The consumerisation of IT is changing how businesses in the Middle East use and buy IT, and enterprises can learn from trends in the retail channel.
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IT retailers are a good barometer of consumer habits, says Dikran Tchablakian, founder and CEO of Tecbuy, and can offer insight into consumer technology trends in the Middle East.
With vast experience across the region, spanning physical and electronic retail with CompuMe, Tecbuy and letstango.com, Tchablakian’s views on the dynamics of the Middle East retail sector are qualified as the region enters a period of accelerated change.
Tchablakian’s association with the Middle East technology market stretches back to the 1980s when he was involved in the development and marketing of the renowned Sakhr computers in the region. Sakhr Computers produced an Arabic-language version of MSX computers in the 1980s, and the company was also the first to convert the BASIC computer language to Arabic.
With many physical retailers grappling with how best to adapt to omni-channel models, understanding the development of business models is vital.
“I look at the changes, but there aren’t any surprises – it’s the normal transformation of an industry,” says Tchablakian. “Back in 1998, when we opened the first CompuMe store, we were ahead of the market. The souk was the dominant retail format and people said, ‘What are you doing?’ We were even ahead of the malls.”
He describes the changes since then, and going forward, as “natural progress”.
“We saw the malls being built and hypermarkets and major specialist stores flourishing, and many new retailers emerged. A few years ago, we [also faced competition from] big consumer electronics players such as Jumbo Electronics, Emax, Sharaf DG, E-City and others. They had money to spend and could open new stores with no limits,” he says.
When the CompuMe store in the Mall of the Emirates in Dubai was bought back by the mall owners, Tchablakian saw the opportunity to launch a different approach to retail. The company formed a relationship with Virgin Megastores to sell IT products within the retailer’s outlets, using a concession model run under the Tecbuy brand.
“We understood what Virgin wanted and what expertise we needed to provide. We work with the consumer – we understand where they are going and where the trends are taking us,” says Tchablakian.
“By working with Virgin, it meant we weren’t going out and spending money opening big stores,” he adds.
Focus on margins
In consumer tech retail, margin remains king, says Tchablakian. Chasing top-line growth achieves very little, unless it is profitable business. The focus on margin is a philosophy shared by both Virgin and Tecbuy.
“For us, the sales figure is important, but ensuring profitable sales is most important,” says Tchablakian. “It is the margin – the bottom line – that matters, and this is something we learnt from Virgin. We realised from them that we had to sell electronics as part of a full lifestyle concept. By doing this, it helped us grow our margins.
“We left the volume business behind and focused on value, because that’s our strength,” he adds.
According to Tchablakian, there is no point becoming a “me too” retailer that replicates what other retailers are doing if there are no benefits attached to this behaviour.
“Today, staff may come in and say, ‘We must do this because retailer X and Y are doing it and are selling more’,” says Tchablakian. “I say, ‘No – if we don’t make margin, we don’t care’. The iPhone is the most sellable product, but it won’t make us a viable margin. Apple has its own stores, it has ownership and it wants to control it. We say, ‘OK, let’s move on and find a product or a brand that we can have ownership of’.”
There are still multiple specialist retailers and hypermarkets selling consumer tech products in the Middle East. Finding a unique and differentiated retail experience can be a difficult proposition, with supplier policies driving similarities between retail store formats.
“The supplier engages with the electronics retailer. They say, ‘This is my display and this is how it should look’, and they pay their money to get the in-store space,” says Tchablakian. “Then you copy and paste the format across all retailers. It’s the same and there is no involvement or connection with the customer.”
Dikran Tchabakian, Tecbuy
He says the customer connection is vital with the younger generation as they are the spenders. “Today, for example, kids influence the tech their parents buy. They are the influencers in the family and those younger generations are shopping online for tech,” he adds. “They are not visiting hypermarkets and specialist chains unless they are really price conscious.”
The younger generation will lead to e-commerce channels becoming ever more important for consumer tech retail in the Middle East.
Tchablakian’s business operation also includes e-tailer Letstango.com, allowing the company to develop its online presence. What is clear is that new channels and changing market conditions are forcing all physical retailers to review their current setup and the cost of maintaining retail space in the region.
“There has been some softening of business levels in the region. That will continue, but will hopefully stabilise. My guess is it will drop a bit more, but will then level off. Retailers must adapt to this new reality. Buying habits are going to change,” says Tchablakian.
Tchablakian expects consolidation of large-format consumer tech stores because of the high costs involved in running these outlets. A similar transformation has already occurred in major European markets such as the UK and France, reducing the physical tech retail space to just a few chains and a few specialist stores.
“We will need specialist retailers in the Middle East for IoT [internet of things] products,” says Tchablakian. “People need to be educated on how these products operate and how solutions work. You don’t need a huge retail space to do this, but you do need a physical presence.
“Some of the big consumer tech retailers came in and built up their operations when tech sales were soaring. Now they need to have a serious rethink and may see that they can make more money by closing some outlets,” he adds.
Consumers remain fickle, and while they may be emotionally attached to a specific product brand, they are less likely to have the same level of attachment to a specific retailer. It is possible for a consumer to visit an expensive specialist store, receive high-touch expert advice and product demonstrations, then leave to purchase the product for a lower price at a hypermarket.
“It could be the right time for two or three companies to come together and form a consortium,” concludes Tchablakian.