Middle East consumers becoming more cost-conscious
Times News Service
MUSCAT: Consumers in the region are becoming more costconscious, less loyal to brands and rapidly shifting purchasing behaviours, according to the 2018 Middle East Sentiment Survey by McKinsey & Company.
Approximately 55 per cent of consumers are now actively looking for savings across markets, with those in Saudi Arabia leading the pack. They are finding creative ways to spend less and more actively considering alternative brands than in the previous years. The survey was launched last week at the Retail Leaders Circle in Dubai by Peter Breuer and Gemma D’Auria from McKinsey & Company.
Amongst the survey’s findings, almost 35 per cent of consumers now look to buy their preferred brands at any cost, instead of trying out alternative brands at cheaper prices. This is down from almost 45 per cent in April 2017.
The survey also revealed that 78 per cent of consumers in the region changed their buying habits to save money. Multichannel shoppers have cut spending across all channels and increasingly favour discount formats and chain grocery stores.
UAE and Saudi Arabia
Saudi Arabia and UAE consumers felt they were forced, over the last two years, to make adjustments to their spending habits and now feel more confident about spending disposable income, in order to regain some of their lost purchasing power.
In Saudi Arabia, 34 per cent of consumers are looking to buy their preferred brands at any price point, as compared to 42 per cent in April 2017. In UAE, this number was 34 per cent as compared to 41 per cent in 2017.
“Interestingly, consumers in the UAE and Saudi Arabia 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 they did in spring 2017,” says D’Auria, leader of the retail practice in McKinsey’s Middle East office.
McKinsey’s 2018 Middle East Sentiment Survey classifies shoppers into five categories based on their behaviour — savvy cost-cutters, thrifty brand loyalists, selective splurgers, trade-down converts and multichannel shoppers.
Trading up or down
Across the globe, more consumers traded up to more expensive brands, while fewer consumers traded down to cheaper options. Although the overall consumer sentiment illustrates a shift towards cost consciousness, the market remains fragmented with a consistent and sizeable number of consumers still willing to trade up to higher value or luxury brands.
In the region, almost 16 per cent traded down and 11 per cent traded up in this year’s survey. Consumers in the UAE and Saudi Arabia continue to move away from midmarket brands.
UAE was ranked 8th and Saudi Arabia was ranked 11th in the list of countries where consumers were trading up, from among a group of 30 countries.
In the United Arab Emirates, 14 per cent traded down and 12 per cent traded up, while in Saudi Arabia, 16 per cent traded down and 11 per cent traded up in this year’s survey.
Lower brand loyalty
In the region, approximately 54 per cent of those who opted to trade down were happy with this decision, with 46 per cent admitting a desire to return to their old brands.
In Saudi Arabia, 45 per cent of those trading down expressed satisfaction, up from 41 per cent in September 2016.
“People are becoming less loyal to brands. 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 labels and lower tier brands,” added D’Auria.
Winning in retail
Winners in retail today use data inputs such as consumer sentiment to drive analytics-driven decision making, and those that do are significantly outperforming their peers. Decision making has always been data and algorithm driven, but three trends are accelerating the evolution — unprecedented levels of data, tumbling costs and powerful new computing capabilities and algorithms.
According to Breuer, leader of the Retail practice in McKinsey’s EEMEA region, “Quality enhancement and a wider assortment of private labels are the real threats for brands. Top retail performers are transforming their organisations to be analytics and data driven and this is possible even with limited public data. Proprietary insight on consumers is the retailer’s biggest asset and retailers need to focus on business impact, while deploying analytics-driven decision making. They need to create impact fast, but in parallel, work on a roadmap, enablers and capabilities.”