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Beyond the Digital Divide:  Evolving Digital Commerce in the Kingdom of Saudi Arabia in 2014

Capture11Sacha Orloff Group Report

Beyond the Digital Divide:  Evolving Digital Commerce in the Kingdom of Saudi Arabia in 2014

Author: Alexandra de Kerros Boudkov Orlov – CEO Sacha Orloff Group

Website: www.sachaorloff.com 

 

In the Gulf, and in Saudi Arabia, the trend is an expansionist real estate strategy.  Leading groups prefer to cash-in with proven formulas, highly praised in the Middle East, such as malls and western franchises, even if mother-brands operate online and offline.

The Kingdom has largely accepted the principle of the evolution of the shopping Malls, and has adopted by default e-commerce solutions and payments to acquire a large part of the consumer goods and products market, encompassing the full value chain from banking system, retail, airline, hospitality, tourism, transport couriers and telecommunication sectors.  Most of these companies are changing their product mix to support margins, focusing on increasing sales, and consolidate customer loyalty to grow sales and introducing co-branded credit cards.

The Millennial Generation represents one of the most important factors in the adoption of e- and m-commerce in the region. This year, Internet penetration in the Kingdom reached 59.25 percent of the population, and has grown by 11 percent since 2013

Now is the time for the Saudi merchants and business groups to be fully immersed in digital activities. As most of the Saudi firms are still not embracing e- or  m-commerce; they should tap into the market of mobile owners to drive traffic, increase loyalty and grow sales.

To link technology, innovation and strategy to the Saudi digital sector require acquisition and retention of human talents.  Leadership, creativity, expertise, development and execution are key factors to growing success and excellence. It allies company culture to create strong relationship between human forces and firms.

In all the GCC, customer service is weak and investing in training human capital is essential to obtain a level of satisfaction to retain customers. The danger to accept mediocrity is that firms compete with others on the same average level.

The actual organizational moto is to move away from channel focus to customer focus. The business implies data analytics, supply chain optimization, integrated technology and strong customer service. Businesses have to take calculated risks, embrace disruptive changes and empower their talent forces to gain both offline and online customers.

Download the reporthttp://media.wix.com/ugd/17fd63_f7f73aaa041b46fc8de638b8544402ab.pdf

 

Sacha Orloff Group in the Media:

Saudi Gazette:
http://www.saudigazette.com.sa/index.cfm?method=home.regcon&contentid=20140714211489

Trade Arabia
http://www.tradearabia.com/news/IT_261912.html

Technology Market Corporation
http://technews.tmcnet.com/news/2014/07/14/7921871.htm

 

Ministry of Economy Taiwan – Bureau of Foreign Trade
http://www.trade.gov.tw/Pages/Detail.aspx?nodeid=45&pid=480034

Topix http://www.topix.com/world/saudi-arabia/2014/07/saudi-firms-urged-to-bridge-the-digital-divide-tradearabia

The Paypers
http://www.thepaypers.com/e-commerce/saudi-arabia-millenials-are-the-most-important-factor-in-ecommerce-adoption/755814-25

Taiwan Trade
http://www.taiwantrade.com.tw/CH/bizsearchdetail/7553024/C

Retail and Loyalty
http://www.retail-loyalty.org/en/news/saudi-arabia-millenials-are-the-most-important-factor-in-ecommerce-adoption/

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2013 – UAE retail sector set to flourish

Mall of the Emirates Sacha Orloff 2012By Wam

In 2011, the UAE was rated by Forbes magazine as the world’s sixth wealthiest nation by GDP per capita income, surpassing most developed economies. This means the country is on the top in terms of purchasing power, which is playing a crucial role in keeping the domestic retail sector one of the world’s busiest and most vibrant.

With the announcement of new mega-projects in Dubai, with shopping malls and online market services continuing to mushroom, the domestic economy remaining strong and inflation dipping to a minimal level, experts believe the UAE’s retail sector will steam ahead in the next years. What will give this sector an additional momentum is the sophisticated shopping infrastructure in the country and the so-called Arab Spring, which is luring more tourists into Dubai and the rest of the UAE.

The UAE’s high purchasing power is reflected in its massive family consumption, which involves individual spending on consumer items and services. Formerly second only to Saudi Arabia in the Arab region, the UAE jumped to the top position in 2010, when family consumption stood at Dh575 billion. It maintained that rank in 2011 as consumption leaped to nearly Dh640 billion, more than 15 per cent of the total family consumption in the 21-nation Arab League, according to official Arab data.

The steady surge in family consumption in the UAE, mainly a result of the high per capita income, was manifested in the rapid growth in the retail and wholesale sector’s contribution to GDP over the past years.

Trade to GDP

From around Dh67 billion in 2001, the value of that contribution leaped to Dh90 billion in 2005 and Dh134 billion in 2009. It swelled to Dh138 billion in 2010 before hitting an all time high of around Dh146 billion in 2011. The rise boosted the trade sector’s share of the overall GDP to one of its highest levels of around 11.7 per cent to maintain its position as the second largest component of GDP after the hydrocarbon sector.

