The Mena region’s retail sector is more divergent than ever, reports Ryan Harrison.
THE MENA region’s retail sector is polarised as never before. From turmoil in Egypt and Levant to the UAE’s economic recovery, 2013 will be a year of extremes. Consumers are becoming more shrewd and knowledgeable, and are demanding more personalised experiences, whether it’s in-store, in malls or on mobiles. Brands continue to reach out using social media, although online shopping is still nowhere near the levels seen in western markets.
While some GCC countries have seen solid growth this year, the affluent markets in Saudi Arabia, Qatar and Kuwait vie for a piece of the UAE’s retail supremacy.
So what are the new marketing approaches? Firstly, brand advocacy is being picked up by marketers and retailers, even if they’re new and still finding their way. According to McKinsey & Co, a recommendation from a friend is 50 times more likely to trigger purchase than a low-impact endorsement.
Dubizzle – the UAE-based community website offering classifieds and forums for the GCC region, Egypt, Jordan and Syria – has championed this approach as part of its rapid growth in the Mena region during the past decade.
“The most important thing is to develop a fundamental understanding of what will motivate your customers to advocacy. If done correctly, your advocates will be your volunteer marketing army,” says Barry Judge, UAE marketing manager of Dubizzle.
“Unfortunately, there’s no silver bullet solution, but [combining] the marketing into user experience is a great place to start. Outstanding user experiences are deliberate and designed. They do not happen by chance,” he adds.
In fact, some international brands – for instance, coffee pod giant Nespresso, which launched an online boutique this year – are importing these practises into their Mena mindset. The firm says that more than 50 per cent of its new club members experience Nespresso for the first time through friends or family. Of course, since 2005, its brand ambassador George Clooney, has charmed fans and coffee aficionados alike.
In the Mena region, the ongoing rise of ‘smart consumers’ has seen the more empowered shoppers want a greater say in how they experience services and to be ‘active allies’, rather than being ‘passive consumers’. Therefore, shopping is now shifting from being just a physical process of exchanging goods for money to a type of exchange in which retailers add an extra value beyond the actual benefit of the product or service.
Joumana Hage, senior strategic planner at Cheil MEA, says: “Since almost anything can be a retail channel, thanks to mobile technology, brands have ample opportunities to get increasingly creative and develop value exchanges – by engaging consumers in conversations.”
As far as online shopping is concerned, many are still missing a trick when comparing the internet penetration in places such as the UAE, where it has reached 71 per cent, in line with several developed economies at 70 per cent and comfortably above the Mena region’s average of 29 per cent, according to Arabia Monitor.
E-commerce, which is worth approximately $11 million in the region, has more ground to cover in order to catch up with Europe, the largest worldwide at $309 billion. The Mena region is yet to break out of the ‘flash sale’ mentality of online shopping. Meanwhile, Arabia Monitor says that more than half of GCC internet users have security concerns when shopping online, while 16 per cent prefer the ‘physical shopping experience’.
But driven by an increasingly digitally literate and connected youth population, the online market in the UAE could soon be the next frontier for the retail sector. It certainly has a huge scope in the Mena region. Even malls across the region are expanding, whether it’s the establishment of newer malls, or international retailers upgrading their luxury credentials for the ‘wow’ factor, or older malls playing catch up.
According to Euromonitor: “With new malls opening up in Abu Dhabi, it is believed that existing malls may suffer in the next few years, unless they do something to upgrade their image.
...empowered shoppers want... to be ‘active allies’ rather than ‘passive consumers’.
“If you look at Dubai, for example, BurJuman is now upgrading its older sections in order to keep things fresh.”
Other malls in the Mena region also have a strong presence in their regional markets. The Red Sea Mall in Jeddah, for example, is a popular retail centre in Saudi Arabia. A new retail mix and shift in focus to better food and beverage offerings have enabled the mall to enjoy a stronger presence in the Jeddah market. And when measured against other malls in the UAE, the Red Sea Mall competes more favourably.
Meanwhile, most retailers have latched on to consumers’ appetite for greater ambiance and richer experiences.
For instance, Ishwar Chugani, managing director of Giordano Middle East FZE and executive director of Giordano International, says: “This year we have embarked on an aggressive upgrade of our stores, with the first rollout of the new concept design at the Dubai Mall.
“Giordano’s new flagship Middle East store in The Dubai Mall redefines simplicity and embraces a classic, polished and refined design. Space is maximised for product displays and customer interaction, including wider entrances and larger, more comfortable fitting rooms.”
In these revamped stores, wood accents have been added to increase the feeling of warmth and natural space; energy efficient lights to enhance customer experience, while minimising the store’s carbon footprint.
“Thus, with the upgraded design, shopping experience will hopefully be more fluid, efficient, convenient and comfortable,” adds Chugani.
Nassim Nasr, GM of TBWA\Raad shopper marketing agency, Integer ME, says: “Brands such as Holster and A&F are looking to open in this region, which is a good sign for retailers. The size of these brands allow them to be selective. They are only choosing to work with retailers that can get them into the top malls. An interesting development of late is big retail brands taking the franchise and operating themselves.
“We are seeing an increased media spend, brands are opting for and spending more on social media strategies, events and sponsorship deals versus using traditional channels such as outdoor.”
As shoppers are spending more time in malls, operators are looking for new and exciting ways to keep people entertained for longer periods, since malls are also about socialising.
Fostering an emotional bond, therefore, is essential for creating an enjoyable shopping experience and nurturing customer loyalty beyond just sales.
James Tracy-Inglis, MD for shopper marketing specialists Saatchi X, says: “While malls are keeping shoppers entertained with live shows and branded entertainment, intimacy in the relationship between retailers and shoppers is weakening.
“Retailers need to consider that shoppers come to their stores with three basic types of stress that ultimately affects purchase – time, budget and frustration,” he adds.
A few years ago, it was expected that retailing would see a steady rise in the Mena region, especially the UAE. While this has definitely occurred in the recovery markets, continued disruptions have seen stunted growth elsewhere. It’s led to a more vibrant, increasingly creative, yet bipolar environment.
Bargain hunting: Mena consumers are yet to break out of the ‘flash sale’ mentality of online shopping