Retail Surge

With vendors expanding their focus and dealings with the retail channels, just what is the state of the power retail segment and what contribution is it making to the maturity of the Middle East IT and consumer electronics market.

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Retail Surge
By  Manda Banda Published  May 18, 2014

With vendors expanding their focus and dealings with the retail channels, just what is the state of the power retail segment and what contribution is it making to the maturity of the Middle East IT and consumer electronics market.

The IT retail segment in the Middle East has grown rapidly in the last few years, and there are more players now than ever before. With specialised consumer electronics (CE) and IT retail stores popping up across the region, the demand for more products is driving vendors and distributors to begin paying more attention to the retail segment. Both vendors and distributors in the region see an opportunity to broaden their revenue streams beyond the tradition reseller channels and are working with more retailers in the region.

According to analyst firm Research and Markets, the global CE industry is expected to reach an estimated $1.2bn in 2017 with a compound annual growth rate (CAGR) of 5.4% between 2012 and 2017.

Another research house GfK reckons that Middle East e-tailing of ICT and consumer electronics products is currently two years behind Western Europe in terms of market development. A number of e-tailers are emerging in the Middle East retail channel, attempting to capitalise on the projected growth in online sales.

In the Middle East region alone, mobile phone penetration is 109% exceeding the US (103%), Asia Pacific (100%) and even the global average (90%). IT giant Cisco forecasts Middle East mobile data traffic to grow 77% CAGR to 2017 – the highest growth for any region around the globe.

Interestingly, as competition heats up in the CE and IT retail sector, retailers have had to innovate, improve customer experiences and broaden their product range in order to stay ahead of their competitors. Consumers on the other hand, are increasingly becoming more tech savvy and informed about the products they would like to buy. This development in the Middle East is leading the region’s power retail segment on a path to maturity.

Ashish Panjabi, chief operating officer at Dubai-based Jacky’s Group, said the retail channel has seen lots of changes because there are more retail locations that have emerged in the last few years and differentiating your business has become even more critical, whether it’s a brand or a retail store. “We have seen growth in tourism in the UAE that has helped kick up numbers overall.  In addition to this, in various categories, we have also seen sales jump as a result of product launches, for example, last month, we saw flagship smartphone launches with Samsung, HTC and Nokia all unveiling new handsets,” he said.

Neelesh Bhatnagar, CEO at CE retailer Emax agreed and said, the power retail channel in the region is in a state of exponential growth that is expected to continue for the coming years. Bhatnagar said the CE sector in the Middle East is witnessing a high level of competition between retailers as they attempt to maintain their growth and expand their customer base. “The competition between vendors is spilling over to retailers who are endeavouring to be profitable in their own businesses and for the vendor partners,” he remarked.

Bhatnagar pointed out that there are several factors that affect the growth of the retail channel. “A major one is economic performance and there is no doubt, the region’s energy resources helped cushion the effect of the financial crisis, which in turn, kept consumer confidence in the region at high levels as opposed to many of the world’s established markets,” he said.

He added that high disposable income is another major factor and the increasing number of expats settling in the region in search for a more comfortable lifestyle is contributing to the growth of the consumer electronics retail channel.

At Jumbo Electronics, which is celebrating its 40th anniversary of serving the Middle East IT and CE channel, the company believes the regional retail sector is reaching its pinnacle because of the investment the players have made in creating a powerful brand that appeals to both vendors and consumers.

Nadeem Khanzadah, head of Retail at Jumbo Electronics, said the fact that both vendors and distributors are increasing their focus on the retail channel is a show of confidence for power retailers in the Middle East. “It gives the sector the support required to revitalise the market and take business to the next level. For us as Jumbo, the timing is right, along with favourable market conditions as to roll out the many changes we have carefully planned to enhance the Jumbo retail experience for our customers,” he said.

Manoj Mordani, retail team manager at Prestigio, said although the current retail environment is challenging, the GCC’s retail sector continues to present attractive growth opportunities. However, Mordani said the market is highly competitive and retailers need to continuously re-invent themselves to drive footfall and attract patrons to gain market share.

“Traditional power retailers like Emax, Sharaf DG and Plug Ins have expanded their number of outlets over the last several years largely due to the increasing purchasing power, growing expatriate population, changing lifestyles and an expanding tourism and hospitality industry,” he noted.

While there is no doubt that the Middle East CE retail sector is growing, there are still challenges that vendors, distributors and retailers face. Some divisive issues affecting power retailers across the region stem from declining product margins, lack of skilled and well-trained staff, grey imports and counterfeit goods.

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