Figure-driven forecast

VASHISHTHA: Consumers are extremely price-conscious in the UAE, prompted by salary inflation.

International retailers including Spinneys, Carrefour, Géant have ambitious plans to expand across the GCC within the next five years.

However, local chains are also plan for more stores across the region. Panda, for example, plans to double the number of its supermarkets by 2010.

The crux of the retailers' responses to competition will be 'adding more shops'. Then we will start talking about retailer consolidation. What does this mean? It shows the share of modern trade in FMCG sales.

The highest concentration in the region is Kuwait at around 60% followed by the UAE at 53%. In the remaining GCC countries, this still remains around 40%, with KSA at 36%.

We have forecasted that consolidation will take longer in KSA. This is mainly due to the fact that women are not permitted to drive and thus have to rely on stores in their immediate neighbourhoods for daily shopping. In turn, convenience and the proximity of the store to the house becomes one of the key factors in selecting a store to shop from.

In contrast to other countries where smaller formats either decline or experience smaller growths, we have observed that grocery sales in Saudi Arabia continue to increase significantly. Smaller stores are replaced with larger ones offering wider varieties to consumers, and new larger groceries are opened.

From a retailer's point of view, these stores have the advantage of requiring a smaller investment than other formats and it is equally trouble-free to find suitable locations for outlets compared to larger formats.

Traditionally in the GCC, the majority of consumers used to do their daily shopping in markets or souks. However, nowadays we are speaking of a different kind of activity: Shoppertainment, referring to shopping and entertainment at the same time. Supermarket shopping has become a recreational activity for many families in the region, as many stores now include children's play areas, boutiques, music stores, hairdressers and food courts.

The prominence of 'on the go' life styles is another factor impacting shopping behaviour. Consumers are living increasingly fast, full but stretched lives. Therefore, they look for convenience, especially as more women enter the work force. They have less time for shopping, cooking and cleaning, and they look for convenient products that can be prepared quickly.

Another important factor that impacts shopping behaviour is the increase of choice. Across the categories, there is an explosion in choice offerings. And consumers need to optimise the choice.

Gradually, they are sharpening their purchasing and shopping skills to navigate through thousands of SKUs in no time.Price consciousness is also increasing in the region, especially in the UAE with the increasing pressure from the inflation of salaries. Consumers look more for value. When they consider 'value', they usually look for cheaper prices and promotions, rather than private labels currently in high demand in developed retail markets.

The private label category is still nascent in the region. In the Western world, however, where the modern trade consolidation rate is high overall, private label share exceeds 20% for FMCG categories.

However, in the GCC, the overall private share is approximately 4% maximum for the UAE. Private label is the only area where we can say we observe some differentiation amongst GCC countries' shoppers. For instance, in the UAE private label awareness and usage is much higher than in Saudi Arabia and the other GCC countries. In some fresh categories, private label share can reach up to 15%.

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