Saudi Arabia and the UAE are on the very top of the "most price-sensitive" markets globally, given that price elasticity has reached record levels, consultancy firm Nielsen said in a recent report.
"Shoppers have become much more price sensitive. In 2018, 70 percent shoppers claimed to be highly price aware," it added.
Fast-moving consumer goods (FMCG) sales volumes are down by 9.5 percent and 3.2 percent and in Saudi Arabia and the UAE, respectively, on moving annual total (MAT) Q2 from 2017.
The declines are partly due to the recent implementation of new taxes such as excise tax and value-added tax (VAT) as well as progressive consumer price increases.
"In light of the new taxes, shoppers in Saudi Arabia and UAE are more sensitive to price changes than they have been in the past, and are actively looking for promotions," the consultancy noted.
FMCG sales based on discounts and special offers have increased year on year, reaching 49 percent in 2018. As a result to this increasing price sensitivity, manufacturers and retailers have entered progressively an overbidding war on promotions, across categories.
According to Nielsen, there was a mild softening of the trend in Q2 and Q3 2018, but the FMCG promo pressure remained beyond 47 percent. Drug holds the lion’s share with 51 percent of volume sold on deal versus 39 percent for food.
"Given the upsurge in promotional activities, pricing, which is the only element of the marketing mix that produces revenue directly, is becoming an increasingly crucial factor for both retailers and manufacturers to consider in their go-to-market strategies," the report stated.
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