Retailers face up to reality

Last week’s panel session at the RetailVision channel event in Dubai gave a fascinating insight into the psyche of Middle East IT retailers during the current challenging climate.

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By  Andrew Seymour Published  November 8, 2008

Last week’s panel session at the RetailVision channel event in Dubai gave a fascinating insight into the psyche of Middle East IT retailers during the current challenging climate.

Make no mistake about it, these are anxious times for the global retail community following developments in the financial markets during recent months. Although some commentators will be quick to tell you that consumers are likely to maintain IT and electronics purchases at the expense of other luxuries, that hasn’t stopped the retail channel planning for the scenario that buyers may not spend as freely as they have been known to up until now.

There is no doubt that this concern is eating away at IT retailers in the Middle East too, even though the message from the most powerful players on the circuit remains one of fierce defiance. At last week’s RetailVision, five major names in regional retail took to the stage to outline their plans for growth — excerpts of which are included throughout this piece.

What emerged from that debate, and indeed the show itself, was that companies must revert back to the basic principles of profitable retailing, while being smart and innovative enough to craft an offering that marks them out from the crowd. Easier said than done, of course, but clearly a juggling act that retailers can’t afford to take lightly in the present environment.

As I mentioned in last week’s editorial, the channel here remains very much programmed to ‘wait and see’ mode when it comes to measuring the local implications of the economic storm. That stance was conveyed by members of the retail panel, including Sharaf DG CEO Nilesh Khalko. “It is a very simple question but asked during very difficult times because the financial tsunami means we don’t yet know how the demand will be hit,” he admitted when requested to provide his five-point strategy for growth. “But I guess for any retailer a simple five-point plan revolves around two aspects: revenue and costs.”

While addressing the cost side is fairly self-explanatory, the manner in which retailers chase revenue growth is poised to massively influence the shape of the retail landscape given the added pressures enforced upon the market. What’s clear though is that retailers in the Middle East are hungry for new products and accessories that appeal to the new-age consumer, while at the same time appreciative of the need to enhance the buying experience further.

The enduring logic that more stores, in more territories, leads to more prosperity, also lies at the forefront of most retailers’ thinking — a sign that many parties still believe the capacity of the market is large enough to counter any turbulence.

“We are planning to expand very aggressively in the Middle East,” declared Muthanna Al Durrah, CEO at RadioShack. “At the moment we are in nine countries and we are determined to expand into every country in the Middle East. The next stage in fact — and we have already talked to RadioShack International about this — is to acquire the master franchise for India.”

Egyptian powerhouse B-Tech claims to “reinvent” itself every three to five years in a bid to mirror the dynamic changes in buying behaviour and technology. The 45-strong chain admits to revisiting its strategy over recent weeks, but maintains that it will persist with its policy of opening between five and seven outlets per year.

“We have the opportunity and the potential to open many more stores than this, but we prefer to go about things slowly and surely,” explained Mahmoud Khattab, chairman and CEO at B-Tech. “As for international expansion, we have our plans for that. On my desk I have a couple of countries where we intend to launch B-Tech, but to be honest whenever we go to do that we realise the potential of our own country. Next year we hope to see B-Tech in at least one other country than Egypt though,” he revealed.

Specialist retailers also believe that an offensive strategy still suits the market, brushing off suggestions that aggressive expansion tactics might be shelved for the time being. Home automation outfit EON, one of several IT and electronics firms to take up residence at the new Dubai Mall, insists the channel must look past the current turmoil.

“We have existing projects going on in Morocco, and Kiev in the Ukraine, and we are talking to other people in Saudi Arabia with a view to maybe doing something next year,” revealed CEO Leon Beuyukian. “We are in difficult times, but let’s not forget that we will overcome them.”

While the appetite for expansion is refreshing given the economic uncertainty, some retailers have been quick to point out the dangers of an overly cavalier strategy. For a start, the pursuit of extra revenue commands sufficient capital and brings additional overheads. But with the retail channel not exactly known for its transparency, it remains difficult to tell who really possesses the financial muscle to carry out their plans.

Whatever happens, the current changing climate is forcing retailers to analyse their operations more closely, in particular the resources that drive day-to-day business. “One of our main strategies to grow the business is to go back and retrain all of our store managers,” revealed Al Durrah at RadioShack. “As you expand you kind of lose contact with the sales people, so your key personnel is going to be the store manager. You need to train the store manager as they are your eyes and ears in each of your stores.”

Saudi giant Jarir Bookstore, which has raked in sales of almost US$500m during the first nine months of the year and purportedly sells around 1,000 notebook PCs a day, also highlights training as the area that retailers must put further emphasis on to safeguard their positions. “Whether it is refresher training or product presentations for managers, training is very important,” said Manoharan Varadan, VP merchandising at Jarir. “We try and take advantage of vendor education wherever available as well as use third party training.”

While Middle East retailers concede that finding sales staff, let alone training them, is the biggest problem they face, EON is adamant that a lack of creativity is holding the channel back.

“We don’t talk about innovation in the Middle East enough and yet we need to constantly innovate in the retail arena,” reflected Beuyukian, who claims the company’s stores aren’t just used to stock laptops or displays, but to offer expertise to customers.

“At EON we are trying to humanise technology by giving interactive demos allowing home automation to be experienced or by explaining how audio-video can be streamed from one room to the other,” he added.

Until current concerns over the strength of buying behaviour are well and truly dispelled, there is no room for Middle East retailers to let their standards slip. For many, managing the cost base to ensure each and every fragment of their operation is efficient remains vital. And in times when customers may need extra reasons to part with their cash, retailers will have to go that little bit further to ensure the customer keeps on coming back.

Andrew Seymour is the editor of Channel Middle East English.

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