Updated: May 13
Retail businesses in the Middle East have experienced leaps and bounds for the past 15 years thanks to a favorable macroeconomic environment.
Between 2010 and 2015, retailers in the GCC region enjoyed high revenue growth and returned compared to other global retailers due to one factor – high disposable income among households in the region. The disposable income in the region was growing at a much faster rate (three times to be exact) than the global average.
The elevated consumer spending precipitated by the ever-rising number of millionaire households, especially in the UAE, Qatar, and Saudi Arabia facilitated exponential growth in the retail sector.
This was due to the willingness and ability of consumers to spend their large disposable incomes, which allowed retailers to charge higher prices than other global markets. However, this growth recently reached a slump owing to several factors, such as the decline in the prices of oil and radical cultural shift towards digital technology. As a result, the ailing economic situation in the region is causing most people to cut back their spending. According to McKinsey consumer sentiment survey, more than half of consumers are delaying purchases. Consumers are now mainly concerned about prices, and the best way to get this information is through the internet, which is far much faster and easier than visiting stores physically. The odds are still stacked in favor of brick-and-mortar business models, with only 2% of purchases in the region done online. However, even with the high odds, retail businesses are finding it hard to make double-digit profits as was the case previously.
To counter the reduced spending, businesses will have no other option but to reach out to consumers at a personal level, which is impossible without the use of technology. Unfortunately, as consumers are quickly adopting digital ways of acquiring goods and services, retailers are still holding on to conventional business models that will make it hard for them to compete in the future. Currently, only 15% of SME businesses in the GCC have an online presence, with the rest opting for traditional brick-and-mortar business models. This number is drastically smaller compared with other countries across the world such as the US with an overall business online presence of 40%, France, 60% and Turkey, 37%.
The most significant blow, however to traditional brick-and-mortar businesses is the youthful demographic that accounts for more than 28% of the Middle Eastern population. Soon, the purchasing power will be held by this tech-savvy demographic, who as it stands now are avid online shoppers. Moreover, the situation is not likely to revert since this youthful generation will likely influence subsequent generations to adopt technology in commerce fully. Therefore that the future seems bleak for any retail business that does not embrace technology in its operation. Here are five digital strategies that retailers can leverage to boost sales.
1. Proximity Marketing
Proximity marketing is a unique form of marketing that targets customers’ movements within the retail store and communicates with them about the various offers within a specific location they are within. The concept is similar to location-based marketing. However, unlike location-based marketing which covers a wide geographical area, proximity marketing covers a small area, usually a store or even a tiny segment of a store dealing with a small assortment of goods.
Beacons are deployed at various locations in the store, such as the aisles or even at the storefront. These beacons transmit Bluetooth enabled signals within the range they are installed. When a customer comes within that range, the beacon sends a signal to his/her Bluetooth enabled smartphone delivering crucial notifications about the offers within that range like discounts, new product launches, or just a simple greeting or goodbye. When clicked, the notifications may be a gateway to the store’s website, app, or a feedback form that may be used to deliver better services.
Proximity marketing allows the customers to get crucial information about goods and services at the right place and right time. Based on the data gathered, the beacons can be used to alert customers based on their purchasing patterns making it more personalized than any other forms of marketing.
Proximity marketing utilizes the following technologies:
Bluetooth – This is the leading technology in proximity marketing with more than 86% of sensors installed around the globe. There are two Bluetooth beacon standards: iBeacon and Eddystone. iBeacon was developed by Apple in 2013 for its smartphones to capture BLE signals from beacons. Google responded two years later with the Eddystone protocol for its Android platform. Eddystone has become more popular than iBeacon because it can be operated with or without an app.
Wi-Fi Based Marketing – Though not primarily designed for marketing, Wi-Fi is now being taken advantage of by marketers to send notifications to customers who are connected to the network. The only problem with this method is that the customers have to be connected to the Wi-Fi connection or it is useless.
