Saudi leads Middle East as consumer cost sensitivity grows - Gulf Business
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Saudi leads Middle East as consumer cost sensitivity grows

Saudi leads Middle East as consumer cost sensitivity grows

Consumers in the region are less brand loyal and finding creative ways to save money, according to a McKinsey survey

Middle East consumers are becoming more cost conscious with those in Saudi Arabia leading the pack, according to a new survey by consultancy McKinsey.

The findings follow the introduction of a 5 per cent value added tax rate in the UAE and Saudi Arabia this year as well as increases to fuel and electricity prices in the kingdom that saw consumer price inflation surge in January.

Read: Saudi January inflation spikes on VAT, gasoline price hike

McKinsey found that 55 per cent of consumers were actively looking for savings across Middle East markets and finding creative ways to spend less than in previous years.

Other results included that fewer consumers are now looking to buy their preferred brands at any cost, down from 45 per cent in April 2017 to 35 per cent in 2018.

In the UAE and Saudi Arabia this percentage dropped from 42 per cent to 34 per cent and 41 per cent to 34 per cent respectively.

Nearly four fifths (78 per cent) of regional consumers were also found to have changed their buying habits to save money including through discount formats and chain grocery stores.

Despite this, there were signs of returning consumer spending power in the UAE and Saudi Arabia, according to McKinsey, where respondents felt forced to cut back spending over the last two years in light of reduced economic sentiment linked to lower oil prices.

“Interestingly, consumers in UAE and KSA responded similarly to most questions that were put to them and despite fluctuating financial sentiment, they believe they are saving and delaying purchases less than in Spring 2017,” said Gemma D’Auria, leader of the retail practice in McKinsey’s Middle East office.

Across the region, 16 per cent of consumers were found to have traded down to less expensive brands compared to 11 per cent that traded up in this year’s survey.

In the UAE, 14 per cent traded down and 12 per cent traded up compared to 16 per cent and 11 per cent respectively in Saudi Arabia.

Consumers were found to be less brand loyal, with 54 per cent across the region satisfied with their decision to trade down compared to 46 per cent that expressed a desire to return to their old brands.

Among Saudi consumers the percentage of satisfied trading down consumers rose from 41 per cent in September 2016 to 45 per cent this year.

“People are becoming less brand loyal. Earlier, they were looking more for preferred brands in cheaper channels, now they are more inclined to try and stick with lower cost brands – a shift which we attribute to an increase in the perceived and real quality of private label and lower tier brands,” D’Auria added.

Responses were gathered a the Retail Leaders Circle event in Dubai.


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