HOW TO SET-UP
Retail has been a key contributor to the region’s non-oil GDP for years. According to Statista, in 2019, wholesale and retail trade contributed about AED47 billion to the UAE’s GDP. But when the pandemic unexpectedly hit the global economies, the sector, like most other industries, had to operate in recovery and revival mode. The endless change in the paradigm of retail means keeping the pace with new technological advancements, and change in consumer behaviour.
The retail industry is not like many other industries where you can get away with investing a less amount and work your way in gaining high profits. In this particular industry, the more you invest, the higher the returns you will get. Also, what you invest in and when, is key in determining how fast your retail business can potentially secure profitability. These investments could be in customer service, a shopping experience (both online and physically), delivery processes, and so on.
According to PWC’s CEO Survey Middle East report, Navigating the new retail reality, 28% of Middle East CEOs across all sectors believe the global economy will improve over the next year – a decline from 52% in the prior year. This cautious outlook is reflected in the fact that more than two-thirds (68%) of regional CEOs put operational efficiencies at the top of their list of planned activities to drive profitability in the next 12 months.
That said, retail as an industry will never lose its prominence and significance, and the fact that Walmart (with roughly 2.2 million employees) is the biggest employer in the world is testament to that. By the end of last year, global e-commerce giant Amazon added circa 500,000 new employees to its company. Both physical and e-commerce retail in certain verticals have recorded tremendous growth during a crisis and that has encouraged many new retail players to mushroom across the globe, including in the Middle East. However, retailers need to factor in the do’s and don’ts of starting a business from scratch without underestimating the difficulty of owning and operating a store.
The first step to operate a retail business, specifically in the Middle East, is by making sure your business proposal is all ready to be able to apply for a licence. This business proposal must include exactly what kind of retail business you would like to commence. It could be a clothing store, a technology and electronics store, an automotive store, and so on. Your licence will depend on what kind of retail business you wish to open, therefore this is a very important point to consider before applying for your licence.
The next step, which is also very crucial, is hiring. This step is sometimes taken for granted by retailers to keep their budget in balance, which may result in a negative shopping experience, leading to low customer retention. The hiring process, if not the most, is a sensitive step of the process. With the right employees, a company can advance quicker.
Then comes the physical stores. This is a decision you make as a company founder, whether you wish to exclusively be an online e-commerce platform or you wish to introduce a physical store as well. In the case of a physical store, considering the area you open your flagship store matters. What is also importantto consider is the size and affordability of the store you have chosen.
Then finally comes the processes you introduce as a retailer. Carefully evaluate who your suppliers and vendors will be, keeping in line with your chosen retail product range. According to Deloitte’s 2021 retail industry outlook report, “Retail executives seem to agree that an economic recovery to pre-pandemic trajectory levels will take time, with six in 10 expecting recovery in the next one to two years—but a quarter see a longer timeline of two to five years. The old playbook and rules will likely have to be thrown out, and bold, differentiated action will be required to stand out from the competition.” This is the step where you will also need to consider four key opportunities where you can stand out. Those opportunities are: a) Digital differentiation b) Strategising health and
safety protocols c) Supply chain management and
disruption-proof planning d) Realigning your costing to suit the latest economic environment
60% of the population in the MENA region are below the age of
30. This shows how retailers need to understand that their buyers are a young population. Today, retailers of all scales and sizes have three objectives - to sustain, adopt, and build – all while catering to an audience that is digital savvy, demanding, purpose-driven, and also sustainability conscious.