In the early 1970s when large-scale oil exploration activities started, the UAE saw a surge in the number of expatriates leading to the demand for various kinds of food products. Seeing this as business opportunity wholesalers and distributors began importing everything from food products to non-essentials sold through small, neighbourhood grocery stores or baqalas.
Eventually the market expanded in the 80s. By early 90s Lulu Group and others in the space started setting up cold storage facilities to store large quantities of imported goods for a longer period.
“We also set up the department store / supermarket formats around this time,” recollected V. Nandakumar, Director – Marketing & Communications, Lulu Group International.
“Interestingly this period saw the rise of expatriate operated home-grown grocery retail brands including Al Maya, Choithrams, KM Trading, among others as well as cooperatives such as Abu Dhabi Coop.”
The late 90s saw the emergence of organised retail as supermarkets were introduced with proper category management, billing system, use of technology at the back end. By this time most international brands also set up distribution centres in the region. The market became more vibrant and organised.
“One of the most prominent changes was the integration of food and grocery retail concepts in mall-based locations,” Nandakumar pointed out.
Around the same time the Dubai Shopping Festival kicked off (1996) and the UAE started investing heavily to grow its retail offerings. Resultantly, international brands started entering the country and the region and multinational FMCG brands started setting up shops. The UAE elevating its position as the regional shopping hub catalysed further growth for the food and grocery retail segment.
Carrefour (known as Continental at that time) entered the region and gave grocery retail a facelift. The cooperatives modernised. As the population grew each grocery retail brand found their target audience and continued to grow.
The year 2000 was a turning point for the grocery retail landscape, Nandakumar observed. “That’s the time when the Carrefour brand launched in the region and the first big format Lulu Hypermarket opened in Al Qusais. Around this time grocery retail brands also started entering malls as anchors tenants with better design aesthetics, smart layouts, new services, fun events, attractive promotions and raffle draws to offer shoppers a delightful experience.”
Meanwhile, the second decade of 2000s saw the rise of private labels through collaboration with prominent manufacturers. What started as a fancy category in a corner aisle has become a force to reckon with.
“Today a substantial amount is being spent on research, procurement, packaging and marketing of private label products. Certain products [including fresh milk, frozen foods, oats, rice, bottled water, confectionary, detergent, cleaning products etc] under this segment are category leaders for us,” Nandakumar shared.
Technological advancement, consolidation & collaboration and operational efficiency are some key themes in the third decade of the 2000s with contactless checkouts, procurement efficiency and food security being key focus areas.
“Going forward, experience and tech enablement will play a significant role in the grocery retail market. As a channel e-commerce existed even before the pandemic, only its adoption accelerated. However, now we are back to recording highest sales in our stores over weekends. Importantly, for a big box retailer like Lulu Group online accounts for single digit percentage of our total sales,” Nandakumar shared.
“Having said that, technology integration will be crucial for our business as we foresee automatic inventory management (B2B) and order fulfilment (B2C) becoming more common by leveraging data relating to shopping and stocking patterns.”
Even though the days of 200,000+ sqft hypermarkets are gone as store layouts are becoming smarter to fulfil impulse and intended purchases, experience will remain pivotal.
Finally, shifts in consumer behaviour has led to unique collaborations. Be that Lulu Group’s partnership with delivery platforms such as Talabat during the pandemic or its recent collaboration with Amazon MENA to ensure faster fulfilment.
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