https://arab.news/ywtzk
- COVID store closures fail to dent retail giant, as big expansion plans on the cards
JEDDAH: Saudi retail conglomerate Fawaz Abdul Aziz Alhokair Co. (Alhokair) announced earlier this month a partnership with shopping center operator Arabian Centers Company (ACC) to acquire a majority stake in UK-based e-commerce platform Vogacloset, in a deal worth SR68.85 million ($18.36 million).
With Saudi consumers stuck at home due to coronavirus travel restrictions and physical malls shut at various periods over the last 12 months, it is no wonder Alhokair is keen to buy into the Kingdom’s surging e-commerce sector.
In fact, in its full year report for 2020, it recorded a 311 percent surge in online activity in the first quarter of 2021 compared with the fourth quarter last year.
Despite this ambitious entry into cyberspace, Marwan Moukarzel, CEO of Alhokair, confidently told Arab News that in-store shopping is not going anywhere and remains a healthy business sector for the company, despite the events of the last year.
“Retail is here to stay,” Moukarzel said. “It is a cultural thing; it is an entertainment destination and family destination above all.”
And the statistics prove him right. Despite the challenging year, when overall revenue for 2020 was down 1.6 percent year-on-year to SR5.342 billion, resulting in a loss of SR681 million, earnings per square meter was up 3 percent to SR124 and revenue per hour was up 7 percent to SR980.
Moukarzel is putting money behind his big words, with Alhokair planning to open about 57 food and beverage (F&B) outlets in the next 12 to 16 months and eyeing at least another 50 stores in the fashion, cosmetics and beauty, sports goods, and leisure space. And, on top of that, the company will also finalize acquisitions and franchise rights in the gadgets, electronics and multimedia space.
Retail outlets closed in the Kingdom on March 16 last year, and reopened and shut again at various stages throughout the year, but Alhokair took several steps to maintain its business balance. The company benefited from the government’s SANED program, which covered 60 percent of wages for 70 percent of its Saudi staff. In addition, Alhokair managed to secure rent relief from its landlords for the closure periods.
“2020 was tough, but there were also opportunities. It made us think of how can we evolve as an organization, how can we change, and be more agile and resilient,” Moukarzel said.
Marwan Moukarzel, CEO of Alhokair.
He said that the Saudi retail market opened up faster than most markets in the region and internationally, too, especially after the government allowed stores to partially open in Ramadan (June) for six-hour slots during the lucrative shopping season.
As part of its strategy, Alhokair also revamped its network of 1,580 store locations across 13 countries. While 308 non-performing stores have been closed since January 2019, 58 new outlets have opened in more attractive locations.
Across the company’s international markets, revenue was up 1.1 percent overall. While some markets such as Kazakhstan and the US were down 22 percent and 13 percent, respectively, others prospered, such as Georgia, which was up 15 percent, Egypt (up 12 percent) and Azerbaijan (up 7 percent).
“During the COVID-19 period, we were successful in launching several mono-brand sites, and several products almost on every multi-brand platform in the Middle East,” said Moukarzel.
The sites include Aldo and Mango, while the company also launched online versions of Zara Fashion and Zara Home, on top of seven brands operated by Spain’s Inditex, which are exclusive to Alhokair in Ƶ and other markets such as Armenia, Georgia and Azerbaijan. It also launched its own Aleph online store for Apple premium reseller products.
“The one thing that retailers can do better is to understand that the Saudi customers are expecting better services, better experiences … that is complemented with omnichannel online capability,” Moukarzel said.
As part of its deal to acquire Vogacloset, ACC and Alhokair will also pump $12 million into the e-commerce site to develop its presence in Ƶ. Established in London in 2013, Vogacloset sells European fast fashion and beauty products to Arab customers. Since 2015 its sales have grown by 70 percent and in 2020 it attracted 12 million unique users across the Middle East, with more than half shopping from the Kingdom.
According to a Tadawul listing by Alhokair, Vogacloset’s revenue rose from SR58 million in 2018 to SR266 million in 2020. As a result, it went from a net loss of SR240,000 in 2018 to a net profit of SR10.94 million last year. Moukarzel said: “If I recall, when I first joined this company two years ago, online was actually a threat and a challenge. Today with all the progress that we’ve made, I would look at it as a great opportunity that would drive growth and help provide a better experience for customers.”
Established in 1990, Alhokair operates 472,100 square meters of retail space across 81 brands in its portfolio, and has plans to expand even further.
“As part of our strategy, we have geared toward diversifying the business and getting ourselves into more categories in the retail space, such as leisure, gadgets, electronics, on top of F&B,” Moukarzel said.
Alhokair acquired the Saudi rights for 10 international F&B brands from the Food and Entertainment Co. Ltd. for SR340 million over a year ago. “This gives us a new angle to the business and diversifies our focus. We are also looking at adding more exciting F&B concepts into our portfolio,” Moukarzel added.
During the last 12 months, Alhokair added brands like Kiko in the cosmetics space and Decathlon in the sports and leisure sector. The first Decathlon in the Kingdom will be a 3,500 square meter store in the Mall of Arabia in Jeddah.
“We are always exploring every interesting brand that has future potential, is ‘omni-chanellable’, ‘Instagramable’, and has potential in the Saudi market,” Moukarzel said, adding that he aims to add another two to three international brands in the coming weeks.
With their financial year starting in April, Moukarzel said it will be a year focused on getting back to normal “slowly but surely.”
He added: “With Ramadan around the corner and restrictions recently lifted, we can only be optimistic about the future.
“It would be interesting to see how fast the market goes back to normal... [Ƶ] is set for an amazing growth story.”