Bags of advice for the retail sector

The global downturn has turned the focus of retail back to customers' needs – and retailers should realign their strategies to concentrate on the resident UAE market, experts told Emirates Business . As traders report falls in revenue of close to 30 per cent, experts have outlined the way forward for the sector, adding that stability had begun to return, and the time was now ripe to provide shoppers with better in-store experiences and greater value products. Emirates Business spoke to leading retail advisors Colin Beaton of Watt International, Sevil Ermin of The Nielsen Company, and Patrick Rodmell, a renowned global authority. What are typical consumer behavioural changes in a downturn? CB: In a place like Dubai, and the UAE in general, where so many are expats, and their residency itself is tied to their job, uncertainty is amplified. As a result, bigger ticket items, in particular those that require people taking on debt, get hit the hardest. Same-store sales at upper-mid level brands are also in decline, and while those who can afford the height of luxury still can, entry-level luxury has seen greater sales declines than the top or the bottom of the spectrum. PR: When our economic world is de-stabilised, consumers behave in predictable ways – they seek value options on 'need purchases' and cut back on 'want purchases'. Retailers need to segment their offerings into these two camps before they can figure out a strategy to stay relevant in the commercial marketplace. Slashing prices hasn't proven to be a good long-term solution, as consumers tend to start thinking the product was over-priced in the first place, which leaves a lasting impression. SE: To date, we only have a study on the consumer patterns in the UAE from September 2008. But the new results of the confidence survey will be out by the end of this month. How can retailers provide a more compelling proposition for their customers? CB: One thing that is key is focus. These are not times to be trying to be everything to everyone. While tourist traffic contributes significantly to Dubai's retail sales, we should remember that in summer, shopping centres become one of a few climate-controlled public refuges from the heat. Retailers should think strategically of how to take this time to focus their attention on the UAE resident market, and cater more singularly to their particular needs. The global news about Dubai is much worse than the reality, hence, unlike the past, additional foreign firms are not flocking here in search of salvation. This provides an opportunity for existing retailers to solidify their position in the market and better prepare for when this competition will inevitably arrive. PR: Understanding the drivers of consumer behaviour relative to your brand is crucial to success, both in terms of short term sales and long term brand loyalty. For example, what are the factors that influence consumers in determining their retail destinations? What are the most effective ways to entice them into stores on impulse? And, most importantly, how can you migrate them from 'browser' to 'shopper' once they're in your store, or interacting with your product? What strategies and tactics can retailers employ in the Dubai marketplace? CB: The past five years have seen a dramatic shift in Dubai to a sellers' market, which bred some practices and attitudes not consistent with being a merchant. Dubai is the place where a degree of service and luxury is available and accessible like no place else. In the intervening years, demand outstripped the supply of well-trained staff, skilled tradesmen, materials and myriad other things. The economic crisis should remind everyone that the client is king. The new breed of trend responsive strategies include things like 'perkonomics, which are getting a lot of interest these days. PR: We are encouraging our clients to develop two parallel strategies – one that minimises the damage of the current economic dilemma, while the other sets the business up to be first out of the gate when signs of recovery hit the consumer market. SE: My suggestions are mostly at tactical level, but some at strategic level as well – like going to online advertising instead of traditional media. A typical reaction in such times is to cut spending on advertising. Do you support this? CB: It's a natural impulse in difficult times to make efforts to control spending. The danger of course is not to save yourself to death. What's important is to set the correct priorities, and to ensure that any measures taken have the least possible impact on your customer, and how they view your brand. Conversely, a mature luxury brand with great brand recognition might find better ways to spend their dollars than national campaigns when a broad swath of consumers are no longer trading up. PR: While I agree with the commonly held viewpoint of reducing traditional advertising spend, I would encourage businesses to redeploy some of that budget into two areas;