Buying time

Middle East shoppers have always had a reputation for wanting the latest kit. But where to go to get it, buy online or visit a big shopping mall? Windows Middle East looks at developments in the retail industry and how it gets us to part with our pennies.

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By  Peter Branton Published  June 30, 2003

Introduction|~||~||~|Napoleon once dismissed the British as a nation of shopkeepers. When it comes to shopping though, the famous French leader would have seen the Brits have got a thing or two to learn from people here in the Middle East. From haggling in souks to waving the credit card in malls, shopping is one of the supreme pleasures for people in this region.

And not just for people based in the region either. Right now, Dubai in the UAE is in the middle of Dubai Summer Surprises, a 10-week shopping extravaganza geared to persuading tourists that its worth facing the summer heat and humidity to travel to the region and part with some cash. Tourists travel from around the world in search of a bargain at the various festivals that are held in different countries across the region all year long. According to one local vendor as much as 30% of all IT equipment sold in the UAE ends up in another country.

Wherever the equipment ends up, the buyer is faced with a wide range of choice when he wants to purchase his latest piece of kit in the Middle East. Whereas IT retailing was traditionally consigned to the back street dealers – such as the shops along Khalid bin Walid Street in Dubai – the more consumer-friendly nature of IT kit now means that customers are as likely to find good deals in the big malls as down a side street.

Which is assuming that you want to stick with traditional bricks and mortar shopping. There are now a number of options for those who want to brave the online world in search of the hottest new kit, or are looking to get a good bargain. For instance, in Saudi Arabia, ZAI Technologies, the PC assembly arm of Al Faisaliah Group, has just gone live with a “soft” launch of its Web site, zai.com.sa.

According to Bassam Abu Baker, general manager of Al Faisaliah, the site will allow the company to expand its reach across the Kingdom. “For remote towns who don’t have access to the big stores, this is an opportunity for them to get the full customer experience,” he says. “The service will be across the entire Kingdom, not just the big cities that other vendors concentrate on.”

Customers can place an order on the site, and have their PC configured in the way they want, and it is then delivered to their doorstep by carrier firm Aramex. For now, payment is cash on delivery because, says Baker, consumers in Saudi are still wary of paying online, although a credit card service will be available when the site is fully launched in September this year. “For the internet, people still don’t fully trust it for payment, especially in Saudi, but we are talking with two banks now about a service that people will trust,” he says.

Baker is confident the site will prove very successful for ZAI, and predicts that as much as 50% of the company’s revenue could come from online by 2005. However other vendors have reported much less success from online sales. According to a survey conducted on itp.net recently, online sales amounted to just 2.3% of all computer hardware sales.

||**||Going online|~||~||~|For retail chain CompuMe, online fits into a “clicks and mortar strategy”, supporting sales in the retail stores rather than generating a significant amount of business in its own right. Despite launching its online presence at the same time it opened its first physical stores, virtual sales still account for a tiny percentage of total sales, according to CEO Dikran Tchablakian.

“We created the online side to make it easier for the customer to choose products, now they can see everything they can get in the store from the comfort of their living room,” he says. “Once they’ve decided on the product they want, then they can drop by the store and pick it up.”

However, CompuMe has suffered from a lot of fraudulent transactions through its online service, Tchablakian says. “We average 150 transactions a month and I would say 125 of those are fraudulent, we really don’t make any money online,” he says.

There are other problems associated with online retailing. Haytham Kamel, vice president and general manager for Emirates Computers retail arm Technoworld, says there are clear differences between physical and virtual retailing. “When a customer walks in through the door of a showroom, you have a clear chance to assess him, what type of customer is he, what will he need and so on. With virtual selling you have to offer a store which is very descriptive and rich in quality of options, so the individual can get exactly what he wants, yet at the same time it has to be simple and clear.”

Emirates Computers web site etechnoworld.com generates as much as 10% of retail business, Kamel says. “When we started online sales in October 2000 we were making around $40,000 a month, now we’re taking over $300,000 a month, and its new business. We’ve had enquiries from all over the Gulf and Africa, there are no geographical restrictions on buying online.”

“We originally started online sales because we were the fulfillment partner for Dell Computer in the region. Since that vendor is well known for its online sales approach we felt there was mutual benefit to doing the site. Today if you go to Dell’s site and look for the Middle East, it points you to our site.”

||**||Getting value|~||~||~|Adding value to the retail experience is how companies aim to distinguish themselves from competitors. But how does this square with the Middle East consumer’s famed eye for a bargain? “We don’t do the Khalid bin Waled Street type offers, we don’t compete on the lowest possible price,” says Tchablakian. When CompuMe began, in 1998, this was an issue with some customers, he admits. “In the beginning people struggled to understand why they had to pay for value, today people understand the importance of service and support so they are willing to pay for it,” he says. “You don’t want to buy from the fly-by-night stores that may not be there when you take the product back with a fault, these guys close down and go away.”

The CompuMe concept is based on the PC World chain in the UK, Tchablakian says. “We’re not just a retail store, we also do a lot of services around that,” he says. “So we also look at services such as maintenance, training and insurance. We’re continuing to add services to the mix all the time.”

Distributor Aptec has established its own chain of stores, Aptec Mobile, to sell mobiles and smart phone products. The company is looking at a concept store for all aspects of communication, which it is planning to launch in the next six months. Services it has developed include its “software corner” where customers can order in-store for software to be downloaded to their phones and mobile devices, pay in-store and Aptec will pay for the service on a company credit card.

