GCC: Digital transformation, data and robotics to drive the post-Covid-19 recovery of the Gulf’s $275.4 bn retail sector

Technology deployment and digital transformation will be crucial in the growth of the GCC retail sector that will be driven more by customer experience, experts at a recent webinar organised by Retail ME, say
  • The GCC retail sector was projected to have reached US$275.4 billion in 2020, according to a 2019 report by Alpen Capital;
  • Data, artificial intelligence, e-commerce and robotics is expected to drive the growth of the retail sector;
  • Post-Covid-19, the Gulf’s retail sector will shift from transactional to experiential era where customers’ choice will be driven by their experience in retail;
  • GCC retail sector was earlier poised to grow to US$308 billion in 2023

Migration to the latest technology and digital transformation will play a crucial role in shaping the future of the US$275.4 billion retail sector in the Gulf Cooperation Council (GCC) countries, retail sector officials and experts told thousands of audiences at a webinar organised by RetailME, the region’s only dedicated retail sector market intelligence provider.

Consumer behaviour in the GCC countries has seen a drastic shift towards online payment following the outbreak of the Covid-19 pandemic.

A recent survey conducted by Ernst & Young in May 2020 found that 92 percent of the consumers in the UAE and Saudi Arabia have changed their shopping habits – including shifting to online purchase.
Despite being under pressure, the GCC retail sector was earlier projected to grow at a Compound Annual Growth Rate of (CAGR) of 4.0 per cent from US$253.2 billion in 2018 US$275.4 billion in 2020 and to US$308 billion in 2023, according to a report published by Alpen Capital in 2019.

Data will not be oil, but soil for the retail sector, they say, as apps will track consumer habits to generate sales leads.

“Data will be the new soil – the new engine for growth in the retail sector,” said Piyush Kumar Chowhan, Group Chief Information Officer, Lulu Group International, the largest retailer in the GCC. “Technology will drive digital initiatives. Good customer experience will come from an innovation mindset, driven using different technology tools. How can data be used as the new soil in the digital transformation agenda is the big question, and technology will facilitate the process.

“In the coming days, customers will make purchase order based on experience. So, retailers need to ask how can they make data the engine for the digital transformation. Data and artificial intelligence will nurture the growth of the retail sector.”

The retail market is expected to decline in line with the decline in population and economy – especially with job losses and shrinking of businesses. How will the retailers face this challenge?

Ashish Panjabi, Chief Operating Officer of Jacky’s Retail LLC & Jacky’s Business Solutions, says, “Business is being right-sized. A shrinkage now means in changes now but when things get better, we will surely re-think how we adapt to growth as we will make use of all available routes to market (online and physical) and maximizing our returns on it instead of over-expanding. This market had a massive over-supply of everything which is now being corrected.

“Changes that were long due had and will get accelerated. Technology will enable changes, but we also have to rethink the fundamentals of doing business. Technology adaptation and deployment of robots could be a game-changer in retail business. We might see this happening soon.”

The retail industry’s ability to adapt is the first step towards recovery. However, the road to retail recovery will need to pass through many signal posts. Indicators show that Mastercard recorded a 40% rise in contactless payments during the first quarter of 2020, amid COVID-19 pandemic.

The Visa CEMEA Impact Tracker points to a shift to online commerce, with cash transactions being replaced by digital payments. The survey found many consumers in the UAE started shopping online for the first time, during the pandemic.

Two-thirds of UAE consumers (68%) surveyed said that COVID-19 led to their first online grocery purchase, while 70 percent have made their first online purchase from pharmacies. In Saudi Arabia, Danube Online and the Danube App registered an increase in average daily sales by over 200 percent and average order value was up 50 percent by end of March 2020, compared to February 2020.

Saudi Arabia’s Bin Dawood Group reported 400 percent jump in app downloads while online sales jumped 200 percent in just a few weeks!

Meanwhile, an Accenture Digital survey in 2019 indicated that only 40 percent of retailers globally are leveraging data to their best use. Hence, while technology is ‘the’ enabler, retail’s transformation journey entails a much broader roadmap.

