Consumers in the Middle East are changing their buying behaviour, spending less while expecting more convenience, according to a report published today by McKinsey &Company, a global management consulting firm.
The report entitled “Navigating a perfect storm in the Middle East’s consumer sector” surveyed 2,000 consumers in two of the region’s largest economies, Saudi Arabia and the UAE.
The report highlights five main shifts in consumer behaviour:
1. Fear of unemployment is on the rise with 80 per cent of survey respondents in the UAE (up from 75 per cent three years ago) and 72 per cent in the Saudi Arabia (up from 62 per cent three years ago) worried about losing their jobs. In both countries, more than 40 per cent of respondents said they’re cutting down on spending and paying closer attention to prices.
2. Consumers are also less brand loyal with at least 15 per cent of consumers in the UAE and Saudi Arabia reporting trading down to less expensive brands - whereas trade-down rates three years ago were only about 10 per cent.
3. E-commerce is catching on and consumers are increasingly looking for speed and convenience – with 62 per cent of UAE consumers citing convenience as the top factor for shifting to online channels.
4. Health and wellness are becoming increasingly important factors in purchasing preferences with more than 50 per cent of consumers in every age group in the UAE saying that having “all natural ingredients” is either “always” or “usually” an important consideration when buying packaged foods.
5. And finally, demand for local goods to support local businesses is growing, especially among younger generations.
Against this backdrop, retailers and consumer-goods companies will need to adopt a new strategy that consists of two core building blocks: a new and distinctive consumer value proposition and a relentless productivity push.
To meet the needs of increasingly price-sensitive and demanding consumers, companies will need to tailor and fine tune their marketing strategies and consider ramping up their e-commerce presence. In particular, personalization will differentiate those that yield successful results.
Simultaneously, companies will have to fundamentally rethink their cost structure and find ways to keep prices low and extract enough value from their current business to finance new initiatives without compromising margins or the customer experience.
Abdellah Iftahy, partner at McKinsey Middle East and co-author of the report, said: “Firms in the Middle East are still adjusting to the new normal, which is no easy task. But by keeping up to date with changing consumer trends -as well as freeing up funds through a focus on productivity and building new capabilities in digital, analytics, and M&A -retailers and consumer-packaged-goods manufacturers can deliver exactly what consumers want, regardless of whatever direction consumer sentiment takes in the coming years.”
The report goes on to explain that new and cutting-edge capabilities in digital, analytics, and M&A will enable and enhance both consumer value proposition and a stronger e-commerce strategy. Digital and analytical skills are already benefiting retailers, with companies having seen uplifts of between 2 and 10 per cent in sales and two and three percentage points in profit.
Embedding data analytics into decision-making processes and providing incentives for the use of digital technologies in daily work will be especially important for companies to succeed.
Copyright 2020 Al Hilal Publishing and Marketing Group