Tech Startups EP 08 - Consumer Spending in the Arab World

Ismail Al Kamal and Mohammed Horani continue episode 8 talking about consumer spending in the Arab region.

LinkedIn:
Ismail: https://www.linkedin.com/in/ismailalkamal/
Mohammad: https://www.linkedin.com/in/mohammad-h-68613013/

What sectors do people spend most on and which are still growing?
First, we must make a distinction between the expat and local populations. Second, there are high demand areas likeFood, Health, Education, Rent, Water, Electricity, Gas, transport etc.

Businesses tapping into these areas with excellent Quality, Presentation and Customer Service will grow. It’s all about how well your Customer trusts you.There’s still a lot of room for improvement in this area - products and services that may seem not-so-profitable in mature markets, have a long way to go before reaching the saturation levels in the region - so, if you can build a strong brand following, presence and perception, you are in for making big bucks.

One example in KSA is that of Munch Bakery. They make lovely cupcakes (Quality product), their presentation is commendable and they have built a great following on social media (Customer Service and Perception). As a result, they have many branches across the country now, this indeed is a local success story!

Customers don’t have many choices here, so even those businesses that have bad customer service, customers keep coming back to them because there are no alternatives. A similar example in the states would be US based airlines - they are notorious for bad customer service but you are stuck with them because there’s no choice.

How does the price factor play out?
Price is always comparative. it all comes down to which tier your product falls in and whether or not there is a demand for it.

Regardless of what you are selling Toyota, Lexus or Lamborghini, for consumers’ stand point they will only see how it fares or compares with the similar tiered products.

What’s more important is whether people have the buying power for your product, do they have money for it and willingness to spend.

For example, In Saudi Arabia, there’s a successful start-up called Noon Academy, it’s a low-cost alternative solution mainly for private tutoring. They recently received Millions in funding to build and expand their operations locally and regionally. So here, you have the education sector, it’s one of the basic necessities – now the question is if parents would pay for the service and whether there’s a market for it. Youth accounts for 60% of the population in the country and parents are already paying high fees for private tutoring.

Let’s look at the buying behaviors of locals and expats. Expats are basically in the region to save money, although you have varying profiles of the expat population - you have the Labor class, skilled Labor class, Engineer / Doctor / Lawyer class and then the Director / Management / Company Owner class. Usually the expats are on the hunt for deals. This type of consumer is driven by the deal ecosystem whereas locals are less deal-fixated.
There’s no doubt that everyone likes deals but generally locals are not as cost-sensitive as the expats. Locals tend to have more disposable income and are willing to spend on non-essentials. For instance, retail, fashion and jewelry is a leading area of purchases for the locals.

What are the areas of opportunity for Tech start-ups?

[1] Adding Technology to conventional businesses: Building on top of existing businesses and provide something that others are not offering (going above the noise) by means of technology – so you add this value and ease that is only synonymous to you.

Look at Jarir Bookstore in Saudi Arabia, they started as your regular brick and mortar store for books and stationery in 70’s and then they moved to selling computers and electronic items and accessories but since maybe 2010 they started focusing on their digital presence. Today they have an e-commerce platform for people to shop on. IKEA, SACO and the list goes on. All have e-commerce and an internet presence in one form or the other.

[2] Social Media inspired platforms: My sister has a Gold jewelry business in Dubai. She designs her own collection and sells it on Instagram. Although she’s linked up with other E-commerce platforms in the region but her main sales come from Instagram.

Instagram is fast becoming an e-commerce platform for small businesses in the gulf region.

These once-small businesses have the potential to become large. For example, look at Huda Kattan’s HUDA Beauty brand. She is a social media influencer with more than 43 million followers on Instagram which has successfully played in building her brand. Social Media as a technology driven platform is indeed playing a vital role in helping start-ups and other established businesses grow – this is an opportunity area for tech start-ups.

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