“The retail sector in the UAE has grown so fast over the past years that it has become a major contributor to the non-oil economy this growth was driven by many factors, including the presence of a sophisticated shopping infrastructure, the organisation of too many events and occasions every year and the opening of scores of malls and other shopping outlets,” said Mohammed Al Awadi, a prominent businessman in Abu Dhabi. “Other factors include the demographic diversity in the UAE as there are nearly 150 nationalities and cultures this means we are talking about 150 different tastes another major factor is the strong tourism sector in the country, mainly Dubai, which has become one of the world’s dominant retail business destinations,” said Awadi, who controls a big chain of jewellery shops in the country.

Awadi, a former head of the trade committee in the Abu Dhabi Chamber of Commerce and Industry, said he expected the retail activity in the UAE to pick up in the coming years because of the steady population growth, the high per capita and purchasing power, strong economic growth and plans for new mega-projects in Dubai.

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The importance of Innovation in the UAE Retail Landscape

By Alexandra de Kerros Boudkov Orloff

Editorial and released on Dxbuzz magazine May 31st 2012 with the Khaleej Times newspaper.

I have been travelling to Dubai before it was known for being the most opulent retail destination in the world. However, I have increasingly been observing that since 2009, there has been a significant shift in the retail market. Whilst travelling to Dubai this month, my belief that the end of ‘malls as we know it’ has come to a close. The luxury mega malls boom in 2011 should be seen as a sign that some of the existing retail concepts are maturing. Nonetheless to sustain this growth, and adapt to more complex consumer habits, innovation and creativity should form the basis of new retail trends to maintain Dubai’s position in the retail sector.

The robust fundamentals of the UAE consumer market is a fact. Emiratis and GCC consumer have got a higher purchasing power than their European counterparts. Nonetheless, the saturation in the retail sector is leading to questions on how new retails concepts and infrastructure designs can respond to consumer needs. Astute moves by mega-retailers such as Emaar has focused on making retail central to the concept of ‘lifestyle entertainment’.  Malls no longer just offer retail spaces and shops, but consumers are able to enjoy aquariums, water features, skiing, ice-skating and leisurely activities. This not only enhances the consumer experience, but provides much needed activities in a region where nine months out of twelve need to be spent indoors.

The evolution of the retail sector in Dubai and Abu Dhabi has not stopped competing retailers from opening new malls, although primarily a ‘copy and paste’ model is being adopted; modelling on what has worked and not projecting how demographic, social and purchasing power affects consumer behaviour and expectations. For example, Wafi Mall, one of the first malls to open in Dubai is undergoing a complete refurbishment to attract the consumer base it has lost to Dubai Mall or smaller, more local retail spaces. In addition, Dubai Mall is adding thousands of square meters to its existing space in response from the growing demand of international commerce to have a retail space in Dubai.

The desire to be the biggest and most powerful will come at a cost and will outpace market growth. New retail stores will have to drastically shift their marketing strategies to attract consumers, which in turn will off-balance their competitors who will find it difficult to maintain their profit per square meters.  .

Immediate and fairly cost-effective steps can nonetheless be taken by retailers in a segmented approach. First and foremost, investing in consumers is crucial, as they remain their unique assets and is the only manner to spur consumer retention and growth. To achieve this, efforts should be geared towards enhancing the knowledge and skills base of sales as well as sales staff. Employees are the first and sometimes only representation of the retail brand, and regularly lack the necessary brand and company awareness that can then be transmitted to the target consumer. Aside from improving customer services, retail brands have to focus on generating best-practices in the processes and operations. This can be achieved by understanding customer needs through loyalty schemes and rewards, an understanding of the customer mix and segmentation and the promotion of products according to local trends. 

Dubai retailers need to consider seeding new foundations of vertical sources of growth, outside of their existing core business. Whilst brick and mortar are a sound approach, click and mortar is also another source of growth.

In the UAE only, there is vast e-commerce gap, where online purchase could reinforce a healthy competition between malls and virtual retailers. There is enormous share to gain of the modern consumer; who is e-willing to physically and virtually shop.

Other options are organic and modern convenience stores, cash and carry, discounters, and outlet malls mixed with business areas. For an active and busy professional like myself, I enjoy the buzz of the trendy business concept of ‘Make Business Hub’ on JBR; where I hold regularly my meetings with the who’s is who of the  GCC digital scene from Google to Wamda. However, these options are not developed to the fullest in the region, some UAE retailers also have a great potential for implementing changes and innovation in their core businesses enabling to diversify their vertical business structure. Seizing this potential will require astute strategies; with strong organizational development and management to succeed in implementing a more complex business model.   

©Alexandra de Kerros Boudkov Orloff

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Large Saudi Retailer decides to exit Dubai’s retail market amidst rumours of market saturation

© Dubai Chronicle

By Alexandra Orloff – Sacha Orloff Consulting Group

In the GCC news this morning one of Saudi Arabia’s largest retailer is pulling out of Dubai retail hub, after complaining of the never ending rising rents in the most popular malls such as Dubai Mall, and Mall of the Emirates.

It is not surprising, as there is a veritable problem of space allocation, brand leveling vs. the strong franchise groups. Who might sustain profitability and growth if the game is biased from the start?

Profitability is key, yet using only strong luxury brands will soon be an obsolete solution. A newer strategy of leasing and pricing should be considered. We strongly believe that smaller retailers or franchisers have an equal place in the GCC retail market, keeping diversity and newness in the retail game.

As the European economy is tired, the retail landscape in the UAE might also be soon following exhaustion, if diversity is not kept array, rich economies are diversifying on a global scale, so should the retail industry in opening new strategies and not counting only on what has been working so far.

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