A new retail phenomenon [Archives:2007/1071/Business & Economy]
By: Yemen Times Staff
The convenience of your friendly neighbourhood grocer still dominates the retail market in Yemen; the Urban population, exceeding 7 million people with significantly higher income than rural populations, gives more life to the business of retail in urban centres, indicating that retailing is an economic sector worthy of investigation in order to find the market trends happening within the retail industry in urban Yemen.
Every person who spends any money is a part of the economy. Consumers make a conscious decision where and how to spend this money, to spend it buying various household items and foodstuff from your neighbouring shop or grocer, or opting to head to the super or hyper market where more choices and varieties are in one place? Anwar Mujahed, a highschool teacher from Sana'a, says that he never heads to the supermarket, he explains: “when you go to the supermarket you find too much choice and then you want to buy too many things which you cannot afford, it makes you overspend then feel miserable”.
There might be some sense in what Anwar said, continues, his companion, Esam: “Supermarkets and shopping malls are for rich people, we barely afford our current lifestyle where we buy only what we need, then why should we go to someplace where we think we need more than what we actually do?”
The limited income of the bottom segments of urban societies seem to tend to avoid larger retail outlet, branding those as 'places where you will lose your money', however, the population of the limited-income segments is significantly high and, in total, resembles a large chunk of the market. Asad, who works as a Coca-Cola truck driver and who retails mainly to small and tiny grocery stores, says: “almost 90 percent of my retailing is done to these many small shops, they each buy small quantities, less than 100 bottles per week, however, there are some 200 small shops in this area [Hayel street in Sana'a] and I keep on stopping every 150 – 200 meters to sell to another shop down the corner and so on,” he also added: “fathers send their kids with 50 Riyals to buy them a bottle of cola to drink while chewing Qat, its like there is a time of the day when kids come out of no where holding 50 Riyals bills demanding cola, especially during the weekends, Cola bottles are usually sold in ones and twos, rarely in dozens unless there is some occasion.”
The amounts of business for each shop is small, but in total there is a huge potential as population grows, says bakery-delivery boy Abdul Sallam: “last year, shops used to ask for something like 100 – 150 bread loafs every day, but now some of them buy 400 bread loafs every day, I guess there are just more mouths to feed so more work for me and more business for the bakery…”
In a survey attempt to quantify how much business is taking place in each of these tiny shops, it indicated that the capital investment is around US$ 2000 – 3000 dollars mainly spent on making the shelves and buying the freezers, less than a third of the capital investment is used to buy the various products and food stuff, which can be described as working capital.
Hamoud, a Shop owner, says money is precious to be spent in working capital: “people only buy particular items, moving items, people know what they need and will buy only that, if I bring new items there is a big chance no body will buy them and they will expire, unless it is a special occasion such as Eid or end of school year, then spending slightly increases”.
He continues: “you see, the stuff I have here are like bread, eggs, cooking oil and ghee, kilos of rice, sugar, wheat and grains, small packages of biscuits and bottled juices, a small variety of candies and inexpensive chocolates, some detergents, matches and candles, AA batteries among other things every household consumes and every household around me will need”.
Moving along to another side of town deemed to be more prosperous, retails are larger in size and smaller in numbers, larger houses and relatively smaller populations. We spoke to a cashier of a large retail outlet and asked him about the consumers, Abdullah said: “there are two types, the first are the ones usually in a hurry who bought something small like cigarettes or refreshments as such, while the other type is families who buy lots of stuff which should keep them happy for a week, they spend sometimes 20,000 Riyals or even double that for larger families, and they buy all sorts of stuff, foodstuff, kitchen utensils, toys, tools, toys, frozen foods and all kinds of things” When asked about the frequencies Abdullah said: “most of the people who come here are regulars, I think they like the convenience that everything is at once place near by them, and they don't mind hesitate to spend a few more thousands to buy expensive chocolates…”
A new retail phenomenon
Having portrayed that image, it doesn't necessarily indicate that only rich people shop at large retail outlet, a phenomenon has recently emerged where large retail outlets emerged with a specific target set at the limited-income segments similar to discount outlets, there are seven such retail outlets currently in Sana'a city, with a couple more under constructions.
The limited-income retail outlet tend to retail mainly clothing items, home accessories, and other products avoiding food stuff. An Investor, who owns such a retail outlet located in Hadda st., says: “there is a lot of market potential in Yemen if you look in the right places, most of the products being sold here are 'leftovers' which were on display at other parts of the world, but because they ran out of fashion they were sold to me at a fraction of the price, and now I sell them at reasonable prices for the consumers who are happy to buy them for less than half of their original price”.
Mr. Jamal who is a school principle comments: “When my wife went shopping into one of these places I was expecting to see that she bought poorly-made Chinese clothing items because of the very low prices, however, I was surprised to find that some of clothes were made in Turkey and were of excellent quality”.
Housewife Hafsa Masoud says: “as long as I can find enough affordable variety and nice designs, I will buy. Previously, we used to buy similar products from the market for higher prices, now that we cannot afford that because of inflation, we come here and this is a better choice”.
Economists describe the Yemeni market as highly price-sensitive, indicating that although Yemen resembles a large market with reasonable growth potential, Yemeni consumers will buy products that suit their budget first and their liking second; budget in terms of what they can afford and want to spend on, and liking in terms of convenience and tastes. As the new discount retail outlets phenomenon has shown, there is a market in Yemen but it is waiting for the right products, even if it is meant flooding the market with old-fashioned and possibly second-rate goods.
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