Pushing boundaries

The rise and rise of power retailers and their hypermarket rivals has transformed the dynamics of the consumer electronics (CE) channel sector in the Middle East. Channel Middle East surveys the landscape.

Tags: Eros ElectricalsJacky's ElectronicsLG ElectronicsSharaf DGSony CorporationUnited Arab Emirates
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Pushing boundaries Ashish Panjabi, Jacky’s.
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By  Aaron Greenwood Published  November 11, 2010

The convergence of IT and consumer electronics technologies combined with the increasing trend towards large-scale retailing has altered the channel landscape in the Middle East in recent years, and led to unprecedented competition within the sector.

This environment has forced CE vendors to implement ever-more sophisticated strategies for cornering market share and shoring up their relationships with key retailers, who have increasingly usurped their smaller independent rivals in securing consumer dollars.

CE vendors including LG Electronics, Sony and Creative, have been at the forefront of this shift in the market. H. S. Paik, president of LG Electronics Gulf, says the company has altered its strategy in recent years to exploit this trend.

“Our focus is mainly on power retailers and hypermarkets, as market trends are changing,” he says. “Previously, independent retailers had dominated the marketplace, however nowadays power retailers and hypermarkets are taking the majority share, with 24% and 30% respectively.”

Singapore’s Creative has also honed its strategy in the Middle East to snare power retail business, explains the company’s senior manager of regional sales, Desmond Lim.

“The Middle East is home to a number of power retailers constantly opening new outlets and for this reason the region remains [one of] our key markets worldwide,” he says. “Our channel strategy lies in strengthening ties with our distributors and dealers. We believe that by doing this we can establish closer working relationships and in the process bring more products into the market at a faster pace.”

Sony Gulf’s sales strategy remains largely guided by its long-term relationships with exclusive distributors such as Jumbo Electronics in the UAE, which it has worked with for more than 30 years.

According to Oda Takanori, general manager of sales at Sony Gulf, the company’s current strategy is to “focus on further developing existing outlets [while working] in partnership with Jumbo Electronics to expand and support the retail chain”.

“Engaging power retailers is very important in our [industry] and we have developed our relationships with these operators through our distributors,” he says. “Developing a business proposition that provides value is hugely relevant when it comes to dealing with power retailers. Focusing on key strategies helps us enhance our synergies with these players.”

While fewer consumer electronics vendors now seem intent on securing exclusive distribution partnerships in the Middle East region than in the past, the benefits for each party in doing so remain apparent, claims Niranjan Gidwani, deputy CEO of UAE-based retailer, Eros Group.

“An exclusive partnership allows a distributor to ensure pricing stability, establish logistical infrastructure to ensure product availability and invest in initiatives including marketing programmes, consumer research and trend analysis, which can then be shared with the principals,” he comments. “In recent years, we have signed exclusive partnerships with leading brands including Candy from Italy, TCL from China and Linksys by Cisco from USA,” adds Gidwani.

LG’s Paik, who describes the GCC region’s consumer electronics sector as “quite competitive”, believes the key to success in this market lies in providing a holistic offering encompassing well designed products pitched at the right price point while also offering added-value sales support.

“Our marketing programmes mainly consist of bundled offers, price discounts and voucher distribution with LG products for secondary sales,” he says. “As a means of supporting our retail partners, we also provide exclusive display areas to promote our product ranges. Over the coming months, we will be offering ‘unconventional’ display units which will signify LG’s association with Formula 1.”

The spread and influence of power retailers across the GCC region has been remarkable in its scope and has only been rivalled by the efforts of hypermarket retailers, which have also been hugely successful in securing market share on the back of an inherent mass market approach to the business.

Indeed, in recent years, power retailers have been locked in an increasingly bitter struggle with their hypermarket rivals for market dominance, which has led to the establishment by the former of massive retail developments in the key markets of the UAE, Saudi Arabia, Oman, Qatar and Bahrain.

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