UAE consumers smarter now
Dubai - Experts also note that technology will have a big role to play, as retailers try to ease shoppers into spending once again
Published: Fri 6 Apr 2018, 10:27 PM
Last updated: Fri 6 Apr 2018, 11:38 PM
Consumers in the UAE and the region are becoming more cost-conscious and less brand-loyal, a survey has found.
Shoppers are finding creative ways to spend less, and are more actively considering alternative brands than in previous years, according to the findings of the 2018 Middle East Sentiment Survey by McKinsey & Company. Approximately 55 per cent of consumers are now actively looking for savings across markets, and 78 per cent of consumers in the region reported that they changed their buying habits to save money. The survey also revealed that multichannel shoppers have cut spending in all channels and increasingly favour discount formats and chain grocery stores.
"People are becoming less brand loyal. Earlier, they were looking more for preferred brands in cheaper channels, now they are more inclined to try and stick with lower cost brands - a shift which we attribute to an increase in the perceived and real quality of private label and lower tier brands," said Gemma D'Auria, leader of the Retail practice in McKinsey's Middle East office.
The survey revealed that almost 35 per cent of consumers now look to buy their preferred brands at any cost, instead of trying out alternative brands at cheaper prices. This is down from almost 45 per cent in April 2017. In KSA, 34 per cent of consumers are looking to buy their preferred brands at any price point, as compared to 42 per cent in April 2017. In UAE, this number was 34 per cent as compared to 41 per cent in 2017.
"Interestingly, consumers in UAE and KSA responded similarly to most questions that were put to them and despite fluctuating financial sentiment, they believe they are saving and delaying purchases less than in Spring 2017," says D'Auria.
Although the overall consumer sentiment illustrates a shift towards cost consciousness, the market remains fragmented with a consistent and sizeable number of consumers still willing to trade up to higher value or luxury brands.
Consumers in UAE and KSA continue to move away from mid-market brands. The UAE was ranked eighth and KSA was ranked 11th in the list of countries where consumers were trading up, from among a group of 30 countries. In the UAE, 14 per cent traded down and 12 per cent traded up while in the KSA 16 per cent traded down and 11 per cent traded up in this year's survey. In the region, approximately 54 per cent of those who have opted to trade down were happy with this decision with 46 per cent admitting a desire to return to their old brands.
Experts also note that technology will have a big role to play, as retailers try to ease shoppers into spending once again. Alexis Lecanuet, managing director of Retail, Consumer Goods, Travel & Automotive at Accenture, noted that understanding your shoppers is a good starting point in the industry.
"Today, you have a number of different demographics in the region, and all of them come with their own different rules," he said. "You need to understand how their needs are different from each other, and what is the best way to approach them. For example, they way you target millennials, will be very different from how you target their parents. With millennials, there is a very fine line between an offer being considered as useful or for it to be considered as intrusive. They are the digital generation that are very cautious about sharing their personal details with retailers. You can be certain that they don't like to be spammed by special offers."
"Generation X, on the other hand, has no problem sharing their details with you, if they feel that they can get a lot of good offers being sent to them as alerts," he added. "For them, it is much easier to switch between brands if they feel that they are getting a better offer."
Peter Breuer, leader of the Retail practice in McKinsey's EEMEA region, noted that the winners in retail today use data inputs such as consumer sentiment to drive analytics decision making.
"Quality enhancement and a wider assortment of private label is the real threat for brands," he said. "Top retail performers are transforming their organisations to be analytics and data driven and this is possible even with limited public data. Proprietary insight on consumers is the retailer's biggest asset and retailers need to focus on business impact while deploying analytics-driven decision making. They need to create impact fast, but in parallel work on roadmap, enablers and capabilities."