Emerging markets hold key to success

zoom

The explosive growth of the consumer electronics industry in the GCC is being driven by consumer demand for new technologies including plasma and LCD TV displays, digital music players as well as the increasing availability of high-definition media content.

Figures published by the Hong Kong Trade Development Council (HKTDC) assert that the median age of Kuwaiti consumers is 23, with 52% of the country's population aged 20 to 44.

"With such a young population, Kuwait offers major commercial potential in the long-term for our handheld devices business," says Samsung Gulf's Makarand Phadke.

The relative lack of brand loyalty in these markets has created a more even playing field among consumer electronics vendors.

Many industry pundits claim this offers a window of opportunity for entry-level vendors to steal a march on higher profile brands.

South Korea's Hyundai Corporation has recognised this trend and recently launched its consumer electronics range in Qatar. Partnering with Doha-based Universal Business Systems (UBS), Hyundai is aiming for a 20% share of the country's consumer electronics market by 2010.

"Hyundai is keen to develop its multimedia and home appliances businesses. There is a large consumer market segment for Hyundai-branded products in this region," says UBS managing director NMR Siraj.

Hyundai claims Qatar's massive expat population, amounting to 75% of the nation's inhabitants, and emerging market dynamics, could see it emulate the UAE as a major market for consumer electronics sales.

"Price-sensitive markets such as Qatar offer an alternative route to success in the Middle East," claims Hyundai Corporation's Ahmad Thanveer.

Thanveer also notes that Chinese brands have been quick to capitalise on this factor in the GCC. "The majority of GCC consumers are price-sensitive, causing many traders to opt for cheaper Chinese products or established brands with manufacturing facilities in China."

Thanveer suggests that by leveraging the reputation of South Korean brands in the region and investing in value-added services, Hyundai will win favour with the region's burgeoning middle classes, avoiding a futile price war with its Chinese counterparts.

"South Korean brands are well-respected in the Middle East. By offering our channel partners decent margins and premium after-sales service support we are aiming to project a strong brand image," he says.

"Making our products available in hypermarkets will also enable us to achieve the volumes necessary to meet our targets."

The GCC region's developing retail sector has encouraged consumer electronics power retailer Emax to pursue a strategy of establishing ‘big-box' outlets across the region. Emax currently operates mall-based retail outlets in Bahrain, Kuwait, Oman and Qatar. The company is relying on its ‘big box' retail concept stores to drive its regional expansion strategy.

"We have observed how competition in the consumer electronics retail sector has inflated mall rental prices to a point where both retailers and consumers are ultimately losing out," says Deepak Srivastava, COO of Emax.

"We are aware of the disparities that impact various consumer markets across the GCC region, but we are also confident that our ‘big box' retail concept will head-off competition from rivals in these countries."

Srivastava says the company is targeting 20% share of the total GCC CE retail market by 2008.

"By introducing the concept in Bahrain, Oman and Qatar, we hope to compensate for the lack of mall space in these countries, as well as nullifying the issues power retailers have faced in countries such as Saudi Arabia and the UAE," he explains. "The concept will enable us to offer improved service standards to our customers and access to a huge array of products under one roof at affordable prices."

Channel distribution companies stand to gain significantly from the rush by vendors to embrace emerging markets, as a general lack of infrastructure in these countries means vendors will be heavily reliant on the channel sector to service each market effectively on their behalf.

The effects of globalisation may moderate this trend but this will rely heavily on foreign investment and the increasing influx of Western expat workers. While countries such as Bahrain, Kuwait, Oman and Qatar seem close to emulating this trend, Yemen still lags significantly behind.

As the GCC region's developed markets approach maturity, its emerging markets will continue to present huge commercial opportunities for vendors willing to confront the inherent logistical challenges associated with working in these territories.

Print | Email | Discuss this article

| Share |

READERS' COMMENTS

Click here to post a comment

Add your Comment All posts are sent to the administrator for review and are published only after approval. ArabianBusiness.com reserves the right to remove any comment at any time for any reason. Please keep your responses appropriate and on topic. Arabian Business would like to point out that only comments relevant to the story will be published. Any containing personal insults or inappropriate language will not be approved.
Name *
Remember me on this computer
Email *	(Your email address will not be published)
City
Country
Subject *
Comment *
Notify me of further comments
Enter the words above *
Please click post only once - your comment will not be published immediately.

MORE FROM ARABIANBUSINESS.COM