Cashing In On The GCC’s Electronics Boom

The electronics sector is witnessing an unprecedented boom across the GCC, specifically in Dubai and Saudi Arabia.

Smartphone penetration rates are among the highest in the world, reaching close to 200 per cent.

All of this is great news for regional electronic retailers such as Emax, part of the mammoth Landmark Group. Launched seven years ago, the retailer opened its 50th store in November last year, and revealed ambitious plans to open the next 50 stores within the next three years.

“The opportunities in the GCC are tremendous. One should have the guts and the financial strength to capitalise on them, which Landmark has,” said Neelesh Bhatnagar, CEO of Emax.

“We have tried to maximise the potential of this region, but I still feel there’s a long way to go.”

A growing young population is fuelling the region’s electronics boom.

“The customer is becoming younger and younger in our case and because of the nature of our products, gadgets receive a lot of media attention when launched. So the industry constantly remains in the news and the products remain in the mind of the people.

“Hence this category is growing and picking up a share of the wallet from sectors like fashion and clothing – the youth of today want to have the latest gadget rather than the latest t-shirt or shoes,” explained Bhatnagar.

The lucrative market has obviously attracted many retailers, with competition getting fiercer by the day. How do tech retailers survive amid such a cutthroat environment?

A huge regional presence and good support from vendors and customers has helped Emax thrive, said Bhatnager. He also credits the brand’s service standards for giving Emax an upper hand.

“Qualified knowledgeable manpower is a challenge in our industry, hence we have taken many initiatives to improve service standards.

“We train new staff from the time they are hired and vendors also train our people whenever they launch new products. We also have printed–buying guides available in our stores, which serve as a tool for the customer and the salesperson,” the CEO said.

Emax has also engaged a professional company to conduct mystery shopping and provide feedback every month.

“It is a long-term mechanism that can’t happen overnight,” he admitted.

“But we have come a long way in customer service.”

Another factor boosting competition is the issue of oversupply, he explained.

“Overall, in the region, I feel it is a situation of oversupply of everything, which creates very stiff competition. There are far too many brands, far too many models of phones, too many retailers and too much retail space that we occupy as an industry.

“But operating costs are already high and because of stiff competition, you spend a lot of money on marketing and promotions. I’m not sure whether all of these costs are sustainable over a period of time because of the narrow margin structure of this category. So your profitability can be very challenging.”

A further problem is a thriving grey market in the GCC, admits Bhatnagar. But with Dubai becoming a darling for several big phone-makers, it has found its way either into the first or second tier of cities when new products are launched. This in turn helps to regulate the market, he said.

Regional retailers also have to address growing saturation in the market.

“We are tying up with certain international companies for a mobile exchange programme, so that if somebody exchanges his old phone for a new one, the old one can be taken to those countries where it may still be new,” said Bhatnagar.

“We have to create a replacement market and need to provide a credible solution to the customer.”