The Four Ps of the Future of Retail
In the Middle East region, the Gulf Co-operation Council (GCC) retail sector is expected to grow to $554.13 billion by 2030. The rate of growth is expected to further accelerate due to the impetus given to eCommerce due to the pandemic. In all GCC economies, eCommerce is expected to witness growth in excess of 50 percent from 2019 to 2030, as a result of which eCommerce that accounted for 0.4% of GCC GDP in 2018 is set to increase well over 2 percent of GDP by 2030. The GCC region also ranks 10th among the most favourable retail destinations, specifically the UAE, Saudi Arabia, and Qatar.
“The retail space will undergo massive changes as the age of disruptive technology, exacerbated by the pandemic, continues to impact consumer behaviour and buying trends,” said Murali Krishnan, Visionary Innovation Group Research Analyst at Frost & Sullivan. “With Covid-19 pandemic acting as a catalyst, online shopping in the Middle East region has been growing at a rapid rate. Retailers should proactively adopt technology transformation strategies to leverage this growth opportunity as this trend will continue to grow strongly in a post-pandemic world.”
According to Krishnan, new points of commerce such as home ambient commerce, and in-vehicle commerce, will grow, and Gen Alpha—babies born from 2010 to 2025—will join Gen Z in becoming a dominant digital native population influencing retail strategies. Further, digital assistants, assisted and ambient commerce, AI-driven decision-making, advanced analytics, purchase automation software, and automated processes virtual assistants, among other technologies, will revolutionise all aspects of retail, leading to a personalised, fulfilling customer experience.
To tap into the growth prospects, vendors need to focus on the four Ps according to Frost & Sullivan research:
Future retail place:
In a post-pandemic world, traditional shopping centres will lose their relevance as people will prefer the e-commerce format as opposed to going out and shopping. However, in an attempt to remain relevant and retain customer interest, these shopping centres will take on new avatars, by selling experiences. Due to the rapid growth of online retail, the Middle East region will also witness a rapid infrastructure capacity building, such as, the $870 million Dubai Commercity, expected to be launched in January 2021 to support eCommerce retailers.
Future points of commerce:
Globally, the rise of the Internet of Things and the growing trend of sensorisation will mandate that retailers and brands develop new strategies to be able to compete and lead in these new points of commerce, such as smart home commerce, in-vehicle commerce, and anywhere commerce. In the Middle East region, physical retailers will aggressively partner with online retailers or build their own capability to provide an effective offline-to-online experience with growing impetus on online shopping due to the pandemic.
Gen Z is expected to account for nearly 1/4th of GCC’s population and thus, is a significant influencer on the consumer base. Vendors need to understand the purchasing habits of Gen Z as well as Gen Alpha as both these groups will become a dominant population cohort by 2025 and beyond, making it vital for retailers to increase personalisation and build relationships with this vital population segment.
Contactless shopping will gain prominence in the post-COVID world. Retailers will increasingly invest in digital technologies, including augmented reality, ambient commerce, artificial intelligence, automation and data analytics, to gain competitive advantage. In the Middle East region, spiraling last-mile costs and increasing congestion are resulting in new business models for last-mile deliveries driving the use of drones and bots, thereby improving customer delivery experience. The rise of automation and the growth of online orders is leading to a number of dark facilities like warehouse with goods that fulfill online orders, without physical contact with shoppers. Challenges such as security in online payments limiting current eCommerce penetration, in the region will be slowly eliminated and thus, influence further adoption of the omnichannel approach.
Going forward, physical stores will have to reinvent themselves; they will evolve from small boxes to novel boxes, and the emphasis will be on technology adoption, customer engagement and social experience.”