UAE’s hypermarket operators focus on convenience-store segment to boost revenues

The hypermarket operator’s Lulu Express segment, which opened its first shop in 2011, now has 17 outlets across the UAE and Qatar. Ravindranath K / The National

Nick Griek is among the growing number of UAE residents who eschew shopping at hypermarkets in favour of a weekly “big shop” at local convenience stores.

“I only came in [to Lulu Express] for some water, but have a new toothbrush, a USB cable and some flowers for my girlfriend,” said the Abu Dhabi-based Croatian catering manager.

“I don’t go near the hypermarkets now. These new [convenience] stores are clean and you can trust all the branded products on sale. Why fight for a parking space in the big malls when I can get most things I need around the corner?”

The competition for supermarket customers in the UAE is increasingly visible at small convenience stores and suburban environments.

Carrefour, known for its hypermarkets in some of the UAE’s biggest malls, has opened its third “Carrefour City” concept in Dubai’s BurJuman metro station. It follows Carrefour City Union and Carrefour Al Fahidi, which are both under the RTA partnership.

The hypermarket operator is looking to exploit the trend of shopping at small, local shops rather than once-weekly shopping at hypermarkets.

“As the demand for convenient retail experiences increases, and the number of residents and communities in Dubai continues to grow, we always look for new ways to adapt our offering,” said Frank Rouquet, a vice president of Majid Al Futtaim Carrefour Market. “Partnering with the RTA allows us to reach a new shopper segment through our neighbouring convenience store concept.”

Likewise, Lulu Hypermarket is also increasingly focused on the convenience outlet segment. Its Lulu Express concept, which opened its first shop in 2011, now has 17 outlets across the UAE and Qatar. In more mature markets the spread of small shops has led to falling revenues at hypermarkets. However, this is not viewed as a significant problem in the UAE.

“Our Lulu Express concept complements the bigger stores, not cannibalises them,” said Vijay Nandakumar, the head of corporate communications for Lulu Hypermarket.

Mr Nandakumar said: “Any big brand needs to be close to its residents and smaller stores open more options for both shop and shopper. We don’t discriminate on price either. Products cost the same at Lulu regardless of where you buy them, which is not the same as other operators. We will continue with our expansion of ‘Express’ but it will be balanced by hypermarket openings.”

Industry watchers forecast a boom in the UAE convenience sector but point out that hypermarkets remain customers’ favourite shopping venues.

“We expect the number of convenience stores to double in the UAE over the next five years,” said Diana Jarmalaite, a research analyst at Euromonitor International.

“In western Europe the average number of convenience stores per 10,000 people equals to 171 outlets, while in the UAE this number is only 30 outlets. Hypermarkets are still popular. In 2015 the market size for hypermarkets is estimated to be at Dh32 billion, and is expected to grow by 5 per cent [a year] from 2015 to 2020.”

Follow The National's Business section on Twitter