Saudi retail giant Bin Dawoods online battle with pandemic

DUBAI: The supermarket business is at the sharp end of the war against the coronavirus COVID-19 pandemic.

Shoppers want to ensure they have the essentials for life in the midst of protective curfews; a trip to the store has become a welcome distraction from “working from home” syndrome; and store operators have had to adapt business models to take account of drastically new circumstances.

Ahmad Bin Dawood, chief executive of the holding company that owns the eponymous store chain as well as the Danube outlets, was ready for the challenge presented by the pandemic from the beginning. “We started at a very early stage, and today I think we are in very good shape,” he told Arab News.

The biggest change in the habits of the Kingdom’s consumers has been the shift to online shopping. Locked-down households have taken to e-commerce as never before, both to reduce social contact and to comply with the restrictions on public movement.

You might be forgiven for thinking Bin Dawood saw it all coming. Three years ago, before any of its competitors, the group launched an e-commerce platform across its operations, and that move is now paying dividends.

“The pandemic forced others to expand their online business, but we have had a dedicated separate company for the past three years. It is run totally separated from the offline operations, right down to the last-mile delivery methods we use,” Bin Dawood said.

Online sales in for a 10-day period in March showed a 200 percent increase over the same period in February, the average order size was over 50 percent higher, and downloads of the the Danube app soared by 400 percent, he said.

While competitors were rushing to beef up their online capability and facing significant technical problems and downtime, Bin Dawood’s systems have been in operation continuously without a hitch.

“When you have time to develop systems over three years, you avoid the problems of trying to do it in a couple of weeks,” Bin Dawood said.

That does not mean it has been entirely “business as usual”. The group has had to take on more staff to man online operations. Since the outbreak began 600 extra workers have been hired, many of them former employees in the restaurant business who found themselves out of a job when the restrictions closed their workplaces.

“The government liked that idea and encouraged all the retailers to do the same,” he said.

Other costs have also increased since the crisis first hit. In Bin Dawood’s staff accommodation facilities, social distancing measures have required managers to allocate fewer people per unit, and transport facilities such as buses and coaches have also been operating with reduced passenger loads.

“There might be seats for 60 people, but we only put 25 on a bus now,” Bin Dawood said. “Costs have increased, but we have not seen any drop in sales. In fact, the average basket size is 52 percent up.”

Shoppers are going for long-life products such as canned foods and pastas, as well as (inevitably) cleaning and sanitizing products like soaps and detergents.

“People are trying to maintain their supplies, but it does not amount to panic buying. They are stocking up because they don’t want to go out as frequently, to protect themselves and others. So fresh and perishable items, like fruit and dairy, are being ordered online,” Bin Dawood said.

Some supermarkets operators in the Kingdom have warned about threats to food supplies from transport restrictions, but Bin Dawood has not seen any significant problems in this area.

Likewise, some early problems with deliveries during curfew hours, which other operators reported, have affected Bin Dawood less because of their dedicated delivery teams, as opposed to relying on third party courier services.

“The food sector is generally excluded from most of the restrictions, like hospitals and pharmacies. But we’ve been working with other retailers, as well as the ministries of trade and telecommunications, to secure the necessary permits. I don’t think it is a problem any more,” he said.

He is quick to praise the Saudi government for its handling of the pandemic crisis, which saw travel restrictions and bans on gatherings, even in religious centers, very early on.

“Saudi Arabia has comparatively one of the lowest number of cases anywhere because they took precautions at the beginning, even stopping people en route to Makkah,” he said.

The city — which was the birthplace of the Bin Dawood family business in the 1980s — has been reported as a center for COVID cases, but again the CEO believes the early government measures put in place will help deal with what he called “not that many infections.”

He also believes that Saudi Arabia is better placed to face the challenge of the pandemic thanks to the policies put in place under the Vision 2030 strategy to diversify the economy away from oil dependency.

“Saudi Arabia is robust. One of the major goals of Vision 2030 is to make the Kingdom a powerhouse for manufacturing, and it has also helped put it in a better position to secure the economic essentials, especially in food supply. Maybe, like some other countries, Saudi Arabia will try to limit exports to be able to satisfy internal demand,” Bin Dawood said.

Nonetheless, he recognizes that the economy may take a short-term hit from the global economic downturn and the fall in oil prices because of shrinking global demand for energy. “I see it as a temporary thing. If we control it well, the country will open up again, and long term it’s going to be beneficial. We have seen countries like China opening some sectors, and that will happen in Saudi Arabia too,” he said.

Once the pandemic is over, Bin Dawood will resume its ambitious expansion plans in the Kingdom. The two brands in the group — Bin Dawood and Danube — have been expanding at a fast rate in recent years, opening around 7 stores each year since 2016, and that is set to continue. There are currently 31 stores across the two chains.

The Bin Dawood name, true to its Makkah origins, is targeted toward Saudi citizens and pilgrims, he explained, while Danube is subtly different. “It is aiming at people who want a different experience and shopping environment.” Both chains aim to expand in high population areas and “quality destinations.”

The group is also likely to resume its transformation from a family business to a more modern corporate structure. Before the crisis came, there was increasing speculation that it was preparing for an initial public offering (IPO) and that a list of big-name advisers had been signed up to bring it to market.

The CEO will not be drawn on the IPO. “This was just speculation and rumors. Once we have things in place and if we decide to do that, we would announce it officially,” he said.

But even if an IPO does not happen, the progress toward being a more institutionalized business, with enhanced standards of corporate governance, transparency and employment policies, is well underway. The arrival of Investcorp as a big shareholder in early 2016 accelerated that process.

The group is debt-free and cash-generative, Bin Dawood said, so there is no pressing need to raise new capital. “But an IPO is not just for fundraising; it’s also about how to strengthen the company and introduce best practice across the board,” he said.

Whatever the future holds in a corporate sense, Bin Dawood is likely to retain the legacy of a Saudi family business for many years to come.

The current CEO took up that role in 2014, but he had been steeped in the business from an early age. As a child, he would help his father Abdulrazzaq and two uncles, who are still leading the business, “doing odd jobs like bagging groceries and helping the cashiers,” he said.

During Hajj in Makkah, he and his brother Waleed (now chief commercial officer) would stay in the city for a whole month, helping in the eight stores there.

“I have really fond memories of those times. I was cocooned in the business, taking it all in — the thousands of pilgrims coming to the stores and me serving them. I’m very proud of this legacy,” he said.