The world of retail may be chasing its growth prospects online, but don’t count on the Lulu Group to join in the mad rush.
“Price, quality and convenience have always defined retailing — if one can guarantee all three, there’s no reason why brick-and-mortar should lose out to online shopping,” said Yousuf Ali M.A., the Lulu Chairman and Managing Director. “As long as we can find new locations for our hypermarkets that are as close to our consumers as possible, we will have people coming to our stores. We already do the price and quality right.
“No, I’m not going to be overawed by the threat of online retailing — not in the Gulf, India or any other territory where we are.”
In fact, the Lulu Group will be doubling down on its new openings. For this year and the next, the plan is to add a further 12 locations, mostly in the Gulf territory. That would take the hypermarket operator closer to the 160-store number. Each of these would entail costs of Dh60 million to Dh100 million.
“Each new district or neighbourhood that gets created in the UAE opens up another opportunity for us,” said Ali. “Can online retailers cover all of that geography and at the prices our supermarkets offer? I don’t think so.
“So far, I haven’t seen anything to suggest that online shopping is taking away business from us.”
What Lulu will do is mix a bit of online into its brick-and-mortar business. Within the next three months, it will go live with an upgraded “omni-channel” service, whereby someone in the UAE can do their purchases online through the Lulu web portal and then pick their bag of goods from a Lulu hypermarket within their neighbourhood. Pilot tests have been going on for some time, using shoppers within Dubai.
“Mixing brick-and-mortar and online is the best formula for markets such as the UAE,” Ali added. “It can never be about online alone for shoppers here or some of the other Gulf markets.
“Because we have such control on our product prices and costs, I think in time the omni-channel will become profitable as well. At some point even push it to around the 10 per cent mark of our sales.”
“Whatever be the format, if we keep offering the best price options, the shoppers will be there for us. Because we source in such volumes for our 140 plus locations, we can ensure the most competitive online prices as well. It’s not something that the online competition and even most of the other supermarket operators can duplicate.”
Between now and 2021, the UAE will see a surge in new mall capacity, with the northern emirates joining in as well alongside developments in Dubai and Abu Dhabi. The Lulu Group through its subsidiary Line Investments is lining up new mall openings in Umm Al Quwain, Sharjah, Dubai Silicon Oasis and Abu Dhabi’s Khalifa City. The combined investments on these are around the Dh2 billion mark. (In addition, there are malls being developed in India, including one in Lucknow, the capital of Uttar Pradesh, India’s most populous state.) “For the immediate future, at least, these two markets should keep us busy,” the Chairman added. “But I will not completely rule out new markets for malls.”
Even as Lulu adds to its locations, it is focusing just as much on the back-end, which is where the sourcing of merchandise for its stores take place.
These distribution and food processing hubs are already in place in India, South Asia, the US and Europe. Right now, the Group is placing a lot of attention on possibilities in the UK.
“We have had a processing and distribution facility in Birmingham and the city council has just provided us land for a bigger one,” said Ali. “Work will start on it next month.
“We do not want to be limited to a handful of sourcing markets — spreading them out will be a major priority. It’s in keeping with the nature of shoppers at our hypermarkets — where possible we want to have products right from their home markets.”
Lulu acquires taste for property in UK
The Lulu Group will continue exploring possibilities to pick up niche properties in the UK and integrate them into its real estate portfolio.
“We did that with the Great Scotland Yard building in London (for £110 million (Dh540 million) in 2015) and then the Waldorf Astoria Edinburgh — The Caledonian (for £120 million in January this year),” said Yousuf Ali M.A. “The time is right for selective buys of vintage properties, and the UK is where you see quite a lot of them. I wouldn’t mind doing more.”