Here's how companies can adapt to changes in the retail sector
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Here’s how companies can adapt to changes in the retail sector

Here’s how companies can adapt to changes in the retail sector

By monitoring the signals of shifts in consumer spending closely, retailers can effectively plan their supply chain operations and avoid overstocked shelves

Gulf Business
Retail sector trends from Kearney

The last decade has put the retail sector through its paces. Online and mobile shopping was already on the rise pre-pandemic, with demand for such solutions skyrocketing at its onset. ‘Omnichannel’ then quickly became a buzzword, closely followed by ‘experiential’, forcing retailers to adapt their strategies to match the ever-evolving expectations of consumers. Those who didn’t struggled to survive. Those who did – and got it right – thrived. Shortly after overcoming this hurdle, the world entered an economic slowdown, with some economists arguing that we are on the cusp of a global recession.

The GCC region has long been known for its affluent consumer markets, with its population having strong spending power due to high per capita income. However, with market inflation on the rise, how has this impacted consumer sentiment and spending?

Key trends in the retail sector

Kearney Middle East has been regularly monitoring purchasing habits in these markets since 2020. It is no doubt that inflation is currently a prominent issue in buyers’ minds. In fact, our most recent research reveals that 84 per cent of those surveyed highlighted concerns about global market volatility and rising inflation.

Despite these concerns and notable price increases across both essential and non-essential items, half (51 per cent) plan on making a major household purchase in the next six months with no sign of planned expenditure slowing down. This speaks volumes about the confidence consumers have in their purchasing power regardless of the macroeconomic environment, driven by the strong economic foundations and continued favourable policy changes towards business and individuals in the two countries.

On sifting through the research data, the two categories that emerged as the most popular among consumers were food and beverage – including groceries, as well as apparel, footwear, and accessories. A closer look at these categories, as well as recent and emerging trends provides critical insights which will be key for retailers to keep in mind when planning ahead:

Strategic online promotion  will be key to attracting and retaining customers

One area which benefitted from the effects of the pandemic and continues to reap the rewards of the shift in consumer behaviour is online shopping. Historically, online channels used to have a price premium compared to offline stores, however, they are now considered as an address for affordability and convenience, which will continue to gain more importance given the current market conditions. To remain competitive, retailers should focus more on online exclusives, with the correct product and promotion type selection.

Know your customer well to better plan supply chain operations

As consumer spending returned to pre-pandemic levels, there was an increasing number of items in warehouses and shelves that quickly became less desirable (and those that were suddenly in high demand). This forced many international retailers to aggressively mark these down, clearing the way for incoming stock. By monitoring the signals of shifts in consumer spending closely, retailers can effectively plan their supply chain operations and avoid overstocked shelves.

Mature consumers require more choice

The demographics of consumers in the UAE and Saudi Arabia continue to evolve and mature, with more power and knowledge at their fingertips. This has made them more demanding and expectant of retailers to provide them with a greater availability of assortment of brands and products.

As such, we expect new brands that play across the price spectrum (luxury and value) to enter the market in the coming year. With spending showing no sign of slowing down, we expect growth in both luxury and mid-tier level retail driven by the growing middle-class demographic, particularly in Saudi Arabia.

Focus on sustainability to target the green consumer

Our past surveys have indicated that younger customers are more inclined to take sustainability into account in their purchasing decisions. We have also seen a willingness to pay more for ‘greener’ products.

While we certainly see that not all consumers may pay more in the coming environment, we remain confident that purpose driven brands that associate themselves with sustainable practices will enjoy greater customer loyalty.

Overall, while consumers are wary of the global macroeconomic environment, the sentiment remains positive with spending power continuing to be strong. By closely monitoring the evolving face of retail and adapting strategies in response to consumer demands, key stakeholders in the retail sector can capitalise on this positive, local sentiment. This will ensure that they stay relevant and engaged with consumer needs to remain competitive.

Also read: How customer-centric technology is reshaping retail industry

Debashish Mukherjee and Mohammed Dhedhi are partners at Kearney Middle East and Africa


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