It’s a familiar scene. Along most of Saudi Arabia's narrow, crowded streets, the shoppers stroll, pause, walk some more and then, from worn sidewalks, turn into shaded suqs to inspect, sniff, squeeze and eventually choose, from overflowing wooden crates jammed haphazardly together, their fruits and vegetables for the day.
The next step is equally familiar. They hand their choices to the shopkeeper who pops their bags onto one side of an old brass balance scale, nimbly picks out a combination of weights to balance the trays, and makes change from an old wooden drawer while simultaneously greeting friends, bartering with customers and loudly advertising today's loss leader.
Further on, in the meat suq and the fish suq, or in a small shop stocking canned goods, you'll see similar scenes. They're part of Saudi Arabia's economy and heritage: a familiar way of shopping - and of life.
But today, that scene is changing -swiftly - in the Eastern Province, in Riyadh and in Jiddah. Nothing, in fact, shows the swift modernization of Saudi Arabia more vividly than the emergence of the giant supermarket.
Overnight, it seems, the kingdom has gone from suq to super-suq, from the homey corner store to the computerized supermarket with its steel-frame racks of smartly packaged international foods, and from the shopkeepers' old brass scales to electronic registers that total bills, calculate refunds and give printouts of sales.
In fact, though, the transition has been gradual; alert businessmen began to introduce modern retail food stores in the Eastern Province years ago (See Aramco World, January-February 1977). They were not really supermarkets, but they did chart the way for the food chains that have since opened in the Eastern Province, Jiddah and, more recently in Riyadh - where the Saudi owned Panda Trading Establishment already operates two stores and plans three more. Panda, moreover, is not alone. The al-Johar Trading Establishment has also opened a supermarket, the French Euromarche chain will open a 108,000-square-foot "hypermarket" this year, and the American A&P chain will enter the field soon.
The new super-suqs vary considerably in size, ownership, organization and marketing strategy. In the Eastern Province, for example, two American-style chains cater to an international clientele, whereas in Riyadh, Panda focuses on
Saudi Arab customers. With products like fresh camel meat selling at $1.36 a pound and lamb at $160 per whole lamb - both cut, pre-packaged, weighed and displayed alongside the meat from other parts of the world - Panda has drawn large numbers of Saudi Arab customers - about 35 percent now - and plans to boost its total with a $300,000 advertising campaign.
As in the United States, retail food is a highly competitive business in Saudi Arabia, and where suq and super-suq meet head-on, the supermarkets are not forging ahead because they're underselling their competition. Instead, they are relying on convenience, accessibility, one-stop shopping and well-lighted, spacious parking lots adjacent to the stores -evidence of how, in recent years, Saudi Arabia has developed into a motorized society.
This is particularly true in the Eastern Province, where the Tamimi and Fouad Food Company - an offshoot of Safeway Stores - and the Souks Company, Ltd., predominate. With a total of five stores, these two chains have invested close to $55 million in modern facilities.
In these stores, for example, shopping begins when electric eyes sweep doors open for customers and display what in some cases is a Disneyland array of brightly colored packages, fresh vegetables and fruits, meats in shining trays, and rows of decorative and functional household goods beneath high ceilings overlooking thousands of different products bathed in fluorescent light: fresh Caribbean coconuts, Greek parsley, Australian beef and lamb, Swiss chocolates, English biscuits, Japanese oysters, Danish caviar, and Saudi dairy products and breads.
These days, Saudi Arabia boasts a multinational work force and this, in the super-suqs, is instantly obvious. Well-groomed, uniformed Filipino and Indian employees help customers, stock shelves, man registers and push brooms endlessly across waxed tiles - and, of course, boost overheads. Imported labor costs more than kids from the neighborhood. But then most of the food is imported too: an inventory of between 6,000 and 8,000 items which, for these Eastern Province entrepreneurs, has meant a logistics problem with several twists.
When, for example, the al-Khobar Safeway opened in the fall of 1979, the company ran preliminary marketing surveys, found that expatriate customers preferred U.S. Grade A produce in the bins and chartered a jet to fly fresh produce from the U. S. - 90,000 pounds of vegetables and fruits at a cost of $100,000. Unfortunately the company overlooked a key problem. Buying and flying ran to about $1.50 per pound so the store had to increase the selling price to break even. But they couldn't-because government regulations had established ceiling prices on imports of such basic foods as milk, eggs, flour, sugar, coffee - and produce. As a result the company had to revamp its whole buying strategy; produce is now purchased from local importers or neighboring Arab countries.
In an area of burgeoning income, such price regulation is important. It helps combat inflation and keeps food prices under control. But in Saudi Arabia there are regulations on food sales with a far more important goal: to preserve Islamic traditions.
One regulation affects all products containing pork or alcohol -both forbidden to Muslims in the Koran. Under a 1973 law on labeling, all oils and shortenings, creams and milk products, juices, tomato paste and tea and coffee extracts must show the name of the food, ingredients, volume, name and address of the producer, date of packing, and country of origin-in Arabic. And under a 1979 amendment jams, tuna, salt, soups and canned meats were added to the list. In addition, new foods are put through laboratory tests to check for pork and alcohol content.
For importers who have not done their research carefully, these regulations have meant some surprises. Nutmeg, for example, is classified as a drug; some mustards contain quantities of white wine; gelatine and lard products are sometimes made from pork; and some shortenings, a key ingredient in pastries and pizzas, contain pork products.
As authorities enforce the labeling law by checking goods when they arrive at Saudi ports, some products have been banned because there is not enough information on them. Manufacturers, for instance, couldn't adequately show the origin of the animal bones - from which the gelatin in Jello is made - so Jello, for a time, couldn't be imported.
In addition, regulations require that shipments of meat be certified that the animals were slaughtered according to Islamic requirements-including proclaiming "Bismillah" and "Allah akbar" ("In the name of God" and "God is great"). Saudi consulates or their representatives issue the certificates in the exporting countries.
Such regulations, of course, affect costs and deliveries. One supermarket manager says labeling requirements add about eight percent to the cost of affected goods, and inspection of labeling at ports has sometimes caused delays. To Saudi Arabia, however, which is determined that modernization will not dilute Islamic tradition, such factors are quite simply irrelevant
Since local wholesalers had already complied with the laws, the new supermarkets soon began to buy heavily from them. The Souks Company, for example, now gets close to half its food -and all its household goods - from local sources. Their figures show transactions withl13 local wholesalers.
Even so, both the Souks Company and Safeway have to import substantial quantities of food and other goods. The Souks Company, for example, imports about 60 percent of its stock from 17 different countries, primarily the United States-and Safeway maintains an inventory of $5.4 million worth of goods in its stores and warehouses.
Ultimately, however, high sales volumes depend on more than large inventories. In the Eastern Province the super-suqs must appeal simultaneously to Saudi Arabs and to the great variety of nationalities now working in Saudi Arabia since the kingdom launched its massive modernization plans, and at the beginning the owners weren't at all sure that a system that is computerized, prepackaged and impersonal would be acceptable.
They needn't have worried. Supermarkets, in fact, were probably inevitable. In the first great rush to market food and luxur faitems to Saudi Arabia's population some years back, Western-looking, medium-sized stores not only appealed to expatriate and Saudi buyers alike, but made handsome profits. As a result, electronic cash registers, modern shopping carts, and flashy packaging were not completely new to the area. Furthermore, Saudi buying habits had been changing as more Saudi Arabs traveled to the West.
Another factor is that more Saudi Arab families are moving into modern high-rise apartment buildings where storage space is limited. Consequently more frequent trips to the markets are necessary - which make parking lots and one-stop shopping more attractive.
In many of the supermarkets, what the customer doesn't see is as impressive as what he does: structural and safety features the equal of any stores in the world. Both Eastern Province chains have their own refrigerated transport systems and backup generators in case of a general power failure and Tamimi has a second backup system - batteries - which provide lighting and power to cash registers to allow customers to check out even if the generators fail. Souks Company claims that the laminated beams in the stores' structure will remain intact longer than steel in case of fire, and both chains have heat-sensitive sprinkler systems to protect against fire in all phases of construction. Also invisible to customers, but vital to their convenience, is, at several chains, a fully computerized ordering system which provides instant inventory analyses.
Another difference between the kingdom's supermarkets and their counterparts in the States is that by law, they must house their imported workers -and they do so, in dormitory-style rooms or apartments with recreation rooms, pool tables and other amenities such as outdoor volleyball courts. The chains also feed their men in company dining rooms.
Both chains in the Eastern Province, like Panda in Riyadh, are 100 percent Saudi-owned, but were planned and developed along American lines. Some Americans still serve as consultants at the Souks Company, but the management in 1980 was all British, a result, says one general manager, of American tax laws which make U.S. personnel too expensive. Tamimi still has a majority of Americans on its 24-man management staff, but says it will have to hire fewer Americans in the future if the tax laws don't change.
Originally, both companies had ambitious expansion plans. The Souks Company, for example, built a 50,000-square-foot warehouse which could supply an additional six to eight stores comparable to the 20,000-square- foot stores now in operation. It also has enough staff housing for four times its present 100 workers. Safeway, also looking ahead, built a 100,000-square-foot warehouse.
