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Cenomi in bid to shake up kingdom’s online retail industry

Cenomi fashion Cenomi
Cenomi Centers and Cenomi Retail said conditions and timing are currently not ideal for the business combination
  • Fawaz Alhokair Group rebrands to deliver ‘new era of Saudi retail’
  • Company to launch online marketplace in 2023
  • Plans include e-commerce operation with tech delivery network

The retail behemoth previously known as Fawaz Alhokair Group is overhauling its operations from being predominantly bricks and mortar-based to one of the region’s biggest online marketplaces.

“Over the past three decades, we’ve done a fantastic job at making the business what it is today, but we know there is a lot more to be done in the future, and we know the future is going to be very different from today,” CEO and managing director Mohamad Mourad told AGBI in an interview.

This week, the 32-year-old group rebranded its two businesses – Arabian Centres Company, which owns, manages or operates 21 shopping centres across Saudi Arabia, and Fawaz Alhokair Fashion Retail, Saudi’s largest franchise retailer with 95 global brands including Zara, Gap and Estee Lauder – to Cenomi Centers and Cenomi Retail respectively. 

The parent company has been renamed Cenomi Group, with the name derived from the Greek ceno meaning “new”, and mi referencing “me”, according to a group statement. 

The ambition is to “deliver a new era of retail and lifestyle to the kingdom and beyond”, the statement added. 

Currently, around 10 percent of group revenue is derived from online sales, Mourad said, but “I am not happy with that given how fast e-commerce is growing globally”.

He wants to increase the figure significantly as a result of the changes he is overseeing, to create an omnichannel business.  

Cenomi Group is a private family company and does not disclose its financials. However, Cenomi Retail and Cenomi Centers are listed on Saudi Arabia’s Tadawul stock exchange.

Mohamad Mourad, CEO and managing director of the Cenomi Group, rebranded from Fawaz Alhokair Group

Cenomi Retail posted revenues of SAR5.9 billion ($1.5 billion) for its 2022 financial year which ended March 31. 

This helped it return to a net profit of SAR38 million from a net loss of SAR1.1 million the previous year when the coronavirus pandemic had all but halted retail footfall. 

Cenomi Centers reported in November a threefold surge in net profit for the second quarter of its 2023 fiscal year (the three months to the end of September) to SAR246.4 million, driven by a 15 percent revenue increase to SAR573.7 million.

Mourad has a background in technology, having worked as managing director of Google Middle East and North Africa in Dubai for five years until 2016, and afterwards as managing director of emerging markets business development at YouTube in San Francisco. 

He joined Cenomi as group managing director and chief executive in January and has since been finalising a strategy for the company’s next phase of growth. 

Big ideas for Saudi e-commerce

At the heart of it are plans to launch an e-commerce marketplace called next year.

It will have a similar model to global giant Amazon and regional rival, but with a tight focus on fashion, beauty and lifestyle, rather than on “brooms and all the other things you can find on Amazon”, Mourad laughed. 

The website and mobile app will not just sell Cenomi Retail’s licensed brands but a wider range of products from Saudi Arabia and overseas, although they will only be shipped to customers in the kingdom initially.

Future growth phases may look to expand the website’s reach to customers in the GCC, but this is a long-term goal, said Mourad. 

The group may also look to create a dedicated website or app to sell food and groceries.

Cenomi Retail is the licence holder for food brands such as Cinnabon in Saudi Arabia. This product category tends to do well online, making up on average 30-35 percent of the group’s e-commerce revenues, Mourad said. 

Other options are apps catering to the luxury and electronics segments – Cenomi Retail is the kingdom’s first Apple reseller, through its flagship store Aleph.

“We could follow the approach of the Facebook family, which has different platforms to reach different consumers – Pinterest, Instagram and so on.” 

Cenomi Retail operates 30 of its brands’ Saudi websites, said Mourad. The group also owns 51 percent of VogaCloset, a UK-based online store selling European fashion across Middle East and North Africa (Mena).

“So, e-commerce is not 100 percent new for us but we want to move away from doing it because we have to, to doing it because we’re the biggest e-commerce player in the kingdom,” Mourad explained.

“This is why we decided that has to be open to other brands, not just our own. 

“It’s like the process of starting a shopping mall. The stores are open to any retailer who wants to occupy the space otherwise there’s no growth – the centre is just a subset of our own revenues. Some of the brands in our malls are competitors and we treat them fairly, at arm’s length. 

“The same logic applies [online]. You wouldn’t be leveraging the power of the internet if you limit a website to your own brands.”

He cited Amazon founder Jeff Bezos’s analogy of the online marketplace as like a bookstore without the limitation of shelf space: could be a shopping mall without the limitation of square footage, he said. 

“We could ask, why can’t every store in the world be in our marketplace? But we don’t want to become a general marketplace [like Amazon], as we don’t want our brands to be diluted or feel they are being commoditised.”

As with all e-commerce businesses, faces logistical challenges such as delivery and storage, which Mourad said are considerable.

“We are building the first technology hub in Saudi Arabia, and we need a whole new infrastructure – software, drivers, warehouses, automation, a website. 

“But when you compare e-commerce fulfilment and delivery in Saudi Arabia to that in Silicon Valley, where I lived for two years, it is below par, and we need to fix that.” 

Issues include the kingdom’s complex and confusing address system, which makes it tough for drivers to locate homes; cross-border difficulties related to import rules, and low expectations on the part of customers about how long it should take for shipments to reach them.

A typical online delivery time is up to 10 days, compared to 3-5 in other nations, according to Mourad. 

He won’t seek to tackle all these issues immediately, he added, and will in the first instance outsource some functions, including delivery. 

But the company has already hired an e-commerce team including project managers, software engineers, website designers and others.

And it is exploring options to build, buy or lease logistics warehouses across the kingdom to store and transport goods. 

Another possibility is to use vacant space in existing shopping malls as click-and-collect locations for customers, or “micro fulfilment centres”, Mourad said.

Cenomi Centers has a 1.3 million sq m portfolio, of which around 90 percent is occupied. 

There are no plans for fundraising or other investment moves – the changes Mourad plans to oversee will be financed by group revenues and existing capital, at least for now. 

“Given the scale of our operations this [goal] is well within our reach. We are confident in what we are doing, Covid is gone, the market is strong, and we can now position ourselves for the future,” he said. 

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