Card is king as Middle East retail surges ahead

In a clear indication of how rapidly the Middle East is adopting to plastic money, the region’s retail sector saw cash payments declining to 20 per cent last year, down from 70 per cent in 2017, according to a recent report by Statista.com.

On the other hand, payments through credit cards jumped from 16 per cent in 2017 to 38 per cent in 2021, showing the new trend emerging in the retail landscape — Buy Now, Pay Later (BNPL) – a new buying power.

“The overall environment in the retail sector is changing. If anything, tech-driven innovation is catalysing massive growth and many firsts – the first phygital store in the region, launch of the first ‘metaverse-as-a-service’ business and much more," said Justina Eitzinger, Chief Operating Officer of Images Group Middle East.

The size of the GCC retail sector is expected to rise to $308 billion in 2023 at a compounded annual growth rate (CAGR) of 4 per cent from $253.2 billion in 2018. Retail sales are likely to rebound and rise by 2023, led by the projected increase in population and international tourist arrivals.

The e-retail industry in the region has already been expanding rapidly over the past couple of years. The value of e-commerce transactions was forecast to reach around $27 billion by 2022 in the UAE. The country ranks first in the Middle East and North Africa (Mena) region in the UNCTAD E-commerce Index, followed by Saudi Arabia.

As per CNNB Solutions, Mena e-commerce sales will grow to $50 billion in 2022. Ninety-one per cent of customers in Mena have become digital converts and will continue to buy online, with 73 per cent shopping more online since the pandemic. Mena shoppers are looking for safe and secure online payments – over 60 per cent of people believe secure checkout is fundamental for a good online shopping experience.

At the same time people and purpose are strong focus areas for businesses, said Eitzinger. "While new jobs are being created and some roles becoming redundant, retailers are investing in their people and purpose. Sustainability and DEI (diversity, equity, inclusion) are key focus areas and have become important than ever before. Brands are at a new trajectory of growth and it will be incredible to see these stories unfold at MRF this year,” she said.

According to Euromonitor International’s Voice of the Consumer: Lifestyle Survey, 2021, over 50 per cent of consumers in the Middle East prefer spending money on experiences rather than things, compared to 44 per cent globally. Moreover, 65 per cent of consumers seek curated experiences — much higher than 58 per cent of consumers globally.

The survey also revealed that people prefer to engage more on a personal level, whether through social media, or talking directly with customer service assistants. For example, 65 per cent of those in the Middle East prefer speaking to a human than a chat bot, compared to 58 per cent globally. Therefore, as retailers in the region devise strategies, digital technology must combine with customer engagement, an engagement that still believes in a “real” and “human” experience, experts say.

In the Middle East, physical retailing remains stronger compared to other regions, although e-commerce is making strides, according to a report by Euromonitor. In 2020, the penetration rate of e-commerce in the region rose to 8 per cent from 4 per cent in the pre-pandemic period. Thus, while there has been a strong boost in e-commerce, store-based physical sales dominate the region’s retail landscape. Local consumers are expected to spend an average of over $2,400 via physical stores in 2025, up from nearly $2,000 in 2020, compared to only $295 online the same year.

More than 300 retail industry experts from 120 participating companies including 80 speakers will discuss these challenges and opportunities brought out by the new retail revolution driven by digitization across the industry at the Middle East Retail Forum (MRF), taking place in Dubai on November 15. The MRF conference concludes with the annual Images RetailME Awards that recognizes the best performing retailers in different categories.

“MRF and the RetailME Awards have become the industry benchmark convention and annual awards that everyone in the retail sector relate to and take pride in participating. It has become a matter of pride not only for the retailers, but it firmly has re-positioned the region in the global retail map,” Eitzinger said.

Middle East Retail Forum is supported by Mastercard, Zebra Technologies, Adyen, Altavant, Kalandoor, Line Investments, Al Bayader, BinDawood Group, Rasasi, ENOC, XENO, Red Sea Mall, Board International, EZ Dubai, Tap and Jiffy among others.

• Business