Consumer Electronics in the Gulf Cooperation Countries

Consumer Electronics in
THE Gulf Cooperation Countries:

Opportunity but with
Strategic Uncertainty

One exception to the COVID economic destruction in the Gulf Cooperation Countries (GCC) has been the consumer electronics market. This encompasses all electronics from mobile phones, laptops, televisions, iPads, to driers. In a fairly small but very competitive sector, many electronics retailers keep reaping profits!

COVID-19 was a boon to this sector albeit temporarily. The survival of that sector, if not also profitability, underscored two prongs of business strategy for consumer electronics retailers:

1) The indispensability of online sales
2) Integration of online and traditional marketing

These are the revolving door between digital sales and in-store sales. With the online consumer electronics retail market reaching $billions in Saudi Arabia, digital maturity is a past-time. Now, integration is the way to go, between digital marketing and sales and the offline counterpart.

Strategy Surgery and Consulting interviewed a digital marketing manager from a major consumer electronics retailer in Saudi Arabia, the biggest market in the GCC, who wanted to be anonymous. His experience spans 4 years in digital marketing on the client side and 14+ years of experience in digital advertising before them. The goal of the interview was to track trends to inform business strategy from the consumer electronics sector in the GCC. The below are signals of consumer behavior that can inform retailers’ business strategy.

COVID-19 was a temporary exception in the spike in sales: “Online sales have been growing big-time but the pace of growth has been slower than in 2020 [the peak],” the expert said. Strategy Surgery and Consulting pinpoints factors, post-COVID, that are driving retail consumer electronics are:

The type of item had a major role in online vs. offline marketing. During COVID, many consumers “caught up” on household work or maintenance by purchasing some ($1000 or more) high-ticket but small-sized items like smart-phones, laptops, and others; but they preferred going to the retailers for large or long-term high-ticket items, such as HD televisions, dishwashers, and others. The Average Transaction Value was 1000 SR. But still, 87 to 88% of sales were off-line, not online in the COVID period, when people began to get used to purchasing online, the expert said.

“In 2018 and 2019, online sales in consumer electronics in SA constituted around 5 to 6% of total sales. So, 95% were in-store. In 2020, we went all the way to 20%-- a huge increase,” the expert said. “In 2021, it went to back to where it was but it will be 12 to 13%. Within 5 to 6 years, we’re likely going to reach 20%.”

The consumer electronics market has become increasingly competitive in the GCC, with other retailers assuming market share, mainly Amazon and Noon. Digitization and rapid technology advancements have given customers the options of the website and their mobiles through which to purchase. The user-friendliness and speed of the phone application determines if consumers use it.

“The best-selling categories are mobile phones and their accessories, TVs, and the computer category. I would single out the category that had the biggest growth in 2020– it is computers, for the obvious reason.”

What CEOs should not lose sight of is the double-edged sword of online sales. Online sales have receded but still growing. The factors post-COVID that are driving retail consumer electronics are:

These factors will continue to grow in the years to come.

“The range for online conversion in consumer electronics is 0.1% to 0.4%, very low.” This is a double-edged sword: Traffic online is a major factor and indicator of a website’s usability and CX on it, but conversion is a more important KPI.

Another dimension is omni-channel presence. Retailers, especially those of consumer electronics, are at an advantage: Consumers visit stores when they want big- ticket items such as refrigerators or ovens. Retailers, rather than mobile phones or Amazon, have the advantage of omni-presence.

Therefore, to reap the most benefits from digital and traditional marketing, a company would need to conduct statistical tests to see how much each factor in the purchase decision matters. With online sales rising rapidly now, it is necessary but insufficient to allocate budgets to either type of marketing without ascertaining as closely as possible the conversion rate as the most important KPI. Marketing directors are focused on such KPIs as conversion rate, bounce rate on their websites, the source of online traffic, the keyword search volume, and others. Now, determining your “bang for your Buck” is less predictable. Factors that affect the online purchase decision are: