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Cash and carry will change retail

Head of wholesale giant says concept will enable small outfits to compete with the big fish

Sameer K. Mohammad, Managing Director of Jaleel Holdings
Image Credit: Supplied
Sameer K. Mohammad, Managing Director of Jaleel Holdings, says he is ushering in a whole new pattern in UAE retailing with his Jaleel Wholesale Points concept.
Gulf News

Dubai: The UAE's wholesale business is currently undergoing a shift and entering a new era in which it is going to give the large retailers and hypermarkets a run for their money, according to a leading wholesaler in the country.

Sameer K. Mohammad, Managing Director of UAE-based Jaleel Holdings, which owns Jaleel Wholesale Point, told Gulf News that a new trend will engulf the UAE's wholesale trade that could potentially make the groceries and corner shops more attractive and price competitive than they are now.

Currently 350 companies control the wholesale business in the UAE and Jaleel Wholesale Point is one of the largest, especially in fast-moving consumer goods (FMCG).

Powered by modern enterprise software technology, the country's wholesale business that provides a lifeline to retail sector and the consumer market, is gearing up for a major shift which will change the way retailers do business across more than 10,000 groceries, supermarkets and hypermarkets.

The UAE's retail sector, which was once dominated by groceries and small neighbourhood stores, lost out to the hypermarkets and large cooperatives in the mid-1990s when Carrefour, LuLu, Union Cooperative, Emirates Cooperative, Hyper Panda and Geant began to eat into their market shares. These hypermarkets also reduced the mid-sized supermarket segment dominated by Lal's, Choithram's, Hassani, Sunrise, Al Madina, Safeer and others.

The UAE's retail sector is split between the organised retail that represents about 55 per cent of the market and is dominated by the hypermarkets and other organised retailers, while groceries and stand-alone neighbourhood stores represent the rest.

However, this could change back towards a more balanced ratio once the wholesalers and smaller retailers adopt more advanced technology that could reduce overheads to allow wholesalers to offer better prices to retailers, according to Mohammad.

Hypermarkets usually offer greater price competitiveness due to bulk sales and economies of scale that the grocers cannot match.

"This was primarily due to the multiple layers of traders in the chain before the goods got to the grocer. However, we have been able to reduce these layers," Mohammad told Gulf News.

But how is that going to happen? How can the grocers match the economies of scale of the large hypermarkets to pass on the extra margins to the consumer and make products match the prices of hypermarkets? Businesses have to be turned around or re-engineered to be able to do that.

Apparently that's what is happening, "by turning ourselves, the wholesalers, to a one-stop hypermarket where grocers become the bulk buyers", Mohammad says. And that will be made possible by offering the same inventory management system, storage, purchase and sale process adopted by the hypermarkets.”

A local version of the popular cash-and-carry concept gaining ground is the Jaleel Wholesale Point, launched by the Dh1 billion Jaleel Holdings.

This way, Mohammad said, the overheads are reduced and the company can bargain for greater price benefits when buying from brand owners, suppliers and importers.

In an exclusive interview, he elaborated his views on the UAE's wholesale and retail sector. Excerpts: 

Gulf News: What is the current scene in the UAE's wholesale market and how is it changing?

Sameer K. Mohammad: The UAE's wholesale market has, for a long time, operated in the traditional format. That is, purchasing goods from importers, suppliers and directly from the manufacturers' representatives from their warehouses and then selling these to anyone who comes to the shop.

Sales in these outlets were mainly to semi-wholesalers and van salesmen and in the form of credit.

Most wholesalers are still operating in the same way, while many have changed according to the times and have introduced advanced inventory management and storage systems, and delivery to grocers' doorsteps and restaurants. 

What are the changes taking place among the wholesalers?

They are becoming smarter and more efficient in management. You have to remember, most wholesale businesses in the UAE evolved naturally as demand grew due to increase in population. Most wholesalers entered the business to serve the retail sector as a bridge between the manufacturers or importers and the market. In those days, demand drove the businesses, not technology.

However, the influx of hypermarkets has taught us one thing: smart inventory management with the use of technology and bar-coding that helps us to monitor the inventory in a much more effective way.

At the end of the day, we know exactly the volume of each product in store. Every product that enters or leaves our warehouse is updated in the system. This way, we are in control of the stocks. This helps us to manage the business better, as it reduces wastage and losses, and helps clear goods well in time. 

But how is that going to help the retail sector and add sales? Most households will still continue to shop at the hypermarkets for weekly or monthly essential shopping because of the convenience of getting everything under one roof and at a better price.

Here is the point — the technology that we have implemented, especially under our Jaleel Wholesale Point (JWP) platform — allows us to purchase in bulk from suppliers — manufacturers or importers. We are enjoying the same benefits as the hypermarkets. So, we are becoming a hypermarket for the retailers who are purchasing from us at a better price and well in time to sell it to the end-users.

JWPs are designed after the popular cash-and-carry concept in European and US markets, with due consideration to the unique characteristics and requirements of the Gulf region.

