OUT WITH THE OLD
Sarah Abdullah reports from Jeddah, where the young ‘chameleon consumers’ are reshaping the city’s evolving retail sector.
WITH THE COMPARATIVELY recent introductions of hypermarkets and major showrooms, along with its large millennial population, Saudi’s traditional retail structure is taking a 360-degree leap into the future.
The millennial population comprises a large chunk of the present global phenomenon, namely: chameleon consumers – a term coined by Ernst & Young (E&Y). (Please see GMR News Plus October 2012 for the report on Mena’s Chameleon Consumers).
Their influence is becoming increasingly evident across the kingdom’s retail sector. Just by walking through any of the 200-plus shopping malls in Jeddah or any other city in Saudi Arabia, one will notice the changes in shopping patterns, when compared with just a decade ago. Gone are the days when consumers relied entirely on old souks and bagalas for their shopping needs. Now in their place comes malls with several facilities and attractions, including supermarkets, anchor stores, food courts, entertainment centres and a cornucopia of shopping options.
According to E&Y’s latest report, titled: 2012 MENA Customer Barometer, the chameleon consumer is described as “those who constantly adapt their personas and defy the confines of traditional market segmentation. They have conflicting preferences: they shop online, but demand a human touch; they insist on individualised service, but communicate in packs. Overall, they are tough to read, far more
Gone are the days when consumers relied on old souks and bagalas for shopping.
knowledgeable than in the past and much harder to please.”
So what does this mean for retailers in Saudi Arabia? Put simply, they must adapt their business plans in line with the emerging trends or forfeit market share.
“It is true that retail trends are changing in Saudi Arabia and people are shifting their buying behaviours – from shopping at local speciality shops to hypermalls,” says Mohammed Al-Madani, managing director of Awtad International Company – a management firm with first-class malls in Jeddah, including Etoile Centre, Le Château Mall and Le Mall.
He cited openness, due to the internet, as a major catalyst of change.
“The internet is being used increasingly to get information about products, along with advertising via SMS, [which has also risen], and special offers frequently being emailed to preferred consumers.”
Consumers, especially women, he adds, have realised that hypermarkets provide a wider selection than traditional one-stop shops.
“In addition, malls have begun to entice consumers away from competitors with special seasonal offers.”
Additionally, government reforms are also reshaping the Saudi retail landscape.
“Legitimate businesses have always suffered from loss of revenue and market share due to illegal street sales, counterfeiters, frequent loss of talented salesman and the absconding of expatriate workers causing a reduction in opportunities for nationals and females,” says Al-Madani.
He adds that the Ministry of Labour’s Nitaqat programme and the recent amnesty of status correction will solve these problems, ushering in a new era of development in the retail sector.
Due to these changes, Awtad International Company has prepared an annual budget of between $346,667 to $800,000 (SAR1.3 million to SAR3m) for promotions at each of its malls. It is also expanding with new projects in Jeddah and other cities.
“I hope once the government’s labour status correction period ends in November, there will be new job openings for expatriates and young Saudi nationals, allowing us to consider other expansion plans as well,” says Al-Madani.
Nonetheless, according to Mohammed Alawi, CEO of Red Sea Markets Company – owners of the Jeddah-based Red Sea Mall – these aren’t the only reasons for the changes in Saudi retail trends.
“Looking at the demography of the country, whether it’s locals or expats, there’s a shift towards value. With the government injecting huge amounts for projects in infrastructure, more workers are coming into the country.”
Consumers, he adds, are re-evaluating their spending habits, as basic commodities have become more expensive. This, he says, has affected both the local and non-local economy, causing consumers and retailers to be more value-led.
Alawi adds that increased demand for F&B is also altering retail patterns.
“There is a huge shift in this sector with a large number of casual dining restaurants entering the market, due to a growing interest in fine dining and cuisine.
“Also families are now recruiting international [culinary professionals], such as chefs, since there are a lot of working women who do not have the time to cook at home anymore.”
Shopping as a type of entertainment remains a key trend that is widespread in Saudi Arabia, with retailers focusing on appeasing the youth and families.
“Looking at the demography of the country, whether it’s locals or expats, there’s a shift towards value...”
Alawai adds that most malls are trying to inject more entertainment-related activities into the shopping experience.
“This is, especially, happening with the bridge retail concept, which is highly anticipated and is booming throughout the Saudi market.”
The Red Sea Markets Company is currently focusing on three major sources of retail spend: the mall’s direct spend, events and activities and in-house retailer spend – allowing the mall’s tenants to use the available space for activities which, in-turn, grows its business.
“In 2012, we organised and successfully completed 77 events, with another 100 planned for this year. In light of this, the total amount of all market spend components could reach up to SAR20m a year.”
He also adds that while there are no current plans to expand the mall regionally, the company is adding a 12,000-squaremetre retail space and a 36-outlet F&B venue to the existing 110,000-square-metre 400-outlet Red Sea Mall.
“We are hoping that this will help us become the leader in the Saudi retail sector, especially when it comes to utilising bridge retail,” says Alawi.
And, when it comes to catering for Jeddah’s Red Sea Mall, he says that consumer profiling is an annual process for the firm.
Alawi says: “We examine sales during high and low seasons, helping to reduce the effect of changes in consumer behaviour – whether it’s spending habits or brand loyalty.
“Through this we understand consumers’ preferences, according to age, gender and nationality, including [the time they] spend in the mall, the shops they target [and so on], allowing us to develop a sophisticated study towards our tenant mix plan.
“The plan has also led to several improvements over the past three years, including a shift in shop locations, its development and zoning, and categorisation, bringing in approximately 13 million visitors [to the mall] in 2012.
“Overall, while the new type of consumer is changing the face of retail, it is those companies that respond to new trends that will never fall victim to the chameleon consumer influence.”
Retail-tainment: Red Sea Markets Company is aiming to bridge the gap between entertainment and retailing
Star performer: Awtad International Company’s Etoile Centre in Jeddah is one of the top-rated malls in the city