Trends shaping global retail
Experience-driven retail spaces and omnichannel strategies are at the forefront of the landscape
The Middle East retail sector has been undergoing rapid transformation, accelerated by shifting consumer behaviours, technological innovations and a growing demand for seamless shopping experiences.
As the region adapts to the digital age, retailers are increasingly looking for ways to integrate the physical and digital shopping experiences.
PwC estimates 70% of retailers are investing in omnichannel strategies to enhance the customer experience. This includes integrating mobile applications, e-commerce platforms and physical stores to ensure a smooth shopping journey.
“Consumers are looking for experiences to complement their in-store shopping,” said Philip Coverdale, retail expert at GlobalData. “Despite the economic headwinds, e-commerce and omnichannel platforms are growing in this region, although not without obstacles.”
In November, Mashreq and MEED jointly hosted a roundtable discussion to explore this new retail landscape and its development, examining integrated concepts; the potential of generative artificial intelligence (AI); the adoption of e-commerce; the inclusion of environmental, social and governance (ESG) elements; and the customisation of products, as well as strategies for overcoming challenges.
Global destinations
In Europe, e-commerce penetration is significantly higher than in the Middle East.
According to Coverdale, the European e-commerce sector currently stands at more than $600bn and is expected to reach more than $950bn by 2029.
This is largely due to mature digital infrastructure, established online marketplaces and a strong culture of online shopping, particularly in countries like the UK, Germany and France.
The Middle East is still catching up, with e-commerce accounting for around 10%-15% of total retail sales.
This is changing fast. According to Deloitte, the e-commerce sector in the Middle East is expected to reach a market volume of $50bn by 2025, driven by the widespread use of cutting-edge technologies and favourable government initiatives to promote digital economies.
Generation Z consumers are playing a pivotal role in advancing digital trends. “They research products online, visit physical stores to engage with them firsthand and ultimately make their purchase online when they find the best deal,” said Imaad Khan, vice president and senior cash management sales manager for global transaction banking at Mashreq.
For the time being, however, traditional brick-and-mortar stores remain dominant, contributing 85% of total sector spending.
This reflects the significance of physical retail outlets in the region, even amid the digital transformation.
Omnichannel retail strategies
As digital retail penetration rates accelerate, the concept of omnichannel retail – integrating online and offline shopping experiences – has been at the forefront for businesses in the region.
The Middle East’s unique combination of traditional shopping habits, as a part of larger social culture, and its digital adoption, presents an ideal environment for the rise of omnichannel strategies.
Consumers in the region maintain a strong preference for in-person shopping experiences, which are often linked to social interactions and seasonal activities, particularly during the summer heat. At the same time, they are increasingly adopting digital technologies for greater convenience and efficiency.
“In Saudi Arabia, we have higher online penetration due to the lower number of physical stores compared to the UAE and Qatar,” said Giulio Dal Dosso, regional director of finance at Hugo Boss. “Our goal is to generate 10%-20% of our overall revenue from online sales.”
Moreover, the concept of ‘phygital’ stores that integrate physical and digital shopping experiences, blending in-store interactions with technology, is also gaining traction.
In the Middle East especially, these stores are ideal due to the region’s high digital adoption, preference for social shopping and demand for innovative retail experiences.
For instance, Apparel Group’s phygital store 6thStreet.com, in Dubai Hills Mall, seamlessly combines the ease of online shopping with the sensory experience of an in-store visit.
“The success of this model has made it a key part of our business strategy as we expand in the region,” said Neeraj Teckchandani, CEO of Apparel Group. “As customers become accustomed to the online shopping experience, we are seeing a shift in their journey and behaviour.”
Technology and innovation
Technology, especially in the form of data-driven solutions and digital tools, is being leveraged to enhance various aspects of the retail process, from logistics and pricing to customer engagement.
“Currently, we are using generative AI for catalogue and marketing content generation, rather than directly for consumer-facing applications,” said Prashant Talwar, director of retail and grocery at Deliveroo.
“We are still in the early stages of utilising AI but are beginning to see traction with solutions focused on fit and personalisation.”
Similarly, augmented reality (AR) is increasingly being adopted to serve the next-generation consumers, as they are more receptive to immersive experiences such as virtual try-ons, gaming and interactive media. As younger consumers increasingly demand innovative and tech-driven experiences, AR is becoming a key part of their digital landscape.
“At Hugo Boss, we invested in digital campuses in Portugal and Amsterdam to enhance our technological capabilities and future-proof a 100-year-old brand,” said Dosso. “While we still value the tactile experience, we are now focused on developing the next generation of retail.”
Alongside technological advancements, sustainability has also become a crucial focal point for retailers, particularly driven by younger, environmentally-conscious consumers.
However, in the Middle East, there is a gap between government-led sustainability initiatives and consumer demand.
While many retailers are making strides towards adopting more sustainable practices, including eliminating single-use plastics and launching recycling programmes, consumers are not yet prioritising sustainability in their purchasing decisions.
“As retailers, we are ahead in our sustainability efforts, though many consumers do not yet recognise its importance,” said Katia Fakih, chief financial officer of Yolk Brands.
Cost is cited as the main barrier to the adoption of sustainable products, often overshadowing other factors. Sustainable products and packaging tend to be more expensive, making it challenging for retailers to maintain competitive pricing while meeting sustainability goals.
Fakih finds the younger generations a lot more aware and receptive to sustainable products.
Meanwhile, Mashreq’s Khan believes that as the market matures, advancements in technology, increased efficiency in production processes, and economies of scale are likely to reduce the costs associated with manufacturing sustainable goods.
“The decrease of production costs for sustainable goods will lead to more affordable options for consumers,” he said.
Customer experience
Creating unique and memorable experiences for customers has become a critical differentiator in today’s competitive retail environment.
Retailers are increasingly leveraging customer data to deliver personalised shopping experiences. By analysing purchasing behaviour, preferences and demographics, retailers can create tailored offers, promotions and recommendations.
“Consumers can reorder sizes from the trial rooms of the 6thStreet.com phygital store and it’s delivered straight to their room within two minutes. The experience is fully integrated, allowing the customer to share their selections on social media and even personalise it,” said Teckchandani.
According to PwC, 68% of retailers in the region are prioritising personalisation across both digital and physical touchpoints.
Additionally, digital loyalty programmes using QR codes enable staff to quickly recognise high-value customers, offering personalised service based on purchase history and preferences. Contactless payments streamline transactions, reducing wait times, while self-service kiosks help customers to independently browse and check out.
Mobile loyalty programmes further enhance convenience, reducing friction in the shopping process. Retailers are also employing multilingual staff and signage to cater to the diverse demographics and international tourists in the GCC.
Deliveroo’s Talwar believes personalisation at the customer level, including problem-solving and concierge services, will be key to expanding the retail experience in the near future.
