Asian entrepreneur warns: "Tesco, watch out!"

| 21/10/2008 | Reply

by Kate Pritchard

Asian entrepreneur warns:

Khalid Hussain is the boss of the UK’s biggest chain of Asian
supermarkets. Earlier this year, he opened a megastore in one of the
most deprived areas of Birmingham. No wonder the Big Four supermarkets
are sitting up and taking notice.

“This
site was formerly an ugly old bus depot,” explains Hussain as he shows
us around the new Pak Supermarket. “I’d driven past it before but it
had never occurred to me that I could build a supermarket here. Then I
just tripped upon it by chance one day and saw the ‘For Sale’ sign.”

Hussain got on the blower to the estate agents, only to be told that
four other potential buyers were circling the land. But the proposals
they’d put forward were all subject to planning permission.

“We went in with an unconditional proposal and that’s what clinched the
deal,” he says. “Yes, I took a massive risk. The agent told me not to
get involved but I thought, ‘What the hell, I’m going to do it anyway’.”

He bought the land for £2.3m and a year later, in June 2006, he got
consent to build the supermarket. Hussain’s gamble had paid off. The
entire project set him back a whopping £8m. NatWest ploughed in £6m and
Hussain stumped up the rest of the cash (“I own a few properties, I can
release equity from those if I need to”).

“We’d budgeted £5.5m for the entire project. We were slightly off!” he
laughs. “But this is our flagship store – and I intend to take this
model and roll it out across the country.”

This supermarket is certainly different from the other five stores in
the Pak chain. For a start, it doesn’t just sell Asian food, it sells
everything. Hussain realised that if he was going to be a serious
threat to the Morrisons and the Tescos, he’d have to play them at their
own game.

“Our core customers are of ethnic origin. That’s our niche and that’s
where we have an edge over the Big Four – but we were missing a trick.
Customers were coming to us to buy their halal meat, their lentils and
their cardamom, then they were going on a second trip to one of the
bigger supermarkets to do the rest of their weekly shopping. I realised
we could bridge that gap and offer them the lot.”

It’s a cunning move. The average basket size in the new store is £25,
compared with £8 in the other Pak shops. Overall sales this year will
jump from £12m to a predicted £33m, with an 18 per cent gross profit
margin.

And if the big players rain on Hussain’s parade by stocking more ethnic produce, he’ll still be standing.

Read the full interview with Khalid Hussain, the entrepreneur
behind £33m-turnover Pak Supermarkets, in the November edition of Real
Business magazine.

Category: Europe

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