Supermarkets on the rise

Shoppers at Agora in Maghbazar, Dhaka yesterday. Photo: STAR

With the recent opening of its second pilot superstore in Dhaka, ACI diversifies the retail sector. After opening two new outlets in a short span, it plans to open another dozen or so in next four months.
Old Dhaka might not exactly be an area where one would expect to find the latest trends in retail. Yet, it is here that ACI has chosen to test the reaction of the local population to its Fresh'n Near superstore format.
After a first shop in Postagola area, a second one opened recently at Wari. Besides a range of manufactured consumer goods, the shops also offer a variety of fresh vegetables, meat and fish. With prices of the perishable goods being offered below the prices of the nearby kitchen markets, the company hopes to convince customers to change their shopping habits. The company aims to provide a hassle-free environment for women, who otherwise feel uncomfortable shopping at crowded markets.
ACI's attempt will not be limited to Old Dhaka alone. Within the next four months, ACI plans to open another 10 to 15 stores, says Asif Iqbal, the company's chief operating officer.
So far, the pace of expansion of the existing key-players in the supermarket business has been rather slow. Agora, Meena Bazar, Nandan and PQS have no more than a handful of stores.
Many plan to expand their business, but quite a few difficulties arise when launching a superstore-chain in Bangladesh.
“The biggest problem is the supply chain,” says Niaz Rahim, managing director of Agora Superstores (owned by Rahimafrooz).
“The distribution system is just not organised,” he adds. This means that the goods are not delivered to the stores on time.
Another problem is finding affordable space for expansion. According to Rahim, his company plans to double the number of stores, from four to eight outlets, in the next two years.
“The government does not recognise supermarkets as a form of service to the people”, says Pravin Robin-David, chief operating officer of Meena Bazar.
“We can provide goods at lower prices because we buy in bulk,” he says.
He also stresses improvements in food quality and freshness that supermarkets are trying to achieve by using quality controls, better hygiene and correct storage conditions like cooling and refrigerating.
Within the first quarter of 2009, Meena Bazar, a concern of Gemcon Group, aims to double the number of supermarkets to a total of 10 stores in Bangladesh.
David also says the company faces challenges in the amount of time required to get all the necessary permissions, before opening a new store, sometimes even a year or more. They also have to deal with distributors and suppliers, some of whom are unprofessional.
In order to secure a reliable supply of products, Meena Bazar is developing the sourcing channel of fruits and vegetables directly with groups of farmers.
However, a majority of Bangladesh customers will not change their shopping habits anytime soon. At least this is what the leading academic researchers in this field view.
Supermarket diffusion in developing countries has occurred in three waves, so far, starting in the 1990s with much of South America, East Asia (outside China) and South Africa. This was followed by a second wave in the mid-to-late 1990s, including Mexico, Central America and much of Southeast Asia. In the late 1990s and early 2000s, a third wave hit China, India and Vietnam.
According to Thomas Reardon, a professor at the Department of Agricultural, Food and Resource Economics at Michigan State University, Bangladesh is part of a fourth wave that just barely has emerged in the last few years. Other countries at a similar stage are Cambodia, Bolivia and certain countries in West Africa.
The American researcher feels it is likely that the diffusion of supermarkets will be quite slow for the fourth wave, compared to the first three waves. The reason is that the key socioeconomic changes necessary for a change in the retail environment are happening in Bangladesh at a pace much slower than, for example, in India.
These changes acting as a driving force behind supermarket diffusion include increasing urbanisation, increasing number of women working outside their home (which leaves them with less time for shopping of essentials), and increasing incomes per capita.
By the estimates of Ashok Gulati, director of International Food Policy Research Institute (IFPRI), it will probably take another decade or two, until supermarket diffusion in a country like Bangladesh is appreciable, meaning that roughly around 20 to 25 percent of retail sales are made through this channel. “But the time for South Asia seems to have come,” he adds. “Just look at the expansion of Cargills Ceylon in Sri Lanka.” That retailer has more than 120 food-supermarkets all over the country.
In fact, Sri Lanka with a population of over 20 million people has 240 supermarkets, while Dhaka with its 15 million inhabitants does not even have 50 such stores.
“It will not stay like that forever, just look anywhere in the world,” explains Meena Bazar's Pravin Robin-David. “It's just a question of who does it first”. But it will even take time before the big players get in each other's way.
“Each of the five big chains in the country has growth potential for another 100 new stores, without one hurting the other,” he adds.