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Total retail 2017

Retail Disruption – what’s the outlook for the Middle East?

Last year, our 2016 Total Retail report showed that online shopping was experiencing green shoots within the region. This year we are seeing game changing developments not only in the sector but also with the industry players coming into the Middle Eastern retail market.

So what's changed

We only have to look at Amazon’s high profile acquisition of to know that the face of Middle Eastern retail is changing. At the time of the deal, Goldman Sachs labelled the acquisition ‘the biggest M&A deal in the Arab World’. 

If we add to this that 51% of this year’s survey respondents told us that they had never shopped with Amazon, we start to paint a picture of an investable Middle Eastern market ripe with opportunity. It was publicly reported during the Amazon deal that e-commerce accounts for just 2% of retail sales in the Middle East and the appetite for investing in online retail continues with the announcement of the acquisition of Noon, another estimated heavyweight player, will launch operations during 2017 and is also expected to have a big impact on e-commerce within the region.

With the retail landscape changing on a daily basis, both retailers and investors need to truly understand the dynamics behind these changes - What is it that online consumers seek? How can retailers effectively engage with them? What online challenges do retailers face? And how will the brick and mortar retail outlets compete in the growing world of online retail?

In early 2017, PwC released its previous Total Retail survey in which it interviewed over 24,000 people across five continents in 30 countries. In the Middle East, we asked over 1,000 online shoppers who were geographically spread across the UAE, Egypt and Saudi Arabia about their shopping behaviours and expectations. This report takes a closer look at the Middle East consumer and sheds light on the latest trends and preferences facing the retail sector.

Since we began issuing our annual Total Retail survey for the Middle East in 2013, we have noticed a gradual trend increase ‘year-on-year’ in those shoppers who are frequently shopping online. The increase in monthly online customers has risen 6% from 23% to 29% in 2016.

29% in 2016

What has been your main motivation for buying online?

Shopper behaviour continues to vary by age throughout the region. 36% of those surveyed between ages 18 and 24 shop online monthly compared to those aged 55 years and above which comes in at 13% in comparison.

When we asked respondents about their motivation for buying online, 40% stated that it was due to lower pricing and 31% said it was due to the product selection, while only 17% cited convenience compared to buying instore. In contrast, 36% of respondents globally stated lower price and convenience as their motivation, which suggests that there is a significant opportunity for Middle Eastern e-retailers to further develop and enhance the convenience of their service.

40% - cheaper than buying in store, 31% - assortment of product selection, 17% - more convenient than buying in-store

It’s likely the impact of e-commerce will be felt much quicker here in the region due to the young age demographic who are actively using their smartphones and heavily engaged in what’s trending on social media

Norma Taki, PwC PartnerHead of Retail, Middle East

5 investment areas for retailers

Retailers are facing one of the most competitive environments in decades with preferences shifting to online shopping. We've identified five key investment areas that can act as a guide for Middle Eastern retailers when making future investment decisions.

1. Mobile

  • 41% of shoppers in the region are now are using their mobile device as their main tool to purchase items.
  • Consumers prefer online portals that are mobile friendly rather than downloading an App.

2. Social customer engagement

  • Social media is driving customer behaviour with 48% of consumers engaging in online promotions. 
  • 52% are using social media channels to read product reviews.

3. Secure platforms

  • Online safety continues to be a concern. 62% of consumers are worried about having their personal information hacked via their mobile device.
  • 60% shop online with companies they feel they can trust.

4. Loyalty

  • 32% of online shoppers remain loyal to their favourite retailers because they trust the brand.
  • 48% of shoppers say that attractive prices drive repeat purchases at their favourite retailers.

5. Showroom experience

  • For luxury goods such as jewelry and watches, 42% of consumers want to see and touch products before purchasing them.
  • Customers prefer to buy high priced items in-store and say they value interactions with experienced sales associates who have deep knowledge of instore product ranges.

When asked whether the Middle Eastern online shoppers prefered to buy from single brand or multi-branded websites, the findings indicate that customers like to shop from single brand websites for better service, while they prefer to shop from multi-branded websites when they are seeking better prices and promotions.

When we look a little deeper at buying preferences by product category, most of those surveyed preferred to buy books, music, movies and video games online, followed by consumer electronics and sports and outdoor equipment. However, grocery shopping is still lagging behind with only 27% choosing to purchase online vs 58% still preferring to buy their groceries in-store.

What drives you to purchase from single or multi branded websites?

  Single brand website Multi-branded website
To get the best selection 58% 73%
To get the best price 45% 82%
To get access to the best promotions 52% 76%
For better delivery/logistics 60% 70%
To get the best customer service 75% 61%

Contact us

Norma Taki

Norma Taki

Transaction Services Partner and Consumer Markets Leader, PwC Middle East

Tel: +971 4 304 3100

Vincent Giborees

Vincent Giborees

Director, ME EmTech Lead, PwC Middle East

Rand Shuqair

Rand Shuqair

Manager, PwC Middle East

Tel: +971 (0)4304 3788

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