The UAE has quite a different profile to other Middle Eastern markets, given its status as a tourism hub, and the number of visitors who come specifically for shopping. There is also no VAT, although this is expected to change with the announced introduction of VAT in 2018. The UAE also has a growing domestic population and a high proportion of wealthy residents – both expatriate and nationals – who are keen to buy Western brands. This is one reason why it is believed that clothing and footwear will be the fastest growing spending category in 2016, with spend up over 11% on 2015. They also forecast a rise in household spending from $72.8bn in 2016 to $97.9bn in 2020, and 40% of UAE households are expected to have an income in excess of $50,000 by that time¹.
Despite the challenges of a low oil price, the government continues to invest in major infrastructure projects, including a 550 million square foot wholesale market in Dubai, which will eventually host the world’s largest e-commerce platform as well as offices and shopping malls.
In this year’s survey, the UAE stood out as having more experienced online shoppers than is typical in the region: 10% have been shopping online for more than ten years, compared to a Middle Eastern average of 5%. Likewise everyone surveyed in the UAE said they owned a mobile phone, but in the region overall 7% did not have one. Aftersales service is more important to UAE respondents (37% versus a Middle Eastern average of 31%), as is Click & Collect (27% versus 22%), and they value loyalty points more in loyalty schemes (64% see it as a key benefit, compared with a Middle Eastern average of 55%). UAE consumers are more likely to choose a retailer for their stock availability (24% compared with a regional average of 18%), and because they trust the brand (32% versus 29%).
UAE respondents are more concerned about security risks online (22% versus 14%), and – perhaps for similar reasons - are much more likely to use a debit card than another form of payment (46% compared to a regional average of 25%).
¹ United Arab Emirates Retail Report, BMI Research, Q2 2016
KSA is the largest economy in the Gulf region, but very much less of a tourist destination than the UAE. However, household incomes are rising, and even though the oil price will be a dampening factor, growth in retail spending should still be fairly strong. Saudis are likely to buy more in segments like furniture and home, food and drink, and fashion, especially international brands. Over 800,000 households already have an annual income of more than $50,000, which offers opportunities for retailers. The new $1.9bn Avenues Riyadh complex is set to open in the capital in 2019 and will include a shopping mall.²
16% of Saudi respondents say the slow speed of their data connection is an impediment to mobile shopping, compared to a Middle Eastern average of 10%
In this year’s Total Retail survey, Saudi respondents tended to conform to the overall regional trends in their answers. Some of the variances that did stand out are aftersales service and Click & Collect, which are both less important in Saudi than the regional average (24% versus 31%, and 18% versus 22%, respectively). Saudi respondents also put a lower value on reward points as part of loyalty schemes (47% see it as a key benefit of a loyalty scheme compared to a regional average of 55%). The other interesting finding was that 16% of Saudi respondents say the slow speed of their data connection is an impediment to mobile shopping, compared to a Middle Eastern average of 10%.
² Saudi Arabia Retail Report, BMI Research, Q2 2016
Egypt has seen strong retail growth in the last few years, as the economy recovered from the aftermath of the Arab Spring. Forecasts suggest unemployment will continue to decline, and wages and household incomes will rise. Egypt is one of the largest markets in the region, and has a growing population, and a rising middle class, which explains why so many operators are investing in new retail real estate: Cairo’s Mall of Egypt and Alexandria’s Cleopatra Mall are on track to open in 2016 and 2017 respectively. Developments like this illustrate how the format of Egyptian retail is changing, with a shift from smaller, local stores to hypermarkets (for grocery) and malls (for more leisurely discretionary spend).
Turning to the survey results, one of the most striking findings is the polarisation of the online shopping landscape. Egypt has more people shopping online daily (12% versus a regional average of 11%), but also more people who have never shopped that way (18% versus 13%). It also has the smallest number of people who have been shopping online for a long time – only 0.9% of respondents have been doing this for more than ten years, compared to a regional average of 5%, and 16% of Egyptian respondents said they don’t own a mobile phone, compared to a regional average of 7%. But Egyptians are catching up fast: more of them are likely to research products on their mobile while instore (39%, versus 29% in Saudi Arabia and 31% in the UAE), and they are more likely to compare prices on their mobile while instore (46%, versus 39% for Saudi and 40% for the UAE). Social media is very influential too: 75% of Egyptian respondents value a brand more after interacting with it on social media, compared to a Middle Eastern average of 63%.
75% of Egyptian respondents value a brand more after interacting with it on social media, compared to a Middle Eastern average of 63%
Price and personalisation emerge as other key factors: Egyptians are more likely to choose a retailer because of price (52% versus an average of 49%), and the availability of personalised offers is a major reason why retailers gain ‘favourite’ status (31% versus 24%). 43% would have a better instore shopping experience if there were more personalised real-time offers, compared to a Middle Eastern average of 34%.
Security concerns are much less of an issue for Egyptians: only 2% say that’s preventing them from shopping online, compared to a regional average of 14%. But mobile security is still an issue: 74% are worried about their phones being hacked, compared to an average of 65%, which may partly explain why more of them prefer to pay in cash – 85% versus an average of 80%. Other challenges for the online operators include long delivery times: 51% of Egyptian respondents cite this as a problem, compared to an average of 45%.
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