Middle East consumer behaviour changing and shifting online

24 July 2020 Consultancy-me.com

Despite feeling the financial strain from Covid-19, consumers across the Middle East are still willing to spend more in the near future, although patterns of consumption are likely to change. This is according to PwC’s latest take on consumer sentiment in the Middle East.

The Big Four accounting and advisory firm surveyed more than 500 consumers in the major centres of Abu Dhabi, Cairo, Dubai, Jeddah and Riyadh, to find that the region is in the unique position of having seen the most widespread strain on financial income while also having the largest set of consumers gearing up to spend more.

Nearly two-thirds of those surveyed have seen a dip in household income, stemming from job cuts and reduced hours. Add to this the expenses of caring for a sick family member and the group with affected incomes grows to nearly 80% of all respondents. To make matters worse, the widespread fall in income has been accompanied by a jump in household expenditure on food and utilities due to the lockdown.

Pressure on household income

No doubt, this has had its impact on consumer sentiment. PwC reports that more than 30% plan to cut back on spending in the short term. On the other hand, what is surprising against this backdrop is that nearly 50% of all consumers plan to increase spending over the next few months, which as per the dataset is more optimistic than any other region.

Across major markets such as China, France, Germany or the UK, just around a third of consumers plan to ramp up spending. This figure stands at 49% for the Middle East, led by Cairo where nearly two-thirds of consumers soon plan to up their spending.

This optimism is not a big break from where the Middle East has been before and during the crisis. Back in April, McKinsey & Company reported that consumers in the GCC region were the most positive when compared to other European and Asian markets. What has changed is the list of priorities for consumers.

Spending plans for the next few months

For one, a shift is expected in the type of consumer products in demand. Lockdown has forced many consumers across the globe to go back to basics, shopping for groceries while cutting down on luxury expenditure. PwC paints a similar picture of the Middle East, with more than 60% reporting higher expenditure on groceries, while spending on clothing, footwear and restaurant food deliveries has dropped significantly.

A shifting lifestyle

Lifestyle changes are also being reported elsewhere. In a direct sense, being locked up has driven up spending on online entertainment. Another trend that has been noted across the global consumer market is that a significant share of people have grown more health conscious during the lockdown. Once again, PwC confirms that this has been the case in the Middle East.

Nearly 60% of the respondents are setting aside time each week to improve their health, supplemented by dietary and lifestyle changes for the good. Well over 80% have upped their focus on mental health and wellbeing, which is a cut above the other regions. PwC partner and report co-author Norma Taki pointed out how these shifts represent an opportunity for businesses.

“This phenomenon of a care-centric customer base and business culture could be one of the positives to come out of the Covid-19 pandemic. In the near term, companies focused on health and wellness – food manufacturers that offer healthy, nutritious products and grocery chains that sell local and organic products, for example, will continue to thrive,” she said.

Changes in shopping channels

Ecommerce

So consumers are changing their preference when it comes to products, while PwC reports that they are also making a change when it comes to their preferred purchasing channels. An accelerated shift to online is visible across the Middle East, reflecting a similar trend that has been unfolding across the globe.

But in the Middle East, online buying progress was slow, reported Bain & Company last year, and the Covid-19-induced acceleration is a welcome development for online retailers and ecommerce players.

In the payments segment, PwC reports that the online payments market in the Middle East was the fastest growing among all regions in the world back in 2019, a trend that persisted until the start of this year. Now, as the crisis winds down, more than half the consumers in the Middle East have been shopping more on their smart phones, while computer and tablets are also popular channels.

The trend has partly been driven by concerns around going to public places for fear of infection. Nevertheless, more than 90% of consumers expect to keep this up even after the crisis has passed over. Broader changes in lifestyle are also more permanent in nature, indicating that Covid-19 and the resultant lockdowns might just have changed consumption patterns for good.