Retail will be about survival of the fittest in 2023.
This time last year, in the wake of the pandemic, many working in Middle East retail were looking forward to welcoming shoppers back to brick-and-mortar outlets en mass. For better or worse, this did not happen quite as they’d hoped. Why? Because habits and behaviours born during – or at least accelerated by – lockdowns persisted even after restrictions were eased. It soon became apparent that Covid-19 had left an indelible mark on retail across the Gulf and beyond.
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These challenges have been compounded in the months since, as disruptive technologies have continued to reshape the sector and geopolitical crises in other regions have caused supply-chain issues. It’s now tougher than ever for brands to maintain customer loyalty in the Middle East; no purchase can be taken for granted.
So, what will 2023 hold for retail in our region, and what steps can brands take to stay ahead of the curve?
An evolving landscape
Today, purchasing decisions tend to be based on five key criteria: quality, convenience, availability, safety and value. And while value looks set to remain the primary driver, I would argue that the most interesting shifts in 2023 will relate to convenience. Expanded product offerings, more delivery choices, technological innovations and a broader selection of payment options are all trends we can expect to see.
Consumers have grown accustomed to unprecedented levels of choice in where and how they shop and, paradoxically, this is resulting in a greater variety of products being purchased from fewer vendors. In 2023 I expect to see retailers continue to expand their direct-to-consumer (DTC) offerings.
I also anticipate that some customers, who have traditionally opted to buy products in person, will be persuaded to move online thanks to advances in demonstrative tech. In addition to channelling investment into navigation, online marketplaces are pioneering new modes of interactive engagement such as video sales and virtual ‘try-ons’. Expect to see similar innovations crop up in physical outlets as retailers look to enhance in-store shopping experiences and keep pace with their online rivals.
At the same time, we should pay attention to consumers who are willing to pay a premium to receive products sooner. The 15-minute delivery service launched by UAE-headquartered Noon in 2022, for instance, may well become the norm in segments such as online grocery shopping, and the proliferation of aggregation activities looks set to drive the establishment of yet more ‘dark stores’. Personally, I’m interested to see whether shoppers are willing to forego choice for speed.
Finally, I believe we will see an uptick in ‘buy now, pay later’ options in 2023, as retailers work to alleviate the financial pressures facing certain sections of their customer base. Some shoppers will seek to spread payments over longer periods to enable them to acquire items sooner, and we will see a growing expectation that such mechanisms are in place to deliver flexibility and convenience.
The billion-dollar question
In ultra-competitive markets, retailers the world over always ask the same question: what can we do to distinguish ourselves from our competitors? Well, in my opinion, the answer is simple. Shoppers won’t buy what they can’t see, so – no matter what your product – visibility is paramount.
The challenge is to ensure you remain part of the conversation without going over budget – a balance that can be achieved through effective content and merchandising. It is vital to ensure your customers understand what you are offering and why they should buy it because, when it comes to fast-moving consumer goods (FMCG), 2023 will be about survival of the fittest.
Success is no accident
We believe those who weather this storm will emerge stronger. In tough times, a keen understanding of consumer preferences and behaviours can make the difference between survival and collapse.
The brands that invest in this expertise today will not only be more likely to succeed in the Middle East but will also be able to re-apply these winning formulae in other geographies. Conversely, those that neglect innovation in pursuit of ‘business as usual’ will pay the price.
The race for retail supremacy in the Gulf is progressing rapidly, and only the fittest firms will reach the finish line.