Retailing in the Middle East: How to recapture profitable growth

Retailing in the Middle east

Comments by Andrea Zaffin

I started reading this McKinsey article ready to see the usual cliche’, the reality is that this a superb piece of analysis straight to the point and most surprisingly pointing out so clearly and simply the cause of sleepless nights for many business people in the region (and frustration for people in headquarters) in the last two and half years.

The funny part is that the cause is very evident to everyone but few ones have had the good sense to admit it: Middle East is going through some normalization after years of above average growth.

The entire region is coming from a prolonged favorable macroeconomic environment over the past 15 years (ok we had a tough 2009 in between) with high spending levels which drove retailers between 2011 and 2015 to have “above-average revenue growth, margins, and returns”

Imagine being on a bicycle and having a great ride downhill… so good!

But downhill cannot continue forever and suddenly a steep uphill came up which would be a challenge for any well trained athlete (imaging for those ones who did not build any muscles in years of easy downhill!)

Costs are increasing, possibility to charge higher prices is vanishing, consumer disposable income is not growing and competition is tougher both offline and online.

It is clear that a strong action is required to get fit to sustain overcoming the steepness. In this regards I’d like to focus on one critical aspect highlighted in the article which I really find enlightening looking at building “distinctive value proposition for customers”

“A consumer-centric assortment is one major component of a distinctive customer value proposition. Too often, retailers make supplier-centric assortment decisions—they stock the products and brands that their favored suppliers offer or that are sold at the best prices by their suppliers.”

Here the point: what about the suppliers? Are they mature and ready to partners with retailers to work hand on hand to create “a customer-focused assortment, a finely targeted pricing and promotions model, and seamless omnichannel services”?

Basically we are talking to change a business attitude built on years of successful simple top down to a bottom up approach which is definitely more complex and not necessarily more productive given the market scenario.

Nevertheless the new challenging environment is also an opportunity especially for companies yet underdeveloped since the shift is tackling the status quo opening up space for new or late players in the region.

In this scenario Know-how is and will be even more critical to activate valuable bottom up.

To conclude it is evident that having the right local expertise and competence to drive your decision making process is vital for your business in the Middle East particularly today when we need to overcome the steep uphill we are all facing.

A key point about sourcing seniority is that hiring full time senior executives is often not sustainable for many regional organisations given the limited size of local business with pressure on margins and operational costs increasing nowadays.

To move out from the impasse organisations need value added solutions to source senior expertise and competence while having flexibility and cost effective solution that can be functional to drive the business uphill.

The good news is that today this is possible thanks to innovative solutions.

WOULD YOU LIKE TO LEARN MORE ABOUT? Visit our value proposition page.

Source: https://www.mckinsey.com/middle-east/our-insights/retailing-in-the-middle-east-how-to-recapture-profitable-growth

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