GCC retail brands and the inevitable path to Omni-channel

The GCC countries remain an attractive retail destination for many global brands with UAE and Kuwait topping the list, according to Alpen Capital’s report. The opportunities in the retail sector are immense, and last year’s report indicated that the sector contributed 12% of the GCC region’s GDP. The GCC countries are constantly striving to diversify their economies away from oil and gas, and retail seems to be a lucrative sector. Over the next 5 years, opportunities for growth in the retail sector will continue to thrive due to several factors – mainly: higher per capita income, the growing young and brand-savvy population fueling the demand of luxury and electronics goods, the working expatriate population supporting the demand for consumer goods, and the changes in government regulations and policies aimed at further boosting trade, foreign investments, and tourism in the region as well as encouraging investments in SME and infrastructure.

In general, the future of retail in the region looks promising, but the question is ‘what are local retail brands doing to capture these opportunities?’ and further contribute to the economic growth of the region. As fierce competition is also expected to be on the rise, big brands in the region will have to live up to the challenges and cope with the changing environment of the retail landscape. It’s now obvious that retailing – as we know it – has been changing for the past few years and at a rapid pace. Changes in consumer lifestyles and buying behaviors, millennials outgrowing the baby boomers population, disruptive innovation and technological developments were key drivers of change in the retail business in developed markets.

In North America, the change in the retail landscape started evolving a few years ago gradually shaping up the retail that we know today. Multiple shopping platforms, expedited shipping and pick up, and social media and personalized digital marketing are few examples of services that were not available a few years ago. Amazon capitalized on its strong eCommerce business model to further shake up the retail channel during recession at a time when consumers usually lean towards online deals – constituting a real threat for many brick-and-mortar retailers. However, long before that occurred, some ‘agile’ brands anticipated the change in retail trends earlier in the game and were able to adapt in time to reap the benefits later on. On the other hand, brands that were slow to react are still struggling to adapt in the retail of today. Best Buy, for example, is one of the brands that took a proactive approach and gradually managed a smooth transition from a brick-and-mortar to a click-and-mortar retail format, whereas Sears struggled with this transition. Capturing the right change in trends well in advance and reengineering its business model in a timely fashion not only secured the smooth transition of Best Buy to the digital era, but also gave the brand an advantage to capitalize on for future opportunities. Moreover, the retail market is signaling another disruptive wave looming – triggered by Gen Z and new innovations– and ‘agile’ brands are already gearing up for the upcoming changes. So far, Millennials and new technologies taught us that the connected-consumer is now in the driving seat and not the brand anymore. Today’s consumer wants to consume marketing messages, connect with brands, and buy products on his own terms, and on top of all that he expects an affordable and pleasant shopping experience at all touchpoints with the brand. This scenario is continuously creating a challenge for both slow-reacting brick-and-mortar and multi-channel brands and is gradually forcing them to shift away from traditional retailing and marketing approaches. On the other hand, Omni-channel retailing came in handy for progressive retailers enabling them to bridge the gap between multiple channels, thus providing the connected-consumer a more pleasant and seamless shopping experience whether in stores, on eCommerce or mCommerce platforms leading to higher engagement and conversion rates, repeated sales, brand loyalty, and healthy financial results.

In the GCC markets, the scenario looks similar to the one witnessed in North America a few years ago. Some local retail brands have established themselves as strong household brand names for many years, but now questions started to arise about the sustainability of their business models in light of the changes in the retail industry. Many brands in the region are facing tremendous challenges to adapt and embrace change in the transitional phase to the digital era. It seems that many local brick-and-mortar retailers were caught by surprise with the fast-changing demands of the local consumer, so they reacted by adding ‘digital’ services and adopting fragmented multi-channel strategies in stores, online and on social media, which don’t necessarily live up to the expectations of the local connected-consumer. According to Emarketers, the region will witness a high smartphone user penetration rate in the coming years, and the UAE is leading the way with a rise estimated to reach around 75% of smartphone users by 2018. If this is any indication as to what will happen in the coming years, local retail brands have no option but to resort to a holistic Omni-channel retailing approach and start the change process right now – to cope with the mCommerce hype as well.

In order to maintain their positions and build for a long-term sustainable growth, local retail brands will have to revisit their current business models and organizational structures and consider various transformational plans and cultural changes in preparation to meet the upcoming opportunities.

