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These changes should serve as a wake-up call to consumer companies in the Gulf region, an article by McKinsey partner Abdellah Iftahy, associate partner Jhonny Jha, and consultants Stephanie Khairallah and Mona Lambert—all in the company’s Dubai office—cautions.
McKinsey’s latest Middle East Consumer Sentiment Survey shows a new type of consumer is emerging in the Gulf region, one who is more price sensitive, digitally savvy and socially responsible. These shifts in consumer behavior started during the peak pandemic months and are expected to continue driving spending decisions for the remainder of 2022 and beyond.
Prior to the pandemic, retailers and consumer-packaged-goods (CPG) manufacturers in the region were riding a growth wave fuelled by a strong economy, robust tourism, and ample government infrastructure spending, so there was little impetus to take risks and experiment with new products and services, they noted.
In addition, as well-established Gulf companies enjoyed brand loyalty from their customer base, they did not feel the need to make big investments in advertising and marketing. Gulf consumer companies have, therefore, been slower than their US or European counterparts to adapt to transformative trends like digitisation and sustainability, they said.
But as the landscape has changed, to attract and retain consumers in this dynamic environment, retailers and CPG manufacturers would do well to refocus their strategic priorities and put consumer data at the heart of every business decision, they wrote.
This requires a two-pronged approach. First, the Gulf consumer industry can expand into new products and businesses that are better aligned with evolving customer needs. Second, incumbent retailers and CPG manufacturers should develop personalised marketing initiatives. Gulf companies that choose not to pursue these new strategic priorities likely will not remain competitive for long, they warned.
The survey noted three of the most striking characteristics of today’s Gulf consumers: they are price sensitive, rise in e-commerce adoption and sophisticated and socially-conscious shopping habits.
Economic uncertainty, job insecurity and a protracted pandemic have made consumers more price conscious. More than 50 per cent of consumers in both the United Arab Emirates and Saudi Arabia are cutting back on spending. Consumers in both countries are actively trading down and looking for cheaper grocery options that offer similar quality, with the change being the most pronounced in the lower-income groups.
There has been an exponential increase in e-commerce adoption, driven by a young population that is earning more and spending more time on the Internet. Incumbent retailers are competing with a growing number of digital market entrants, including super apps, social media players, aggregators and global e-marketplaces, the authors noted.
The digitisation trend, coupled with the ease of comparing prices online, has increased online shopping activity across categories. The survey showed that the number of people in the UAE and Saudi Arabia who shop online on a weekly basis has doubled in two years.
Health, purpose and social responsibility are now the defining themes influencing buying decisions of Gulf consumers, mirroring the global trend of growing consumer concern about sustainability and well-being.
Fibre2Fashion News Desk (DS)
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