As is the case with several sectors in the Egyptian market, the retail sector is facing challenges in light of the economic fluctuations and the increasing inflation and interest rates. Discount supermarkets are no exception. However, Kazyon, one of the largest discount supermarkets in Egypt, is handling fluctuations positively, especially in Ramadan where it provides its customers offers throughout the holy month and even a while before it started.
Daily News Egypt sat with Kazyon’s marketing head, Ismail Hafez, who said that despite the difficulty of the challenges, the market will eventually overcome them. Hafez said that his supermarket is expanding and will continue to do so over the upcoming months. By the end of 2017, Kazyon is expected to have a total number of 280-300 branches, especially with its ability to open up to 10 new ones every month, according to Hafez.
What are Kazyon’s offers in Ramadan for its customers to help them cope with the increased prices of goods during the month?
First of all, I must note that to us, the season of Ramadan is not just exclusive to the month itself, but it also includes the several weeks ahead of it. Our offers to customers started in mid-April to include May, all the way to June.
We have a diverse group of offers and discounts on the basic goods we sell, and we are proud to say that our prices are highly competitive and that our sales are good, especially with the Ramadan cartons, which are being very well received by customers.
What makes Kazyon distinctive among other hard discount supermarkets?
First, Kazyon is almost present everywhere, now with its large number of branches. This means that we are close to any of our customers’ homes, workplaces, and basically any place they regularly go to. We serve about 500,000 customers monthly, and customers pay us visits within the range of 1.5 million to 2.5 million visits every month. The quick spreading of our branches has enabled us to create a large customer base.
Second, Kazyon offers its customers the main commodities they look for, but for relatively low prices compared to our competitors in the market. We always aim to have the lowest prices all year long, not just during certain seasons, and this has certainly attracted a large number of customers over our three-year presence in Egypt.
Do you think that the initiatives taken by the government such as Ahlan Ramadan are fair competition to you, or are your sales negatively impacted?
I find such initiatives by the government very beneficial. After all, the aim of these initiatives is to control and regulate prices and help deliver the basic goods to citizens for reasonable prices. Communication usually takes place with supermarket chains before such competition exists, and they are given the choice to either take part in these initiatives or not.
How are you impacted by the inflation rate?
Currently, we are not impacted by this inflation as it took place only very recently. So far, we have no changes in our prices. I also believe that not much will change in our business. However, I expect that investments in Egypt in general may be negatively impacted as investors will have to think a lot before opening a business in Egypt with the current inflation rate. Of course, businesses will suffer from this rate and will have their sales impacted because when there are high prices, there is less demand, but markets eventually accommodate such changes. Currently, specific segments of customers are having a difficult time take in all the fluctuations in prices, so they resort to either switching to a brand of a lower price.
How does the increase in interest rates affect your business?
We are not really affected. However, when increases in prices take place, this is mostly beyond our control. Our role as retailers includes displaying the goods provided by suppliers. We have a goal to achieve a specific profit margin and deliver products of a good quality and reasonable prices to citizens, but as a supermarket chain, I cannot control prices, because they are up to manufacturers to decide.
What we try to do in Kazyon is absorb increases in prices if we sense that they may be passing. In that case, we deal with the price increase from our side through not increasing the prices for consumers, especially when it comes to basic products such as sugar, oil, and the like. In cases like those, we wait instead of increasing prices right away in case the increase is actually temporary due to perhaps a shortage in the product in order to not shock consumers with unexpectedly increased prices. This might impact our profit margin sometimes, but we are okay with that if this happens for a month so that we don’t burden consumers. But the case is different for more luxurious products whose prices we increase right away.
When prices do increase in cases where you cannot absorb them, how does this impact your work?
In most cases, we can absorb these increases or avoid them altogether. This is mainly the result of our prices being much cheaper compared to the prices in other markets, and this is our main goal. Even when prices do increase, our prices are still considered acceptable with a high quality, and this is our main goal.
Our prices are incredibly competitive, making our customer loyal to Kazyon. They rely on basic goods, and this is what we mainly sell at Kazyon. In some cases, consumers are more sensitive to any changes made in prices, and they try to look for cheaper alternatives, and even then we provide them with this alternative in the form of low-priced products.
It is also worth mentioning that prices of products across Kazyon in all governorates are the same. This means that even when a problem or shortage of a specific product takes place for any reason in any governorate, our prices remain unchanged even with a lower supply and a higher demand.
What are your most recent expansions?
In May, we had about five new branches open, which takes our total number to about 200 across 14 governorates across the country, with the most recent ones opened in Giza, Tanta, Alexandria, and Mansoura. We open on average about 8 to 10 branches every month, and sometimes we open only four depending on circumstances.
What is your plan for future expansions over the upcoming period?
We plan to have about 280-300 branches opened by the end of this year. We will be present in the same number of governorates but with more branches in each. For example, we have 18 branches in Alexandria so far, and we aim to take the number to 25 branches.
Do you have a plan to increase your capital or offer shares in the stock exchange?
Increasing capital is never off the table. We have already increased our capital before, and that resulted in total investments worth EGP 800m, and the amount is constantly increasing.
Regarding offering shares in the stock exchange, we do not have a plan to do this now.
In your opinion, what does the retail sector in Egypt currently need in order to improve and grow in light of the current circumstances?
The only challenge we face in retail, although this is significantly becoming less of a problem, is finding a proper location then obtaining licences and permits to start operation in it. If the procedures of permits were facilitated, this will allow retail to expand better on a wider scale.
Other challenges include road networks. Many trucks carry our products on a daily basis to our warehouses in 10th of Ramadan City and 6th of October City, so if road networks improved, this would help deliver more products every day and improve our overall performance. However, several new roads and bridges were recently established and have certainly facilitated the transport of our products.
What is your opinion of the current investment climate in Egypt?
I believe it is improving, which has already been proven to be true by many international institutions that issue reports noting that investments might be flowing more steadily into Egypt. There is relative stability, and the reports are more positive right now, sending assurance messages to investors. After all, investors want to make sure their investments are not in danger. There were predictions over the past period that the dollar will increase, but the rate the dollar is currently standing at is actually good in my opinion. While this might not be the most suitable rate the dollar can reach for businesses in Egypt, I personally believe it will continue to improve over the upcoming period.
Dollar rate fluctuations affect importers and manufacturers the most when it comes to pricing, and it makes any decision-making difficult for them. This repeatedly happens now with the constant changes of the Egyptian pound’s value.