Digital space reshaping Saudi consumer spending amid COVID-19
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by Paromita Dey
The COVID-19 pandemic changed nearly every aspect of global business, and consumer spending is no exception.
While the government of Saudi Arabia announced various stimulus packages to counter the impact of the economic slowdown caused by the pandemic, the majority of the Kingdom’s sectors, affected by COVID-19, will need to adapt to evolving consumer spending patterns and new habits for a rebound effect.
Abdellah Iftahy, partner at consultancy firm McKinsey & Company, told Argaam that the pandemic has not only overhauled how and where consumers choose to spend their money, but their lives as well.
“Consumers have become much more focused now on value for money. This is not completely new but has accelerated in the past few months due to COVID-19,” he said.
Experts have also observed that consumers have increasingly become concerned about their health, as well as the health of their families, and the affordability of the products they consume.
Ahmed Reda, MENA Consumer Industry Leader at Ernst & Young, said he believed awareness of health and affordability will continue beyond the pandemic, with majority of the consumers also being focused on value for money in the future.
“Approximately 40% of Saudi consumers will pay a premium for brands that are trustworthy and convenient for them, and 47% will shop more at local, small businesses as well as eat at more local, independent restaurants,” Reda added.
He also highlighted that household products and home hygiene is one of the segments that has come under the spotlight by the change in KSA consumer spending behavior, with a majority of consumers saying they will spend more on these products.
Changing spending patterns
Globally, including in Saudi Arabia, consumers have shifted towards e-commerce and omni-channel retail amidst the pandemic. Saudi-based FMCG firm Sunbulah Group has witnessed a steady rise in online shopping, with everything from frozen foods to school supplies being purchased from a mobile app.
“These are certainly positive notes emerging from the consumer behavior trends we are seeing in the market, despite the challenging global outlook,” Sunbulah CEO Rida Kaj said.
The company is currently focusing on diversifying its offering in the health and wellness space, while ensuring right supply chains and stocks to meet consumer demands as they continue to fluctuate throughout the course of the pandemic.
“While ingredients and baking products were in high demand before the onset of the pandemic, over the summer months we have seen a shift towards meats and grilling products, and stock-keeping units (SKUs) that cater to family meals,” Kaj added.
The company also revised forecasted demand for its products, as supply margins normally kept for raw materials have altered.
As the pandemic influenced changes in consumption and behavior, consumers have avoided hypermarkets and supermarkets in order to limit their chances of contracting the virus.
“Consumers have engaged more with online channels during the lockdown period as businesses invest in digital technology. More digital experiences, more technology embedded in the way consumers purchase or experience shopping going forward,” Iftahy noted.
Reda agrees that digitization of services and capabilities will be critical to securing repeat customers. “Now is the time in KSA retail history where customers are the most comfortable and willing to utilize online shopping and contact-less payment options,” he pointed out.
According to a recent report by Fitch Solutions, titled “Saudi Arabia Consumer and Retail Report Q4 2020”, while in the short-term it will take time for consumers to adapt to the new normal, the easing of lockdown is good news for the country’s economy. The removal of restrictions, along with the government’s stimulus plan, leads to project a recovery in consumer spending in 2021.
Non-essential retail has reopened, and this will aid a number of discretionary segments that were hardest-hit by the lockdown (such as spending on clothing and footwear, and restaurants). However, non-discretionary spending is forecast to take the lead in the medium-term, the report noted.
Iftahy expects consumer spending to bounce back in 2021 as businesses will have effective hybrid working models and a more aware customer base. “Consumers will look for increased value-added digital experience and right investments. The trend is here to stay and will alter purchase or shopping experience going forward,” he concluded.