We all know the drill, don’t we? Consumers crave a new way to be tempted to buy more, and brands are hungry for new ways to get in front of potential shoppers.

For the past few years, in the Middle East, like elsewhere, brands have grappled with a core retail question: What is better – to connect with consumers online or offer a brick-and-mortar store experience?

Interestingly, although physical stores are expensive to operate and designed to maximize revenue per square foot, retailers are (not surprisingly) most insistent about its benefits. 

Stores are showing they are still very relevant. 

They are getting consumers to experience products as they’re designed to be used in the real world. In the region, retailers are looking to deploy their physical store locations in new ways. Placing itself squarely at the intersection of media and technology, some electronics retailers selling televisions use them as an advertising platform, showing advertisements and making money on a product that it is selling.

Moreover, despite inflation, sales are returning to pre-pandemic levels and higher product stockings. 

The true value of the retail environment today is in the less tangible yet critical value of experiential engagement that physical retail can offer. These elements are fundamental to establishing long-term consumer loyalty, brand reputation, differentiation, and, ultimately, sales.

STRONG APPEAL OF STORES

“The appeal of physical stores remains strong in the region where shopping malls are part of the social fabric,” says Carl Masterman, President – Sports, GMG.

“Physical stores have advantages, including instant gratification and in-person assistance, not to mention the ability to feel, touch, and try on items.” 

The share of new luxury stores that opened in the Middle East in 2022 doubled to reach 6% of the total globally, according to a report by Savills. New luxury stores that opened last year increased by 11%. 

A recent Adyen survey found that most UAE residents prefer shopping at brick-and-mortar stores. Another survey found consumers are expected to spend an average of over $2,400 via physical stores in 2025, up from nearly $2,000 in 2020. Grocery, apparel, electronics, and other retail segments have achieved profits and returns above the global industry average.

Countless digital native retailers have started opening physical stores as they seek a better connection with their customers. They have embraced physical stores as an important element of the brand and customer acquisition strategies.

“In a post-Covid era, we are observing an intriguing trend of customers seeking the experience that physical stores uniquely offer. Customers want to see the products in fresh sections and benefit from the exclusive in-store deals and services,” says Marc Laurent, President, Retail – GMG Everyday Goods. “As the initial e-commerce hype evolves, brick-and-mortar stores have an enduring value.”

While physical stores dominate retail sales, the GCC retail industry is undergoing a transformational phase, says Krishna Dhanak

Managing Director, Alpen Capital. “Shoppers gradually returned to physical stores after the end of COVID-19 restrictions, but e-commerce has developed into a significant and enduring part of the retail landscape.”

TRANSFORMATION OF PHYSICAL STORES

Retailers emphasize it is all about the shopping experience – rapid digitization is completely transforming the role of the physical store.

While the lockdown boost to e-commerce gives way to fresh cravings for real-world experience, brands say there’s a legit reason to move beyond screens and shelves to a hybrid experience.

“Brick-and-mortar shopping is part of this region’s shopping experience. 

That said, e-commerce presents a myriad of new opportunities stemming from changing consumer behavior and market trends,” says Shafi Alam, Head of Direct-to-Consumer Business & Corporate Marketing, Samsung Gulf Electronics. “Consumers are experimenting with diverse channels today, spurring the growth of an omnichannel ecosystem.” 

Laurent says this trend signals a new era of retail where a “harmonious blend of digital and physical interactions” caters to diverse customer preferences.

So, what does all this mean? It certainly doesn’t mean business as usual. The retail landscape has shifted, and retailers must innovate. 

While it is true that a considerable part of all retail sales still takes place in shops, it is also true that those in-store purchases involve some aspect of online interaction along the customer journey.

Stores are becoming experience hubs where customers can touch and feel products and interact with brands. Technology and innovation are key to meeting new customer needs, like seamless click-and-collect and tech-enabled change rooms.

“Retail industry has matured in the last few years, and e-commerce and physical stores complement each other. While brick-and-mortar remains the foundation for retail sales in the region, retailers are converging with technology to enhance the consumer experience while presenting a wider variety of offerings at affordable prices,” says Dhanak.

CUSTOMER IMPACT

Customer impact takes into consideration customer service, how engaging the store’s design, layout, and features are, and the overall experience they feel when they visit the store.

The key is to curate online and offline shopping environments that provide the best of both worlds. It has to be personal, convenient, frictionless, and offer value for money. 

For instance, GMG’s latest Sun & Sand Sports store features digital LED plinths, levitating shoes, and pickup sensors to provide an immersive consumer experience. It also has a customization zone that allows shoppers to personalize products to their tastes.

“Customers no longer distinguish between online and offline shopping; they often start shopping in one and check out in either. A hybrid retail environment has now become the prerequisite of the new retail era,” says Masterman.

Responding to the changing landscape, as brands are getting creative and giving shoppers a unique experience with events and interactive displays in stores, ensuring customers have the most positive overall experience of the store when they visit increases the chances they will make repeat purchases and visits.

To increase customer engagement, Samsung pop-up stores often host a series of competitions, masterclasses, and workshops.

“Consumers today display an evolved shopping mindset where they want to experiment with unique service experiences,” adds Alam.

The e-commerce juggernaut, for now at least, has peaked. According to the Global Retail E-commerce Forecast 2023 by Insider Intelligence, the sales growth of retail e-commerce will only increase by 8.9%. 

“This doesn’t mean no growth; it’s just slower growth. And when it comes to growth, especially in our region, what is important to note is that it is never evenly distributed among markets,” says Masterman. 

GMG anticipates substantial growth in markets such as Saudi Arabia and Egypt, where there is considerable potential. It is also set to establish approximately 50 JD Sports stores by 2028, primarily in the UAE, Saudi Arabia, Kuwait, and Egypt.

Consumer behaviors have forever changed, and the shift to digital is here to stay. For example, Gen Z shops online, and e-commerce is typically their primary point of contact with brands. On the other hand, other demographics choose to mix online and physical.

“Depending on specific product categories — consumers are more inclined to buy smartphones online since they are familiar with the product and its key features. However, TV customers will likely visit brick-and-mortar stores to get a feel of the product before completing their online purchases,” says Alam. 

“Our online store provides exclusive offers, whereas the pop-ups and Samsung stores give consumers that personalized feel of a physical experience, such as the ability to touch and try. The two offerings are intertwined, complementing each other to serve the entire consumer segments best,” adds Alam.

With the changing customer behavior, retailers say it’s important to create engaging omnichannel experiences that provide consumers with a consistent and unified offering. 

“Ultimately, as brands, we must focus on providing convenience and personalization to our customers and continue to offer them products and services through their channel of choice,” says Alam.

Which is, presumably, what every customer wants. Giving them what they want. 

You can hardly put a price on that.