrefour will not do, however, is make deals with suppliers to give their products a more prominent display in return for favorable prices. Spinneys, on the other hand, has been able to keep its prices down not only by its huge volumes of sales, a method all hypermarkets employ, but by putting up massive displays of its suppliers' products.
But these products are often foreign brands like Gillette and Pepsi.
"Any supplier will be happy to see his name ten times or a hundred times in many locations in my stores," Majidier says. "I don't have this right to misuse my space in this way. I don't have to, by favoritism, give some place to some supplier because they are giving me some huge amount of money and forget about the others."
Location, Location, Location
One of Spinneys' proudest accomplishments was securing a 9,000 square meter space in CityStars in Heliopolis. Wright also says that despite its prime location, he has a better cost structure than Carrefour's outlets. Spinneys accomplished this by giving Golden Pyramids Plaza SAE, the owner of CityStars, a 25% stake in the local store.
Majidier insists Carrefour could have taken the space, but rejected it.
One problem, he says, is that parking is not free at CityStars, and a free place to ditch your car is a prerequisite for Majidier. "We know how and why we have to go in some area," he says. "Before we go into some area we are not going to take into consideration our relationship with the owner of the building."
He admits though, that the neighborhood of CityStars itself is populated with some of the most desirable consumers in the country. But Majidier might just have plans in the works to open one of his own branches near his competitor. "Maybe after one year we will be in the end of this street within two minutes of that area. Just wait and see," he says.
Wright also questioned Carrefour's choice of location in general. Carrefour lacks branches in crowded city areas; instead it has opened stores on the highway roads, sometimes in seemingly remote locations, like its branch on the Alexandria Desert Road. But Spinneys is not the only store benefiting from the customers visiting a shopping mall.
The Maadi Carrefour branch might have opened near the outskirts of Cairo, but its City Center mall is filled with high-end retail shops. The old parking lot has been razed and 42 new stores are replacing it. City Center, which also has an outlet in Alexandria with a gleaming new Carrefour, is owned by the same parent company, Majid Al-Futtaim Group, the master franchiser for Carrefour in the Middle East. Carrefour undoubtedly benefits from having its boss as its landlord.
Spinneys' location might look great on the surface, but Majidier warns not to be fooled by appearances.
Some of his former employees who left for Spinneys have learned that lesson the hard way.
"They took most of our managers by offering them a bigger salary," he says. "And you know what? Most of these people either have been terminated or they want to come back to us. But the manager who left me, I will never recruit him again."
Majidier has a big black book on his desk with bright red letters marked, "Confidential." He opens it at a distance, displaying pages upon pages of research detailing national population and financial trends. Like Wright, Majidier says he never opens a new store without all the proper analysis. But often it is best to enter a new market as early as possible. Carrefour now has the distinct advantage of a few years' experience and the research to back it up. Spinneys might conduct surveys of an area, only to find Carrefour has already secured a location.
Already, Majidier promises 10 new stores will appear in the next five years, with more to follow. Maps on his wall, also confidential, have colored dots indicating where the future sites will be.
The locations keep getting better every day, he claims, stopping short of divulging the details of the growth of his stores. Each day new construction finishes in the areas surrounding his stores, filling what was once a relatively empty area. As the city limits continue to expand, maybe some day his store on the Alexandria Desert Road will be a popular residential zone.
In the end, Majidier banks on his simple formula: "If you built a nice store with a huge range, good choice, nice services and especially good services by only asphalt in the middle of the desert, the customer will come to you. Because there is the motivation for that," he says.
He says he does not get customers through slick ad campaigns or half-baked promotions. "This is poisoning the life of customers. The customer has to have a clear mind by buying, testing and choosing the product that he loves not by telling him 20 times per day on the radio or the TV, 'Ding, dong. Ding dong. Buy this.
Don't buy that.' No, no. Let them test. Let them continue in their own way."
Majidier claims Spinneys has imitated Carrefour's research, and probably will continue to do so. There is nothing wrong with that; as Majidier says, much can be learned from the locals who have been doing it successfully. But the original is usually better than the copy.
"The donkey can become a good donkey, but [it can] never become a horse," he says.
By Andrew Bossone
Business Today Egypt 2006