They are like large supermarkets where retailers can shop around with huge trolleys similar to what end-consumers do in supermarkets. Presently, the eight Wholesale Points across the UAE stock more than 5,000 Stock Keeping Units (SKUs) in categories like foodstuff, non-food, cosmetics, home appliances and other FMCG items.

So, if we pass on a portion of our margin, then we — the retailers and wholesalers — could collectively offer goods in the same price range as the hypermarkets. 

Could you further explain how you could actually achieve this?

Until recently, the main task faced by small grocers and neighbourhood supermarkets was to meet the varied requirements of demanding customers, who always look for a variety of brands and packs. If they do not find them at the groceries, they will turn to bigger supermarkets.

Another disadvantage of the old system was that small retailers were forced to restrict their stock to a few brands in each category to avail of economies of scale, thus denying the customers freedom of choice.

The vertical stocking of same items eats into their much valued rack space. The overstocking of limited brands also led to bulky expiries, resulting in lack of fresh merchandise. This was all the more threatening in foodstuff and other FMCG product categories.

Even the very existence of small-timers was questioned in the old system and that was when we came up with a single solution — JWP. 

What is Smart Stocking? How does it work for the retailers/grocers?

To encourage retailers to switch to this new concept, we first ask them a simple question: how many days do the grocers takes to sell the goods that they buy today. Smart Stocking was built around the fact that business is not in stocking more of the same SKU but in stocking a larger range and selling fast.

Named Smart Stocking, the concept promulgated by the JWPs, stood for varied stocking of as wide a range of brands as possible but with the same wholesale price advantages and smart use of restricted shelf space in the smaller retail units. Smart Stocking ensures small-scale retailers get their return on investments faster with quick rotations of fresh stock.

We at Jaleel Holdings, are offering a one-stop shop service to the retailers under the JWP concept. This allows the retailers/grocers to purchase in cash almost everything at a very reduced price — lower than that offered by hypermarkets. They come and fill their trolleys with bulk goods, pay and carry them out — almost like the cash and carry system.

This is helping the grocers a lot. With this, they are able to reduce costs and the overheads. With better and smarter inventory management they could make their businesses more efficient and thus match the prices offered at the hypermarket. 

How is Jaleel Holdings managing this change in business and how are the retailers responding to it?

The whole shift to JWP has boosted our business tremendously. We are now a Dh1 billion company, employing 1,300 people in the UAE. Of this, about Dh750 million worth of business is generated by the cash and carry segment.

The retailers are also responding in a big way. We have developed a very strong, loyal customer base among the grocers/retailers. We have packaged them under a new loyalty card programme, titled Jaleel Business Club (JBC) that offers them additional benefits, including promotional campaigns launched by brand owners. We split our customers in five categories based on purchasing power.

We have more than 6,000 JBC members whose average purchase ranges anywhere between Dh500 to Dh20,000 weekly. We plan to raise this number to 10,000 by the end of this year.

On average, Jaleel Wholesale Points serve about 2,000 retailers a day with deliveries to more than 855. Although goods are delivered to customers, the group encourages retailers to visit the Wholesale Points.

About 40 to 45 per cent of the sector is served by our company, which means about eight per cent of the total FMCG turnover in the UAE goes through us.

Cash and Carry

The cash and carry concept was originally created by Lawrence Batley from Huddersfield, UK.

Cash and carry is a form of trade in which goods are sold from a wholesale warehouse operated either on a self-service basis, or on the basis of samples (with the customer selecting from specimen articles using a manual or computerised ordering system but not serving himself) or a combination of the two. Customers (retailers, professional users, caterers, institutional buyers, etc.) settle the invoice on the spot in cash, and carry the goods away themselves.

Though wholesalers buy primarily from manufacturers and sell mostly to retailers, industrial users and other wholesalers, they also perform many value added functions. The wholesaler, an intermediary, is used based on principles of specialisation and division of labour as well as contractual efficiency.

Jaleel Holdings

Jaleel Holdings was established in Dubai in 1972 by M.V. Kunhu Mohammad, a non-resident Indian from the south Indian state of Kerala. The company revolutionised the wholesale business by first setting up its Wholesale Point in Sharjah in 2006, expanding it to eight outlets in four years.

At present, Jaleel Wholesale Points operate in Musaffah, Abu Dhabi; Nakheel, Ras Al Khaimah; Aweer, Al Qusais and Al Quoz in Dubai; Al Wahda Street and University City Road in Shajrah and behind the New Fruit and Vegetable Market in Ajman. JWP also has two dedicated sales offices in Deira, Dubai — at Al Ras and the Gold Souq.

1. Total number of grocers in the UAE is about 10,000.

2. About 60 per cent of the grocers buy at least some part of their requirement from JWPs.

3. There are 350 wholesalers in the UAE.

4. JWP imports about 275 containers a month from many countries across the globe.

5. JWP is the only wholesaler in the UAE which has a cash and carry format where customers can walk in and choose their merchandise.

6. JWP is the only wholesaler to introduce bar-coding in the FMCG wholesale Industry.