Predictions 2016: Group GM of Easa Saleh Al Gurg Group Abdulla Al Gurg

The Gulf Cooperation Council region has been witnessing consistent growth in its retail sector which represents a great opportunity for investors and retailers, as the market is set to expand and has a positive outlook for 2016.

The drop in oil prices is driving regional governments to invest in non-oil sectors such as retail and tourism in order to achieve economic diversification.

According to Alpen Capital’s report, GCC retail sales are expected to reach $284.5bn in 2018 with the United Arab Emirates, Qatar, Saudi Arabia, Oman and Kuwait ranking among the most attractive retail destinations worldwide. These results are fuelled by the opening of new malls and shopping destinations across the region and other major upcoming projects such as Qatar FIFA World Cup in 2022 and Dubai Expo 2020.

The GCC’s retail market is a mature industry primarily driven by social and economic developments. Apart from the big shopping venues, it is also important to highlight the evolution of community malls that continue to stay relevant due to convenience factors and attractive promotion schemes offered, which in turn represents a good opportunity for small and medium enterprises.

Best in class in 2016

For retailers in the region, it is essential to be up-to-date with the latest trends to service the market’s needs and hence achieve business competitiveness. Therefore, to be a successful retailer in the region, organisations must understand their consumers and deliver customised and unique brand experiences through a multi-channel approach. Looking at PwC’s research onRetailers and the Age of Disruption, there are four main areas that deserve close attention:

• Mobile Technology
• Proliferation of social networks
• Demographic shifts
• Evolution of the store

It is essential that organisations embrace the impact of digital technology on consumer habits and behavioural patterns. People will demand more sophisticated strategies to be in tune with their tech savvy, modern and social profile.

Given the strong mobile penetration in the region, mobile devices represent an important element in the retail sector. In fact, they have a critical role in the pre-payment activities. Retailers must create unique in-store experiences by leveraging mobile platforms for smarter shopping and also tapping into social media to be up to date with the trends and what their customers are talking about.

However, it is important to highlight the gap between online and mobile shopping as according to the PwC research, consumers still use their smartphones to get to the point of buying the product rather than use it for the actual purchase. This can be explained by the fact that Middle Eastern consumers still lack security on their smartphones. Hence, retailers must embrace all online platforms in their strategies in order give their consumers an effective and unique online experience.

The online pace

Middle Eastern retailers must enhance their online presence and customise it to their target audience enabling customers to interact with brands. Social media is one of the channels that provides customers the possibility to create or increase interaction with brands by generating their own content that will represent important marketing outcomes in terms of data gathering and user generated content. Therefore, through social media platforms, retailers have the opportunity to leverage their market presence and engage with their customers in a more interactive and genuine manner.

Nevertheless, this trend will bring challenges to retailers due to the strong presence of well established brands in the digital world. However, retailers can surpass these obstacles and embrace an approach that answers customers’ needs/preferences in purchasing items from a local online platform.

According to the PwC research in the Middle East, 33 per cent of the respondents stated their preference is buying online as they can do it 24/7, while 29 per cent purchase online due to the ease of research in comparing brands including the use of social media to track their brand preferences.

Whether you’re in B2B or B2C, customers are more sophisticated, more knowledgeable and more socially connected than they were even a few years ago. They have access to vast amounts of information and can rely on huge peer networks for advice and expertise. With so much information at their fingertips, buyers do their own research. By being present on social media wherever their buyers are, marketers can better engage with target customers at the critical moments of their decision-making process.

It is clear that Middle Eastern consumers still value the in-store shopping experience, however, they acknowledge the preference of online retail for its convenience. Hence, traditional retailers must embrace these trends and ensure they are at the forefront of the current retail market as well as the future retail environment.

As popular social network platforms evolve their user data, for marketers such fine-tuned targeting means that the distinction between advertising and e-commerce is becoming blurred for some product categories. Facebook, Twitter, Instagram and other platforms are selling ads containing “buy now” buttons, which let users complete a sale on the spot. It is too early to tell how many consumers want such a convenience, but the social platforms foresee a future in which they get paid by advertisers to provide instant-shopping services that make the platforms more useful to their members, and get them to spend more time on them.

Luxury goods retail market

According to Bain & Co’s report, during 2015 the luxury goods retail market was affected by the decrease in tourism spending in the UAE. That can be explained by the decrease of Russian visitors who used to be the biggest spenders in the luxury retail market.

From these facts, there is one key learning that organisations should take into consideration – luxury brands must define the right price model in order to keep up to date with the market demands. As e-commerce and global tourism grows exponentially, consumers demand more transparency around the pricing strategies, hence organisations should have a clear pricing model in order to ensure their business competitiveness.

New paradigm of shopping malls

The Middle East has a strong presence of big shopping venues; however, there is an expected change in the shopping malls paradigm. People prefer boutique experiences and in the future they will see shopping malls as a leisure destination more than a shopping venue. Hence, retailers must ensure that their stores offer experiences to their customers and that their venues tell a story and let people be embraced into the identity and philosophy of the brand. Organisations must be visionary and work to make a difference not only in their business but also in their customers by inspiring them.

The retail market in the Middle East is expected to maintain its positive forecast as the economy grows along with the purchasing power. In addition, the increase in the number of expatriates and the penetration of international retail players will lead to a change of consumption patterns and also an adjustment of the business strategies to be tuned to the market’s needs.