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How can international brands thrive in the Middle East, North Africa and Pakistan?

960 640 Guest Contributor

By Checkout.com

Every economic region can suffer from stereotypes. For the Middle East, North Africa and Pakistan (MENAP), that comes in the form of petroleum, natural gas, heavy industry and concentrated sovereign wealth. Lazy analysis may correlate this with weak individual consumer spending and a lag in mass digital adoption. As a consequence, it’s easy for many foreign brands plotting international expansion to ignore the region.

That may be a mistake. The MENAP is undergoing an enormous transformation. Demographic, technological, political and cultural forces shape new consumer behaviors, not least in the ecommerce market.

As Gaurang Shah, Senior VP, Product Management, Digital Payments & Labs, Middle East and Africa at Mastercard explains: “The short-term response to COVID-19 has led to the accelerated adoption of new connections to the world of digital commerce. More people and businesses can now be welcomed to the formal economy, setting the foundation for sustainable, inclusive growth.”

Some were quick to see the potential. In 2015 the online food ordering service Talabat was acquired by German ecommerce group Rocket Internet for $170 million. A year later, it was under the ownership of Delivery Hero, which saw enough potential in the region to add Otlob (Egypt) and Carriage (MENA) to its portfolio. Elsewhere, Uber acquired Careem — the region’s leading ride hailing service — for $3.1 billion in 2019.

Our recent report found that 78% of consumers in the region frequently shop online, with almost half (47%) anticipating they’ll do more so in 2021. By then, it’s predicted that the Middle East alone will have an ecommerce sector worth $49 billion. And 500 million people will have a smartphone connection by 2025, with 45 million of these on a 5G network, says the sector’s global body .

With such enormous growth potential, the question for brands is how can they tap into this market.

Identifying the trends

Acknowledging this growth is the easy part. Brands with designs on MENAP need to dig into the trends. Only by understanding the forces at play can they work out how to leverage them and take a share of the e-commerce opportunity.

That’s easier said than done. The region is large and complex. Depending on what definition you use, it covers around 15 million square kilometers, includes somewhere between 20 and 30 nations, and has a population between 550 million to 800 million.

But three clear trends have established themselves above this complexity. Each presents opportunities, and challenges, to market entrants.

  1. Cashless payments

The MENAP region has not been alone in its reliance on cash. And as elsewhere in the world, consumer habits can be hard to break. Cash in itself is seen as somewhat abstract. Hard assets such as gold can be preferred as currency. Against this context, digital payments have had an even harder time finding their feet.

Three developments are changing that:

  1. Improved digital infrastructure mobile adoption
  2. More friendly regulations
  3. COVID-19

On the latter, lockdowns have meant people are physically unable to exchange cash while also being suspicious of catching the virus from handling notes and coins. Hadi Raad, VP of Digital Solutions at Visa, suggests that “cash now carries an extra stigma of low-hygiene, in the minds of consumers.”

As interesting as this immediate reaction is the longer-term intentions of consumers. Emre Talay, Director of Global Payment Operations at Delivery Hero, explains that not only did they see 50% of cash transactions go digital after the pandemic, but that they’ve “also seen a rise in consumers wanting to save their card details on file.”

But the move away from cash was already underway before the virus struck. National governments have been making it easier for new digital payment methods to be introduced. KNET in Kuwait, Benefit in Bahrain and Mada in Saudia Arabia are already household names. In Saudia Arabia, which has led the charge, alternative digital payment methods now outstrip traditional card-enabled transactions. And in the UAE, 64% of people expect the country to become fully cashless by 2030 .

  1. Digital natives

Infrastructure and regulation merely lay the groundwork for change. It’s people who transact. As the digitally native generation comes of age, their appetite for choice and convenience fuels the region’s transformation.

In the last century, MENA’s population grew faster than anywhere in the world. Today at least 200 million people are under the age of 25. . And one-third of the region is under 15 years old . This is the generation who have grown up with access to the internet, a phone in their hand, and social media on speed dial. Convenience is not a demand but an expectation. Shopping and paying online comes naturally to them: 36% of 18-24-year-olds shop online at least once a month, compared to only 13% of 55 and overs .

  1. Economic diversification

Layered on this picture of digitization and demographic change are shifting global attitudes to oil production and consumption, pro-democracy movements, increasing immigration from developed nations and rising education standards.

Layered on this picture of digitization and demographic change are shifting global attitudes to oil production and consumption, pro-democracy movements, increasing immigration from developed nations and rising education standards.

