Painted by a dominant blue with yellow strips meant to represent trust and hope, respectively, a warehouse turned wholesale supermarket of Alle, located around Megnenagna, in Bole District, was opened for business by Prime Minister Hailemariam Desalegn last Monday, May 26, 2014. The Premier’s presence reflects the weight the endeavor is given by the government.
Under the pouring rain before him, Hailemariam told the crowd gathered for the opening ceremony how consumers were left without options and were forced to accept inflated prices due to unfair business ties between few suppliers in the market.
“But now we hope the private sector will draw lessons from Alle’s unique business model,” he said.
Alle Bejimla, also called Alle, which literally translates in English as “wholesale is available,” has begun operations through a business-to-business model that focuses on providing goods to businesses like kiosks, cafes and hotels. The one billion-Birr project was initiated by the government over concerns of the lack of competition in the wholesale market of the country that caused a runaway inflation.
In an attempt to tame the escalating prices on consumer goods, the administration of the late Prime Minister Meles Zenawi had even taken control of private wholesalers’ import distributions and warned them it could open the sector to the test of foreign competition. For the government that has repeatedly expressed its disappointment over the domination of the wholesale market in Ethiopia by few powerful suppliers, Alle’s introduction is expected to spur more competition into the market and ultimately bring prices down.
The Enterprise is part of the government’s trade system reform that seeks to create competitive and market oriented business environment in Ethiopia, Hailemariam said. To reach this end, the Enterprise buys the products directly from manufacturers at home and abroad and thereby avoid the unnecessary market chain, which has been driving prices of consumer goods higher and higher, according to the premier.
In addition to the newly inaugurated store, a second one will be opened around Kaliti, in Akaki-Kaliti District, and a third one in what used to be the main Merchandise Wholesale & Import Trade Enterprise (MWITE) store in front of Khelifa Building, around Merkato, Addis Ketema District, in a couple of months.
The three new locations of the wholesaler in the Addis Abeba were all previously owned by the MWITE, another state-owned trading enterprise.
The involvement of an international consulting firm, A.T. Kearney, with almost 90 years of experience under its belt and a one billion dollar earning in 2013, in the establishment and launch of Alle – from strategic design up to implementation – was also one of the unique features of this project.
The US-based A.T. Kearney team has assessed multiple and similar developing market examples and has designed a localised cash and carry model that responds to the needs of Alle’s target customers, reads an email response from the management of Alle that Fortune obtained through its communications agent – Cactus Communication.
In its recent review of the Ethiopian market, A.T. Kearney characterised Ethiopian consumers as highly price sensitive and established the presence of more than 40 supermarkets, 100 minimarkets and 18,000 Kiosks (most family-owned) in Addis Abeba.
This is the market that Alle, with its initial capital of one billion Birr and a paid up capital of 250 million Br, will join, aiming to distribute quality food and other consumable items at competitive prices to retailers and entities serving consumers.
To be a customer of Alle, companies must be engaged in the business of selling or providing goods solely and directly to final consumers with no room for transferring the products to other businesses. As long as these businesses have the capital, they can buy as many items as they want.
Since the Enterprise is planning to trade around 200 items, both local and imported, there will not be shortage of goods, officials of the enterprise state.
According to data collected by the Trade & Industry Bureau of Addis Abeba till February, this year, there were 1,623 shops that have been selected across the entire city, scattered across all districts, to be included in this venture as a designated retailer that will sell products bought from Alle to final consumers.
Nonetheless, though officials downplay the crowding out effect that the Enterprise with a plan to open 36 stores in 25 major towns across the country will have in the merchandise business of the country, private traders are yet to be certain about it.
“Instead of being a threat to the private sector, this Enterprise will work closely with the private sector in a competitive market,” Kebede Chane, minister of Trade (MoT), said during the opening ceremony.
Importers like Legesse Feyissa, the general manager of Camels Trading Plc, an importer of consumer products like rice, however, has doubts about this.
“It will really be hard for companies such as ours to compete with a mammoth like Alle,” he told Fortune.
But for an expert that has been working in the merchandise business for over a decade now and who prefer to stay anonymous, concerns of the private businesses like Camels may be exaggerated. This is because Alle will not take the market hostage, according to the expert. The expert’s view, however, stands in contrast to the wholesaler’s plans to have a share of 25pc to 30pc in the nation’s merchandise trading with close to 10pc lower prices compared to the competition, according to its officials.
Yet the expert believes importers will still be at a disadvantageous edge because of Alle’s entrance into the market, whereas consumers benefit from cheaper products with better quality and manufacturers get access to a reliable market chain.
A macro economist Fortune talked to and who also likes to stay anonymous implores to differ.
“There is no use in creating another MWITE, unless the government works hard to increase supply capacity, especially when it comes to agricultural products,” he said.
Lack of finance and logistics problems are the main reason behind the inefficiency of the sector, according to the merchandise expert, which he believes Alle is immune from, hence will succeed in achieving its goals.
Indeed, this can change the landscape of the merchandise market in the country once and for all, the expert believes.
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