Landmark Group, the UAE retail company that owns Home Centre, Splash, Babyshop and Centrepoint, opened the country’s first discount supermarket chain this week, aiming to tap into rising demand for cheaper groceries following the introduction of VAT.
Viva, which is based on European no-frills supermarket chains such as Lidl and Aldi, aims to cut shoppers' grocery costs by at least 30 per cent compared to the rest of the market, Landmark officials said as it opened the first outlet in Sharjah on Wednesday.
“This is a very good time to start [this concept] – as the market has matured, and as VAT has come in and people are more conscious of what they are spending,” said Renuka Jagtiani, chairwoman and chief executive of Landmark.
The UAE introduced a 5 per cent VAT on January 1. Although oil prices have lifted to above $70 per barrel this year compared with the trough of less than $30 in the start of 2016, , they remain below the $100 per barrel that most oil-producing GCC countries were used to, affecting the jobs market and economy.
With the introduction of VAT, consumer purchasing power has been further squeezed and citizens are seeking to trim their outgoings. The levy is expected to increase consumer prices by 1.4 per cent this year, government officials have said.
Landmark also intends to launch a home delivery service "very soon", Georg Fischer, the newly appointed chief executive of Viva, told The National. He joined Landmark from UK-listed supermarket retailer Tesco, where he was chief executive of its Malaysia operations
"Our promise is the offering of a range of private label quality products for at least a 30 per cent cheaper shopping experience that will lead to savings to consumers that have never been seen [in the UAE] before," he said .
Landmark opened initial four Viva stores – two in Sharjah, one in Dubai and one in Ajman. A further 11 stores are expected to open this year, with lease agreements signed on 10 sites so far across the UAE.
The chain’s business model is based on bulk buying at cost, direct from the manufacturer, and 80 per cent of Viva’s 1,200 products will be exclusive to Landmark. The remaining 20 per cent of products are established European or Asian brands.
Landmark aims to target high-density neighbourhoods with a "cheaper and more convenient” shopping offer in leased units ranging between 400 square metres and 800 sq m in size.
"A food discounter concept is powerful and disruptive; customers will experience a different way of shopping where the highest quality at cheapest prices is found in a compact format all in one place," said Mr Fischer.
Landmark self-financed Viva's launch – Ms Jagtiani declined to reveal the exact size of the "substantial" investment – and does not intend to seek further financing from banks for the foreseeable future.
Ms Jagtiani insisted the introduction of VAT was not the only factor behind the launch, although retailers in general can expect a three-month “bedding-in” period while consumers adjust to the higher prices.
"[Viva] is not something that's happened overnight, the team has been [studying] it for 20 months whereas VAT is less than two months old. To us, offering value is not just about a tax, we are fulfilling a daily need," she said in response to a question from The National.
The chairwoman declined to provide growth forecasts for the Group, saying only that she was “positive” about 2018.