“We look at always adding value to the retail mix,” says Linda Al-Tarifi, marketing manager for Aptec. “For instance, for Nokia we held a promotion for the 9200 series phone, we offered Mutarjim ME software, which is an Arabic/English dictionary, it translates English words into the phonetic Arabic version so you can carry this on your mobile and whenever you need to you can find the correct way to say an Arabic word.”
CompuMe also divides its business between corporate and retail, with retail making up 70% of the mix. “With retail, margins are very low, so you have to substantiate it with value-add services,” says Tchablakian. “What we do is put pressure on the vendors as well to understand that they have to support us with good prices if we are to offer a good service.”

Kamel agrees that price is not the sole issue for customers now. “Price is always an issue, not just in this region but everywhere, people want to buy the best possible product for the cheapest price, this is human nature. But today, based on experience, people understand that cheap is expensive and expensive is cheap,” he argues. “You don’t want to waste time buying something you don’t need, or can’t get to work. And you don’t want to buy from a small firm and find out it isn’t there six month’s later,” he argues.

||**||Surprise in store|~||~||~|Which is not to say that price has dropped out of the equation altogether. Getting back to Dubai Summer Surprises, vendors now are offering attractive pricing packages to increase sales of their products. Acer for instance, is offering deals on a number of its leading notebooks through its sales channel. These include attractive pricing on its 17-inch screen Aspire 1702SC notebook. “This is the time of year when a lot of people are home from work and realise just how useful it would be to tap into vital e-mails from their notebooks,” says Krishna Murphy, general manager, Acer Computer ME. “The unbeatable prices that we are offering on this range of products can fit anyone’s budgets this summer.”

The vendor is also offering a number of other deals on notebooks and is also offering bundled deals on its Aspire desktop computers, offering them with LCD monitors at a special rate.

Such deals do create pressure for stores to comply, says Kamel. “For Summer Surprises we always try to go with the buying moods of the residents and ex-pats so we do run promotions and so on. We participate through our showrooms but at the end of the day its during the summer and a lot of people do go away at this time.”

More important, says Kamel, is the Computer Shopper event, held to coincide with Gitex
every year. “This event is a really great indicator of business for us,” says Kamel. “We’ve been participating every year since it began and year after year it has shown an increase in figures for us,” he says.

Last year’s event saw Emirates Computers host a fashion show, with an Australian cheerleading team flown in from halfway round the world and MTV Asia DJ Nikhil Chinnappa as compère. “Everybody waits for Shopper to get the best prices and the major brands and major vendors run very aggressive campaigns during Shopper,” says Kamel. “But we also do promotions throughout the year, for instance on Valentine’s Day we ran a promotion where if you bought your wife a new phone then we would deliver a red rose to her door.”

Such an idea may seem simple enough, but Kamel says planning promotions is not straightforward. “Unlike what quite a lot of people think, there is quite a lot to running a good campaign,” he says. “You can’t just set a price, sit back and wait for people to rush in. Imagine doing a promotion, having people buy the product in bulk and then you can’t support it, or the product itself has a fault, what then? If a promotion is not properly planned then it can backfire on you.”

For instance, a Nokia promotion proved so popular that Emirates Computers needed police help to deal with crowd problems, Kamel said. “We do promotions through the year, but they do take a lot of work to plan and prepare,” he says.

||**||Service with smile|~||~||~|Where the IT retailers say they score is their ability to offer specialised service. “We can educate the market and we can educate the end user,” says Aptec’s Tarifi. “We have enough expertise and support to do that. Our strategy now is to go into the malls and take our retail business to a higher level.”

However, for many smaller players, malls are too cost-prohibitive and provide too little footfall for pure IT sales. For smaller dealers the appeal of the specialised areas still hold true. Xmedia has moved into Computer Plaza, just off Khalid bin Walid Street in Dubai, from a general mall after business failed to pick up over the course of a year. “There just weren’t enough people going in to that mall for IT,” says Ahmad Farahani, general manager of parent company Ashley. “It could have taken two to three years to pick up, but why wait that amount of time? We’re doing very well now we’re in Computer Plaza.”

The increasing blurring of the lines between IT and other forms of digital equipment is leading to a change of emphasis for CompuMe, says Tchablakian. While the store began very much as a specialised IT store, and still differentiates itself as such, now it is looking to other product lines. “We’re changing our branding to information and digital technology stores,” he says. “We’ll be focusing much more on products such as plasma screens, LCDs, DVDs and so on. There is a huge range of products coming now that the customer will need help and assistance in choosing, we aim to be in that space.”

That space of course, is also being targeted by other vendors, with the big electrical stores looking at what they can add to the mix. Retailer Jacky’s Electronics now has 33% of its business from IT products, and will be keen to exploit any cross-over between IT and general electrical sales. Vendor LG Electronics has also just opened a concept showroom in the region, a Digital Centre, where it doesn’t sell products directly but offers advice on all the product areas it sells in.

There is also competition from the big hypermarkets, with the likes of Carrefour also getting in on the action. Is it too far-fetched to see a time when servers will be bought along with the weekly grocery shopping?

Chains like Plug-ins are also attempting to add value-add by offering more around the shopping experience. The retail chain has just set up a public hotspot, or wireless LAN access point, in its store in Dubai, making it the first place outside of a handful of luxury hotels and private offices to offer such a service in the Middle East.

For the customer though it should all add up to good news, as retailers will constantly look to find new ways of attracting shoppers through their doors, or to their web sites. Adding products and services will be one way, while offering attractive pricing and good deals will be another.
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