OUT WITH THE OLD

Sarah Ab­dul­lah re­ports from Jed­dah, where the young ‘chameleon con­sumers’ are reshaping the city’s evolv­ing re­tail sec­tor.

Gulf Marketing Review - - SECTOR ANALYSIS -

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

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