Why local retailers need transformation?

Simply put, if the brand message, product offering, and services are slowly becoming irrelevant to the brand’s customer base, then the brand risks losing not only its loyal customers but also its top performing employees as customers tend to switch brands and employees tend to ‘jump ship’ during bad times. In order for brands to remain relevant and further grow in light of the changing retail trends, they need to change the way they do business in such a way that allows them to meet the demands of their customers and other stakeholders. It becomes a real challenge for organizations that are purely structured around a brick-and-mortar retail format to quickly transition to 'digital', and it is unlikely that any Omni-channel efforts will yield the hoped-for results – due to the gaps in technology, organizational structure and culture between the two formats. Similarly, ‘eCommerce-only’ formats will face many roadblocks in the transition to an Omni-channel retail organization. If you doubt that – just ask Amazon and Alibaba. Many big brands in the region are facing similar challenges, and they need to start evaluating their organizations from the inside out before any attempt on Omni-channel – whether a small surgical operation or a big scale transformation is required depends on the current situation of each organization. Otherwise, they will keep throwing money down the drain with those sales pitches and disoriented marketing messages popping up everywhere and desperately trying to lure customers to buy whether online or in stores. Instead of these fragmented Omni-channel initiatives, which send the wrong message and are detrimental for the brand, local retailers will have to develop a comprehensive Omni-channel strategy. But without the organizational infrastructure and culture to back it up, the execution remains merely impossible. That being said, The challenging tasks remain to set a new direction for the organization with eyes set on the future, evaluate the company culture and management, examine the capabilities of various business functions and processes within the organization spanning human resources, marketing, supply chain, warehousing and logistics, vendors, finance, customer service, sales and retail operations, stores and eCommerce, IT and data mining etc. , and then make sure to update and adjust these functions to work harmoniously together towards delivering a holistic Omni-channel experience. Furthermore, brands should maximize the use of their existing assets, data and resources to invest and improve their technologies, talent acquisition and retention, innovation, stores and website rationalization, reorganizing or restructuring plans etc. and prepare themselves to embark on the Omni-channel journey.

It’s noteworthy to mention that ‘businesses hoping to survive over the long term will have to remake themselves at least once along the way’ – quoting HBR.

Why Omni-channel retailing makes sense?

The increasing demand for a seamless shopping experience fueled by the mobile, young, and digital-savvy GCC consumer puts a lot of pressure on local retailers to meet the demand or stay out of the game. It’s no longer about the product alone, but it’s all about the shopping experience and the ‘me’ factor. The average local consumer travelling regionally or internationally 2 times more than before, the rise of digital marketing and social media, and the increasingly growing mobile and eCommerce shopping are all factors that not only removed the shopping barriers but also made the local consumer accustomed to a more pleasant shopping experience than the current one – which is hard to replicate in the GCC with the existing infrastructure and organization culture of many local retail brands. In the digital era, the connected-consumer is more mobile, demanding, and vocal about his experience with the brand. A typical shopping journey today, for instance, starts with on-the-go consumer receiving a personalized digital marketing message, turns to his smartphone to compare and buy products, checks out fairly quickly online, heads to the nearest store to pick up his purchase, and then brags about his buying experience on social media in the middle of the night. Now imagine what happens if a retail brand – due to hurdles in its organizational structure or culture – cannot offer a similar shopping experience. The consumer will not only turn to another retailer or eCommerce site to buy – locally or globally – but he will also bash the brand online with negative reviews. Hence, Omni-channel is all about all-round smooth and hassle-free shopping experience of the connected-consumer of today. Consumers nowadays are increasingly mobile and connected, and they expect a smooth shopping experience anywhere, anytime – and that applies to the GCC consumer as well. Omni-channel retailing remains a viable option for GCC’s big brands because they already have the resources and assets represented by their physical stores and marketing data, which are crucial in understanding the consumer behavior. Capitalizing on existing assets would enable these brands to better understand the consumer’s shopping journey and significantly enhance his shopping experience moving forward.

To sum it all up, a GCC retail brand – hoping to survive over the long-term – needs to remake itself and develop a culturally fit organization that enables the brand to overcome imminent challenges as well as prepares it to meet future opportunities expected to hit our markets by 2020.

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