UAE electronics sector may see 20% growth

Despite a dull 2009 and the depressed economic climate, the electronics industry in the UAE can expect to grow by 15 per cent to 20 per cent this year, given there are no unpleasant surprises, according to Deepak J Babani, CEO of the Eros Group.

Speaking to Emirates Business, Babani said the electronics companies in the Middle East are one step ahead when it comes to offering the latest technology to customers. "The UAE has already launched full HD TVs and internet TVs. However, the services are still in the nascent stages here. The pressure is on the service providers and not us. I'm sure connectivity will improve and the cost of using services will come down in the future," he says.

How has the economic downturn been for the electronics industry? How long do you expect this tough situation to continue?

The electronics industry has been quite insulated from the global downturn as compared to other industries. This is due largely to the fact that price points of electronic and appliance products have been coming down, which has, in turn, helped sustain demand.

The demand for electronic goods (LCD TVs and cameras) has gone down by five per cent compared to 2008. The demand for appliances has gone down by 15 per cent 20 per cent over the same period. This year's outlook is a bit uncertain due to the volatility in the economic environment. However, if there are no unpleasant surprises this year, the industry is expected to grow by 15 per cent to 20 per cent.

Do you think consumer electronics companies/retailers will have to lower their costs in the future to stay in business?

With new technologies emerging, the ?demand for consumer electronics is expected to grow and it would not be imperative for electronics companies and retailers to cut cost margins to stay in business. I believe with the current real estate prices and lower inflations rates, companies will have a cost advantage and customers will automatically see reduced prices. In fact, during the economic boom a lot of overseas customers from Africa and CIS countries were finding sourcing products in Dubai quite expensive. Now, with lower costs in warehousing and logistics coupled with lower inflationary trends, we can see these customers returning to Dubai to source their requirement. This is an additional opportunity for the Dubai electronics business.

How are customer preferences changing in the region and are electronic companies such as you equipped to keep pace with these changes?

I can say the Middle East is one step ahead. The UAE has already launched full HD TVs and internet TVs. However, the services are still in the nascent stages here. The pressure is on the service providers and not us. I'm sure connectivity will improve and the cost of using services will come down in the future.

Are customers confused by the enormous variety of options available today?

The days of buyer beware are gone. Today's customers are educated and smart. They have various channels of information. On an average, a customer would check all the information he needs before buying a product and goes to the shop to finally shortlist it to one from his/her list.

Does the dip in the price of electronic goods eat into your profitability year-on-year?

Price changes are a direct result of supply and demand. In the beginning of 2009, the demand was weak but in the latter half it picked up. However, the drop in prices is mainly because of the lower cost of production as technology changes very rapidly.

In which country within the GCC were your sales strongest in 2009?

We saw strongest sales in the UAE, followed by Oman. However, our base in Oman is very small as we changed our distributor two years ago. Qatar also saw strong sales last year. We do not operate in Saudi Arabia.

What kind of business do you expect in the UAE post-DSF?

We are seeing business more or less on the same levels as at the beginning of January this year and for the full year, we expect a growth target of 25 per cent across the GCC.

What percentage of your revenue do you invest in improving customer service?

Whatever success we've seen last year is due to the good customer service that we offer. Our Service on Wheels has been a success, and we have made further investments to strengthen it. We invested around 8-10 per cent of our revenues in enhancing our customer service last year.

Did you cut down on costs to keep up with low sales last year? Can you tell us how much of your workforce was let go and did you compromise on things such as employee training and customer service?

Last year was very difficult and when we were hit by the recession, we took stock of what was happening and prepared ourselves for difficult scenarios. We decided not to retrench people but put a freeze on hiring at the same time. But starting April 2009, the market started shaping up again and by August we had initiated our recruitment drive again.

This year is much better as rents, diesel prices and inflation levels are low. These factors will definitely help businesses this year.

PROFILE: Deepak J Babani CEO of the Eros Group

Based in Dubai, Babani has been with the group for more than 25 years. He joined Eros as a Marketing Manager to handle Hitachi in 1981 and since then has contributed to the success of Eros Group in the region. Prior to spearheading the Eros Group, he worked with the Jumbo Group, UAE, and Murphy in Mumbai, India.

Babani is an alumnus of the Manipal Engineering College in India and holds a degree in Electronics and Communications Engineering.

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