Cashing in on the crunch

As European shoppers turn in force to cheaper alternatives, Middle East retailers need a wake-up call to handle similar trends.

As the credit crunch tightens its grip over economies, retailers around the world famous for their all-singing, all-dancing, high-budget advertising campaigns for the festive season will face the difficult choice of whether to tone them down to reflect the gloomy economic situation with value-for-money messages or urge shoppers to splurge with habitual cheer.

In this region, the chill of the crunch should persuade retailers to increase their efforts to pull in customers with an unprecedented salvo of promotions and discounts, capitalising on the downturn by broadening the appeal of private labels and bulk buying.

Although the Middle East's retail industry has not yet faced repercussions of the crunch on a par with the UK or the US, consumers are still observing reactions in these markets, from the euphoria among discounters to the devastation caused by job cuts.

New retailers are swerving to this region as part of their refreshed expansion drives, yet international coverage has undoubtedly created uncertainty and a decline in consumer confidence, so whether shoppers will visit their stores willing to spend as much as before, has yet to be assessed.

If industry players in the region convey concerted efforts to offer value to shoppers and respond to the credit crunch with the same gusto as other markets, it will strengthen the industry as a whole.

Following recent events in the financial markets, a dark cloud has been cast over future economic growth and some might think that this boosts the candidate pool.

However, forward-looking companies should recognise that a tougher market poses the opportunity to strengthen their talent pools while competitors face cost pressures, thus emerging even stronger from a downturn.

Ultimately, lower spending means fiercer competition, and talent remains the best sustainable competitive advantage in good times and bad. Therefore, retailers should concentrate on splashing out on talent management and slashing costs for their loyal customers, as tomorrow's economic outlook could be very different.

According to industry players interviewed for this issue, although the consumer goods industry in the UAE is less susceptible to market disruptions than some countries, there is an air of "cautious optimism" and a shift towards "wait and watch" strategies.

Masafi CEO Ashraf Abushady said the greatest industry challenge is the rising cost of raw materials, which it has bypassed by being in control of its supply chain. Landmark Group CEO Vipen Sethi revealed that the retail giant has noticed that overall spend and footfalls have softened, as "consumers will now actively seek value for every unit of money that they choose to spend".

Lynne Nolan is the editor of Retail News Middle East.

RELATED LINK: Capitalise on the crunch

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