According to Beaconstac, Proximity marketing is 16 times more effective than Google Pay per click campaigns. It can be used in airports, malls, hotels, real estate, and in events planning, to name a few.
A good example of exceptional proximity marketing is when McDonald's decided to promote a new line of coffee beverages in Istanbul using the app - Shopping Genie. Customers got coupons on their smartphones around 15 McDonald cafes in Istanbul. The coupon advertised a free drink from the new-line of beverages for any coffee drink purchased. It resulted in a 20% conversion rate from 30% of customers who received the coupon.
Reference: McDonald's beacon strategy pushes in-store conversion rate to 20pc
2. Big Data
For a successful marketing campaign, you need a plan. The plan becomes feasible if it is tied to some form of metric or foundation to base on. This is where big data analytics comes into play. In a nutshell, big data refers to an extensive collection of information gathered over time that your business can take advantage of to make informed decisions. The data can range from market trends and customer purchasing preferences to valuable information about competitors. Big data analytics is an integral part of marketing for all businesses, which gives them a significant advantage over competitors that either willingly chooses to ignore this strategy or owing to a limited budget, are unable to set up the right infrastructure for this type of strategy.
Note, however, that the issue is not collect many data, but rather to collect many data that is narrowed down to your business’ specific requirements. With an annual growth of 40%, the amount of data in the world is unfathomable. As a result, you may easily collect a lot of ‘garbage data’ that may lead to poor or wrong analysis and ultimately, poor decision making that may negatively impact your business. The infrastructure is generally divided into three major components: storage, processing, and analytics, while the points of focus are in these three sets of data for marketing purposes: customer, operational, and financial.
In a region where internet penetration is more than 90%, and internet users account for more than 65% of the population, big data analytics can play a vital part in data collection and decision making for retailers in the GCC nations. All the information you need about consumer behavior can be easily gathered from the internet, such as market trends, online purchases, coupon redemptions, response to direct mail, browsing behavior, click-through rates, and conversions, smartphone usage, social media usage, and geo-location data. What you need to do is to invest in the right software and infrastructure, and you are good to go.
3. AI in Retail
Have you ever visited a website and immediately a chat box popped up welcoming you to chat or even ask questions? There is a high likelihood that you were talking with a chatbot. That’s the power of artificial intelligence. Although AI technology has been existence for some time, only large corporations like Google, Apple, Amazon, and Facebook have adopted it in their business structure. However, smaller businesses are also warming up to the idea of incorporating AI technology into there business. 42% of executives believe that AI can make a difference in service delivery according to Deloitte Survey (2018).
Amazon’s Alexa, Apple’s Siri, and Google Assistant are just a few examples of cutting edge application of AI technology. The recent acquisition of Body Labs by Amazon is taking AI to the next level.
Retailers can leverage the power of AI technology in so many areas of business. Think of it this way: AI is like a digital assistant that takes care of a wide range of duties for your business. For instance, AI can be used to keep track of all the customer movements in social networks and websites and the information can use for Ad targeting and engage with the customers on a personal level. The AI can also help customers to easily scheme through a wide array of products by making recommendations that are specific to their needs based on their past searches. In real life, you can even use it to heat map your store to track the movements of the customers, so that you can make improvements in terms of layouts and product placements to increase the rate of conversions.
For instance, heat-mapping can easily indicate dead zones or areas with very few traffic and low conversion rate. You can then reroute the store to allow more customers to pass through the dead zones or even include promotional sections in the dead zones to increase sales. The best feature of AI technology is that it can be personalized to meet your specific needs. Take, for instance, Lowes that uses the LoweBot, a navigation bot that asks customers questions and helps them locate what they are looking for. Or the ‘Tacos On The Go,’ a TacoBot that takes all orders for Taco Bell customers or Walmart which uses robots to scan shelves and keep an inventory of missing products for quick restocking. Fast-food chains are looking to deploy cameras that recognize license plates to identify customers, personalize digital menus, and speed up sales. Starbucks began trying such a system in South Korea last year with customers who preregistered their cars.