The result is economic diversification. Health and fitness, media, and digitally-enabled services are some of the winners. But these sectors aren’t easily infiltrated. For international consumer brands looking to benefit from MENAP’s new spending power, ecommerce is the fastest route to success. And the race has begun. From just March to September of this year, we’ve seen 1000+ new inquiries for merchants shifting their sales online.

For Sunil John, Middle East President at public relations firm BCW, the game’s up for retailers that don’t take this seriously enough: “Pivoting to a digital-first mindset that understands the importance of a seamless online shopping and payment experience will be a strategic imperative for traditional retailers to survive and thrive in the MENAP region.”

Proceed with caution

Preparing to enter any new market can be difficult. When the market is the size and complexity of MENAP, it can be overwhelming. But it doesn’t need to be. Two considerations should be front of mind for international merchants:

How do we navigate the complexity and understand the nuances? How can we do this faster than our competitors?

The key to both questions is payments. Too many businesses leave payments to the end, by which time it’s too late. The ability to offer the payment methods that your customers want can make or break your success. It should be prioritized alongside market research, production, marketing, recruitment, distribution and so on.

For each country you plan to sell online in, there are some basic questions to start with, including:

How do people there prefer to pay? Who is regulated to take payments? What are the broader financial and legal obligations of doing business? Are there any restrictions to domiciling revenue?

But progressive won’t stop there. Ecommerce is about nimbleness. Scalability — in other words, being able to ramp up the number of transactions you take — is crucial. So is data. Understanding payments at a granular level — conversion rate, success and declines, speed of settlement, cost per transaction — is how successful merchants continuously improve their customer experience and margins.

A challenge shared

International brands looking to get a foothold in the region are realizing they can’t go it alone. Increasingly the answer is to partner with a payments specialist with local knowledge, coverage, compliance tools, access to data and the infrastructure to scale. There are many benefits, not least outsourcing the hassle so your businesses can focus on what you’re best at. Ecommerce retailers that understand the opportunity in MENAP and factor payments into their plan will be the ones that thrive.

Want insider insights into what leading brands across MENAP are doing to succeed with payments in the region? Check out our exclusive eBook featuring the views from payment professionals at Seera Group, Delivery Hero, Chalhoub Group and more.

Who are Checkout.com?

Checkout.com’s flexible payments solutions help global enterprises — like Samsung and adidas — adapt, innovate and thrive with more value from every transaction flowing through your business. They’re on a mission to empower merchants by building the connected finance they deserve.

Download our new report to learn how businesses responded when consumers ditched cash during the pandemic

Creating your own marketplace: A project to be taken seriously

960 640 Stuart O'Brien

By Limonetik

Marketplaces were born out of the so-called platform economy. This new form of commerce first appeared about twenty years ago, just after the explosion of the Internet.

Having witnessed the success of Amazon, Uber, Airbnb and Deliveroo, many businesses now want to create their own marketplace equipped with an efficient and global payment platform – a tempting but expensive business model, difficult to set up and risky.

Limonetik shares with you why Brands do not have to underestimate the complexity of what should be considered a full-fledged business project.

Read “Creating your own marketplace: a project to be taken seriously!” by Limonetik

Value of most valuable global retail brands hits $1.5 trillion

960 640 Stuart O'Brien

The third annual BrandZ Top 75 Most Valuable Global Retail Brands Ranking from WPP and Kantar shows the value of the world’s top 75 retail brands has grown 12% to $1.5 trillion in the past year.

The report provides an indication of the brands that are most likely to prevail in a post-coronavirus market and uses valuations data incorporating stock price performance from April 2020 to reflect the impact of COVID-19. It also drives home the retail sector’s pivotal role in the global economy as brands respond to shifts in consumer behaviour while facing business-critical changes to supply and demand and a restricted ability to trade.

BrandZ combines analysis of retailers’ financial performance with the opinions of millions of consumers surveyed in more than 51 markets around the world. Historical BrandZ data confirms that brands with the strongest brand equity recovered nine times faster following the financial crisis of 2008.

“The coronavirus crisis underscores the essential role that retail plays in both our daily lives and the overall global economy; we are seeing some heroic examples of retail companies stepping up to meet consumer need and keep the world turning. While this is a fast-moving and ongoing story, the report allows us to show the businesses that, having invested in becoming a strong brand, are potentially better able to withstand the current shock. Twenty-two years of BrandZ data analysis consistently confirms that strong brands help their businesses to survive turbulent times,” said David Roth, CEO of The Store WPP EMEA and Asia and Chairman of BrandZ.

