CAIRO: Rising from dilapidation and heavy financial losses, Omar Effendi – Egypt’s oldest department store – is setting itself up to become Egypt’s version of Marks & Spencer. Its new owner vows to turn it into the crown jewel of Egypt’s retail sector.
The well-known name dates back to the early 20th century; and with some 80 stores nationwide, Saudi giant Anwal United Trading Company was determined to snap up the store, marking its entry into the Egyptian market.
“Beginning 2005, Anwal decided to grow and started to look into new retail opportunities, said Arnaud Mailhe, Omar Effendi’s chief executive officer. “The retail market in Saudi Arabia is [to an extent] small and limited in opportunities. So, the next best opportunity was Egypt.
With an under-penetrated market of over 70 million people and growing purchasing power, Egypt stood out as a favorable destination for Anwal.
As they hunted for an opportunity to enter the market, the Egyptian government decided to sell the store, which had become overburdened with mediocrity. The bureaucratic management scheme failed to cope with mounting competition from privately-owned retail outlets offering more products and better service.
At the same time, “Omar Effendi offered an excellent opportunity to turn around our business, explained Mailhe, adding that Anwal wanted to operate its own store rather than be at the mercy of a franchiser.
“With a huge network of stores, Omar Effendi is a very strong brand in the Egyptian market, even if its image was bad, he said. “It’s similar to the name Coca-Cola. Everybody knows it.
In February 2006, Anwal finalized purchase of 90 percent stake of Omar Effendi in a whopping deal worth LE 744.5 million ($102.5 million) in cash and debt. The company sweetened the deal by revealing plans to pour in investments amounting to some LE 400 million to settle outstanding debts as well as give the entire department store a facelift.
So far, Anwal has paid more than LE 80 million of Omar Effendi’s total liabilities.
Upon purchase, the new retailer began to tackle everything from administrative and financial reforms to modernizing branches and launching an expansive employee-training program.
“Our renovation plans revolve around three main platforms: human resources, IT infrastructure, as well as [refurbishment] of facades and back-offices of the branches, Mailhe explained.
On the human resources front, the company provided 1,250 senior employees with elective early retirement packages that amount to LE 40 million. The company also hired 400 new employees as well as training new and existing employees on sales techniques.
Anwal embarked on deploying advanced technological systems in all Omar Effendi’s branches and establishing an electronic database connecting all outlets and warehouses. At this stage, roughly 70 percent of the company s activities have been automated.
“We first began with automation of the Adly branch, rolling it out to 30 more branches. By the end of November, we will have fully automated 50 outlets, he said. “IT infrastructure alone will [absorb] investments of between LE 15-20 million.
Meanwhile, renovation plans entail revamping the façade of the different branches, fixing broken displays and cleaning up the stores. Anwal also began renovating Omar Effendi’s internal design, décor and lighting, as well as installing air conditioning and other amenities to improve the shopping experience.
“Overall, we have around 200,000 square meters of retail space to revamp, and so far we have renovated over 45,000, stated Mailhe.
The company has earmarked LE 220-250 million to renew the dilapidated store, starting with the most important branches such as Adly, Hegaz, Morad, Sawalhi, Roxy and Agami. It expects to complete its renovation plans by March-April of next year.
As for the branch on Abdel Aziz Street in Downtown Cairo – deemed to be of architectural and historical value – Anwal plans to offer it up to bidding to bring it back to its original condition.
Mailhe added that the company expanded its line of products to include a wider range of merchandise from furniture, carpets, and heavy-household equipment to mobile phones and other electronic commodities, sold for the first time in Omar Effendi’s stores.
“Bit by bit, we plan to cover all lines of products, he said, adding that Anwal’s main goal is to reinstate Omar Effendi group as a major retailer and a mega department store offering quality merchandise at competitive prices.
To reach that end, Omar Effendi established a new finance scheme allowing customers to purchase commodities via installments offered through Audi Bank.
“We settled on Audi Bank because it offered the fastest payment [solutions] at relatively cheap interest rates, Mailhe clarified.
Moreover, Anwal redesigned the store logo, now dubbed O.E., in an attempt to make it trendier and more appealing.
Acquiring a company with this much liabilities, it was necessary for Anwal to seal deals with several banks and financial institutions to secure loans for its ambitious modernization plans.
One major milestone was the signing of a cooperation agreement last June between Anwal and the International Finance Corporation (IFC) – the private sector arm of the World Bank. The deal secures a $40 million loan – with an eight-year tender and a two-year grace period – targeted towards renovating the stores. In addition to the loan, IFC acquired a five percent equity stake in Omar Effendi – worth $5.7 million.
“The World Bank in particular [conducts] huge due-diligence plans of a company before giving it a loan, said Mailhe, explaining that by agreeing to give Omar Effendi a loan, IFC placed confidence in the store’s potential success.
Indeed, such renovation plans have started to bear fruit, with the store now recording monthly sales turnover of around LE 35 million after barely attracting as little as 30 customers per day.
“The objective is to reach a monthly turnover of LE 40-50 million per month by the end of March, and later double that to LE 90-100 million in two to three years’ time.
Anwal’s vision for the store does not stop there. It recently announced the possibility of expanding nationwide to include new locations and cities across the country. The company will also look into taking the Omar Effendi name to external markets by opening new outlets across the region.
“The idea is to operate a nationwide department store; and with the number of stores, we have to be a leader in the market, Mailhe boasted. “What we’d like consumers to understand is that we have a wide variety of products for home equipment to personal equipment. We want consumers to say: if we want to buy something, we go to Omar Effendi [straightaway].
He added that the company wanted the Omar Effendi brand name to be synonymous with a wide variety of products at competitive market rates.
“At the same time, we want to build a brand because we believe that to sustain in the retail industry today, you have to have a strong brand name, he said. “What we’d like to do with our brand over time is to use it for different businesses such as services, insurance, travel, and so on.
“The perfect example for that is Virgin. They started with one store and built a strong brand name and from there spread over to different businesses because there was huge investment in their brand, he added.
“Your brand is an asset. And that is why we are investing in a new logo to carry our brand.