“Retailers have indeed faced different challenges during the pandemic but have found ways to adapt to the shifts caused by COVID-19. The smarter use of data and real-time analytics will play a leading role in optimising business processes and in delivering improved customer experiences,” states moderator Mark Thomson, Director – retail & hospitality, Zebra Technologies

Retail is still an exciting industry despite COVID-19 that caused a sort of an “electric shock” over the past few months. It is the most severe impact on retail globally, since the great depression of the 1930s, Thomson feels. “But there is a positive amidst the challenges – COVID-19 might act as a catalyst for positive changes in retail.”

Justina Eitzinger, COO, Images RetailME, says, “At Images RetailME, we have closely monitored the impact of COVID-19 on the retail industry. The recent months are evidence of the industry’s ability to adapt, and in many ways, this has been the first step towards its recovery.

“Staying true to our mission to share retail intelligence and knowledge, we brought to the table an insightful and diverse panel of speakers from across the region. The panellists shared their experience on how to recover fast and prepare for both a more digitally connected and safer world.”

As consumption behaviour has undergone significant changes – shift towards online, demand for contactless – will these stick for the long-term? What will retail recovery entail?

“Changes have already happened, which is the new normal. We must ensure that digital remains at the core of these changes to ride the wave instead of being a laggard. Some retail formats must reinvent. While we may not go back to pre-COVID days in the near term, the picture isn’t gloom and doom, as retail will spring back in a different but better shape,” says Piyush Chowhan of Lulu Group International. 

Managing demand seamlessly
“Our sector has been highly resilient through the pandemic. During the lockdown, there was huge demand as customers stocked up and prepared food at home. Our online platforms – both BinDawood and Danube Online – saw huge traction, so much so that we had to expand the capacity of operations. We have also leveraged our mobile apps, coupled with the store network to meet the surge in demand,” shares Waleed AR Bin Dawood, Chief Commercial Officer, BinDawood Holding. “We have used our wide store network as warehouses to support our online sales. We are constantly enhancing the seamless experience through product availability, pricing and delivery.”

In several countries, grocery retailers also struggled to increase their capacity aligned to the surge in online demand, Thomson points out. “Omnichannel fulfilment processes, thus, requires a relook probably with more automation.”

“We expedited our existing home delivery services by launching online shopping. Our loyalty programme has also worked well in accelerating the online orders almost immediately after launch,” shares Youssef Olama, IT Director, Spinneys Egypt. “Recovery will be hard for everyone, and we have to cope. Digitalisation is particularly important during the coming period, and we need to find the right partners to achieve great results.”

Frictionless over contactless
“As consumers are shifting online and preferring contactless, how will brick-and-mortar change?”, asks Mark Thomson. “Is there an opportunity for technology to reinvent brick-and-mortar with new experiences?”

Piyush Chowhan says, “More than contactless, it will be frictionless. If we can give enough confidence to customers by maintaining the highest level of hygiene, they won’t be fearful. In the UAE, customer footfall has sprung back into our stores, and that will continue. The real challenge is to understand how we can move away from transactional engagement into experiential positioning by removing friction. In doing so, personalisation will become crucial, and convenience will be key.” 

Bin Dawood says, “We believe in the long-term; grocery shopping will be a family activity. Our consumers enjoy the experience of shopping in our stores browsing over 140,000 products, some of which are exclusive to BinDawood and Danube. Online grocery shopping is also here to stay, and as such, timely delivery and effective communication with customers will be crucial.”

The road ahead
One of the critical benefits of COVID-19 is the acceleration of a ‘change’ mindset in a sustainable way involving data and technology, Thomson emphasises.

“Technology is undoubtedly the key to future business growth. Data science will be important to understand market trends and leverage them within the business. But we should avoid tracking customers. Privacy has to be well-defined in terms of data usage,” Olama recommends.

“Digital can’t fix a problem; it can be an enabler. People’s mindset shift will bring about the biggest changes, and sustainability will play a key role. Post-COVID, local manufacturing and production are being talked about much more vociferously. There will be a focus on producing locally. There will also be a drive towards personalisation using technology tools,” Panjabi states.  

In summation, Thomson states, “Data is indeed the new soil; nurture it, and it will deliver abundant growth.”