3. Omni-Channel Experience
Omnichannel retail is a new approach of marketing that integrates all channels into a unified platform, offering a seamless user experience across both online and offline channels. Not to be confused with Multichannel retailing, which means selling through multiple channels separately like social media, web store, and physical marketplaces. Omnichannel uses the same channels but integrates them to a unified system that makes it more user-friendly and flexible to purchase goods and services from virtually anywhere with 24-hour access. It can be described as a bridge that connects all channels to the customers. With omnichannel retailing, the limitations of brick-and-mortar businesses are quickly offset by the dynamic and flexible internet-based channels like social media, online marketplaces, and mobile browsing by using retargeted ads.
These online channels are fully-integrated with departmental stores to allow the easy and stress-free transfer of inventory and also in making payments. It also builds trust and goodwill between the business and customers. According to Omnisend, customers engaging in good omnichannel models spend 13% more on average than customers using single channels. They also shop more frequently than their single-channel counterparts. Also, omnichannel models with three or more channels have a 90% customer retention rate, which is far much higher than single-channel models that have a 33% retention rate.
An excellent example of the right model of omnichannel retailing is Disney. With an integrated website and app, Disney allows you to explore all the great attractions they offer. You can then make bookings and even plan your trip by including all the parks, restaurants, and entertainment spots you intend to visit. Disney will consist of all this information in their system, and all you will have to do is avail yourself in all the chosen places, and the app on your phone will do the rest. Online booking helps you to avoid long queues, meaning you will have more time to enjoy yourself. The Disney app also acts as your guide, showing you how to get around, book restaurants, and even shows you where to meet Mickie and other Disney characters.
4. AR & VR in Retail
If you have ever played video games or also used photo filters on Snapchat, then you have experienced the power of Augmented and Virtual Realities. Augmented reality (AR) is using technology to add virtual elements onto a physical environment. A good example of AR is the Snapchat selfie filters that allow you to digitally enhance your face or mobile video that connects various users over the internet. Pokemon Go video game is another classic case of AR used for fun. In augmented reality, there is a clear distinction between the virtual world and the physical world and what connects the two are apps via smartphone cameras.
In virtual reality, the line separating fact from virtual space is very blurred, and people are transported to another world entirely. Think about a virtual reality headset that is extensively used with video games and recently in training and simulations. Large corporations have embraced AR and VR technology to improve service delivery in their respective fields. The acquisition of Oculus by Facebook will likely shake the social media landscape shortly and improve how we interact with each other. Before the acquisition, Oculus already had great VR headsets like Oculus Rift, Oculus Go, and Oculus Quest.
Google and Apple have also developed AR smart glasses that operate as PCs and smartphones, allowing you to browse the internet, take photos, and even look at the calendar and maps using only voice commands. Apart from gaming and social media, the power of AR and VR can also be harnessed to retail businesses. For instance, Facebook recently allowed various online retail outlets to test its AR program that allowed customers to try various assortments like sunglasses and cosmetics from the comfort of their homes. By a simple tap, the Facebook app allows you to catch a glimpse of how you look in a pair of sunglasses or even makeup. IKEA took it a notch higher by allowing you to fit the real size of furniture in your space.
There is no doubt that the Middle East offers a lot of potential in terms of retail and e-commerce. Only 15% of retail businesses have some level of online presence, with most of them still clinging to traditional methods of commerce. The world is moving fast towards digital platforms and you will be easily phased out if you do not leverage the power of the internet.
Do not make the obvious mistakes that most retailers do, which is setting up a website and various social media accounts and hope that the customer will find them organically, you have to plan and invest in digital strategies to attract and retain users. Never lose sight of the customer experience and do not shy away from experimenting with new trends and ideas. Feel free to share your feedback below.