Supermarket chains plan to expand in a big way

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Offline maruppharm

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Supermarket chains plan to expand in a big way
« on: August 05, 2012, 01:33:13 PM »
Leading superstore brands will open at least 14 more outlets across the country by the yearend, mainly to cope with the growing habits of one-stop shopping among the urban middle-class.

A major expansion drive has been taken by one of the conglomerates, Gemcon Group. Its concern Meena Bazar will see another six outlets within the next five months.

ACI Logistics is set to add four outlets to its existing fifty, including the mini ones, under the brand of Shwapno, while Rahimafrooz Superstores, which operates Agora stores, will launch four new outlets. Agora has ten shops now.

The country has a huge potential to grow in superstore business thanks to changes in people's lifestyle, preferences and needs, said Kazi Inam Ahmed, director of Gemcon Group.

“We have added four stores so far this year and will open six more in Uttara, Gulshan, Elephant Road, Pallabi, Wari and Banasree. We have plans to open 12 in 2013,” said Ahmed.

Meena Bazar with sixteen outlets across the country sources vegetables directly from farmers, said Ahmed.

“The expansion will allow us to bring fresh vegetables, meat, fish and other products to customers and ensure fair prices for the farmers,” said Ahmed.

ACI Logistics would open three outlets in Khilkhet, Banasree and Azimpur in Dhaka and one in Sylhet.

“Consumer confidence is increasing and that's why many are planning to expand,” said Sabbir Hasan Nasir, executive director of ACI Logistics Ltd.

Nasir said they aim to increase the number of Shwapno outlets up to 100, including mini stores and chain stores, within the next three years with an investment of Tk 40 crore.

“It's a volume-based business. The more outlets we open the more will be the sales as we will be able to serve more customers,” he said.

The official said ACI Logistics is working to break the market cartels of essential products, which often influence prices, by sourcing directly from the farmers.

“We are offering competitive prices, which are even lower than the conventional market rates in some cases,” said Nasir.

He said the business model of Shwapno is somewhat different from that of other chain superstores as its targeted customers are not the affluent community, rather middle- and lower middle-class people.

The idea of superstore business flourished in Bangladesh last decade, fuelled by growing urbanisation, increasing number of working women, and rising per capita income, said industry leaders.

At present, there are 24 companies with more than 100 outlets across the country, according to Bangladesh Supermarket Owners' Association.

Their combined annual turnover stands at more than Tk 1,500 crore, with the government receiving around Tk 30 crore in value added tax, according to data of the association.

Rahimafrooz also plans to set up 40 new outlets in cities including Dhaka, Chittagong and Sylhet by 2015,” said Niaz Rahim, managing director of the company.

Their total costs of expansion may stand at about Tk 200 crore.

“The expansion will boost consumer confidence and help create markets for manufacturers,” said Rahim, who is also president of the supermarket owners' association.

“Once the supermarket culture is established, the prices of commodities will see stability,” he said.

Supermarket operators, however, said the sector is facing a number of challenges -- a lack of a unified monitoring system, higher import duties on capital machinery and higher VAT.

They said superstore owners have to pay up to 105 percent in duties on the import of capital machinery relating to the sector, while other industries pay a maximum of 5 percent, which is hurting growth of supermarkets in Bangladesh.

Supermarkets account for around 2 percent of the total sales in the country, which is around 10 percent in India, said Ahmed of Gemcon Group.

Around 38,000 shops, including supermarkets, are now in operation in Dhaka, he said.

Supermarkets have to pay 4 percent trade VAT, while other shops pay VAT at a flat rate, said Ahmed.

“It is a discriminatory policy, which is not only hampering growth of the sector, but also depriving the government of revenue,” he added.

“So, the government should introduce a flat rate for all the market players to protect consumer interest,” said Ahmed.
Md Al Faruk
Assistant Professor, Pharmacy