The 2020 BrandZ retail report highlights the actions agile and innovative retail brands are taking to make a difference to the lives of people confined to their homes and forced to change their habits; experience and data shows brands that maintain their visibility in a relevant and sensitive way throughout a crisis are best-placed for a faster recovery.

The top retailers in the 2020 ranking illustrate the scale and breadth of activity making brands meaningfully different and salient to consumers in the coronavirus age: Amazon (No. 1, $415.9 billion) is managing demand and reducing its speed of delivery to prioritise key products; Alibaba (No. 2, $152.5 billion) subsidiary Ali Cloud used its AI expertise to help medics in China significantly shorten the coronavirus diagnosis time; Louis Vuitton (No.5, $51.8 billion) parent company LVMH took only 72 hours to convert its production lines to make hand sanitizer; and Chinese ecommerce brand JD (No. 13, $25.5 billion) delivered medical supplies and food using its extensive distribution network.

Athletic apparel company Lululemon (No. 25, $9.7 billion) grew 40% to become the ranking’s highest riser; current activity includes offering online training programmes, a purposeful marketing tactic to keep it front-of-mind that has also been adopted by Adidas (No. 18, $14.8 billion).

Otherwise the fastest riser category is dominated by pure retail as grocery outlets see a boom in demand as people stock up. Unsurprisingly, the digital-native brands scored highly – Amazon, JD and Alibaba were up 32%, 24% and 16% respectively – but physical retail veterans also showed their ability to adapt to an online-only environment. Costco (No. 11 $28.7 billion) grew 35%, Target (No. 23, $10.6 billion) was up 27%, Walmart (No. 8, $45.8 billion) increased 24% and Sam’s Club (No. 36, $6.8 billion) rose 19%.

Smart retailers are also resisting the temptation to cut back on advertising investment, learning lessons from China where brands that ‘went dark’ are struggling to reconnect during the early stages of recovery as consumers opt for those that actively demonstrated support. Marketing is being adapted as people are confined to staying indoors, with tone of voice being as important as the media mix.

Graham Staplehurst, Global Strategy Director for BrandZ at Kantar, said: “Brand value isn’t just determined by financial performance, but also by reputation in the eyes of consumers. How retailers behave now in terms of helping people through the crisis, as well as the way in which they treat their staff and whether they comply with government and health advice, will be important to their survival. Those that have actively demonstrated their relevance and usefulness and continue to do so as consumers’ lives start to get back to normal, will be best-placed to strengthen customer relationships both in the recovery phase and the long-term.”

 

The BrandZ Top 10 Most Valuable Retail Brands 2020

Rank 2020 Brand Brand value 2020 ($bn) Category Rank 2019
1 Amazon 415.9 Retail 1
2 Alibaba 152.5 Retail 2
3 McDonald’s 129.3 Fast Food 3
4 The Home Depot 57.6 Retail 4
5 Louis Vuitton 51.8 Luxury 6
6 Nike 50.0 Apparel 5
7 Starbucks 47.8 Fast Food 7
8 Walmart 45.8 Retail 9
9 Chanel 36.1 Luxury 8
10 Hermès 33.0 Luxury 10

 

Highlights in this year’s BrandZ Retail ranking include:

  • The strongest got stronger: The Top 10 brands in the ranking outpaced the rest of the sector, posting an average rise in brand value of 16.4%. Amazon’sgrowth sees it account for 27% of the Top 75’s total brand value while robust performances by other Top 10 brands such as Alibaba show that strong brands can do more than get by; they can redefine what is possible.
  • Sector leaders continued to dominate: McDonald’s(No. 3, $129.3 billion) is by far the most valuable Fast Food brand in the world, although others enjoyed rapid growth, thanks largely to delivery and other service innovations such as AI-powered suggestions at drive-throughs and delivery partnerships behind incremental orders. Louis Vuitton is the most valuable Luxury brand, with a new global flagship store in Seoul and creative partnerships with major artists while Nike (No. 6, $50.0 billion) leads the Apparel category with e-commerce, product customization and collaborations driving strong sales.
  • Five new entrants: Three Japanese brands make their debut in this year’s ranking; online fashion store Zozotown(No. 52, $4.5 billion), retail network Aeon (No. 64, $2.9 billion), and convenience story company Family Mart (No. 75, $2.4 billion). China’s ecommerce platform Pinduoduo (No. 26, $9.4 billion) is the highest new entry, following the success of its online group-buying model; Bunnings hardware chain from Australia (No. 69, $2.7 billion) is the fourth new entry.