Because of competition and other unexpected difficulties, however, some chains have scaled down or changed their goals. Tamimi, which once planned 10 more stores in the next five years, has cut back to one in Riyadh, and the Souks Company is studying the possibility of switching to another U.S. phenomenon: the neighborhood convenience store, patterned after the 7-11's and Minute Marts which now dot American cities. These shops would be open king hours and carry a limited line of goods: milk, eggs, frozen dessert and other items suitable for a five-minute stop. The firm's planners once thought of opening these mini-marts in al-Khobar, but are now considering sites in the smaller areas of Jubail, Qatif and Hofuf. Small-scale operations relative to the supermarkets, they would be supplied by the central warehouse, with each group of three stores under one manager.
Behind these cutbacks is a very real question about the future. For one thing competition is fierce. Suqs still do a thriving business and medium-sized markets, though crowded with goods and lacking parking facilities and aisle space, also offer their customers the personal touch impossible in the super-suqs. For another, supermarkets, because of the enormous initial investments, must maintain a high volume of sales. If Saudi buying habits haven't permanently changed - that is, if Saudi Arab customers see the supermarkets as a novelty and eventually return to more familiar shopping places the chains would be in trouble. Should the number of Western expatriates decrease in the Eastern Province, the supermarkets, obviously, would have to depend even more on the Saudi and Eastern expatriate customers.
Are supermarkets, then, another fad, subject to overbuilding and saturation? It's certainly possible. With markups on household goods of between 50 and 100 percent, 20 percent on local foods and 30 to 60 percent on imported foods, overall supermarket prices are 20 to 50 percent higher than in England, and Souks Company management says it will take about two years for the company to make a "reasonable" profit. Furthermore, there are additional concerns ahead.
One is an effort by the government to facilitate customs inspections by requiring all imports to be shipped in a standard 20-foot container with double doors at each end of the container; although this will facilitate inspections, the chains believe it will also add to the cost of imported goods.
Nevertheless, Souks Company and Tamimi say they're there to stay. They say that overall food prices in the Fastern Province have dropped some seven to eight percent in the past year because of the influence of the super-suq. And they achieved this, they say, by constantly reviewing their prices, to stay competitive, by advertising on the radio and in newspapers, and by announcing specials and new products over the store intercoms as customers wheel their carts down the aisles. Recently, the Souks Company, in cooperation with a local automobile dealer, also sponsored a contest in which shoppers tried to guess the value of foodstuffs packed into the rearof a Toyota liftback. And in Riyadh the al-Johar Shopping Center- which already accepts credit cards may build a car wash on its premises and offer free car washes to customers who spend a certain amount.
Some chains have also begun to lease satellite shops which surround the centerpiece supermarket with its large lighted sign beckoning motorists to parking places creating, in effect, shopping centers.
Furthermore, with experience in dealing with the specific problems and restrictions of the kingdom, companies hope to cut what were "sizable losses" in the beginning. And they definitely don't think that Western buying habits - in a country of still burgeoning business opportunity - are a temporary fad.
The evidence is certainly persuasive. In Riyadh, for example, Panda has invested some $600,000 in a computer system to link all its shops with its warehouses. And the al-Johar center, which includes a department store, provides parking for 300 cars and some 54,000 square feet of space for shoppers inside - including a 200-foot aisle of diet foods and a selection of 250 French cheeses.
In Jiddah, the kingdom's major commercial center, there is even stronger evidence. The al-Mokhtar chain already runs three stores, one an 18,300 square foot, three-tiered store, one of the tiers, a ground-floor, 17,000-square-foot supermarket. Al-Mokhtar, furthermore, plans to open a fourth store in northern Jiddah soon.
Another example is the Caravan Shopping Center with 63 specialty shops plus a supermarket, and still another is the jiddah Shopping Center, with a central supermarket in a U-shaped complex of offices, shops and apartments. Its supermarket carries some 4,500 to 5,000 items on its shelves and specializes in fresh imported meat which is cut and packaged in the store itself.
The Jiddah center - also owned and managed by Saudi Arabs - believes in drawing Saudi customers by catering to an increasingly cosmopolitan palate, yet also providing traditional foods. The policy reflects co-owner Muhammad Arif's belief that the success or failure of the super-suqs will depend more on sales to Saudi Arabs rather than to Saudi Arabia's expatriates, Like his counterparts elsewhere, he too thinks that the super-suq is here to stay.
George W. Windsor Jr. is an English instructor at tin University of Petroleum and Minerals in Dhahran.
