Dubai: Gulf shoppers are turning hesitant over spending even at the supermarkets. This is amply reflected in the indifferent growth in the region’s consumer packaged goods category.
In the UAE, the category has shown a decline of 1 per cent year-on-year, and 3 per cent in the first five months of 2016, according to Nielsen’s “Retail Audit Tracking” study. As for Saudi Arabia, consumer product demand has been “more resilient”, recording a growth of 7 per cent year-on-year and 5 per cent in the first five months of this year.
With consumers clearly watching their wallets, retailers ought to change their strategy. Those among them who can give a value proposition stand a better chance of catching whatever spending is taking place. “As consumers are rationalising spends, marketers should be more conscious in making decisions on their value offering, retail execution, seek out opportunities and closely monitor consumer behaviours to make tactical calls,” said Arslan Ashraf, Managing Director of Nielsen, Arabian Peninsula and Pakistan.
“Innovating affordable portfolio to cater to all layers in consumer pyramid would be mantra for success.”
Until now it was felt that only discretionary spending — those on luxury products, etc — were affected by the slack consumer spending. But, as per the Nielsen findings, it is now encroaching on day-to-day needs of shoppers.
Current global economic conditions, oil price fluctuations, decreased tourism activity, an unstable real estate market in the UAE, and higher defence spending in Saudi Arabia over the last year have “pressured the growth rate of the region’s consumer packaged goods segment”.
“In this challenging retail environment, it is important for retailers to understand the shift in consumer behaviour and spending patterns,” said Ashraf.
Where possible, consumers prefer to chase discounts or promotions when they want to buy something. They are “actively looking for promotions and increasingly aware of price changes,” states the Nielsen statement. “In fact, not only are the consumers conscious of their spending due to current economic conditions, but many relish the thrill of seeking out good deals (58 per cent of respondents in the UAE and 54 per cent of Saudi Arabia respondents say they enjoy taking the time to find bargains).”
And, yes, they are “cutting down on luxury items and moving towards buying only the essentials”.
“For consumers, the changing economic landscape has made the job market more challenging, which has subsequently affected disposable incomes” it added.
In the kingdom, Nielsen’s Retail Audit report shows that the current conditions are affecting the growth of non-essential categories such as impulse and beverages more than grocery, personalcare and household bands.
For grocery, personal care and dairy, consumers tend to find large packs more attractive; as they seek to get more value for money as the cost per grammage declines.
The percentage of respondents who have admitted to changing their spending patterns to save on household expenses is also up this year: 69 per cent of Saudi Arabia respondents in Q2-16 and 73 per cent of UAE respondents.
