Interview: Bashar Arafeh
What major trends are shaping the retail business in Jordan and the Middle East?
BASHAR ARAFEH: Retail is strongly influenced by demographic factors. Given the region’s youthful population, as well as the fact that young consumers are more likely to buy products online, retail companies are earning more and more revenue from internet-based transactions. Although young online customers in the region tend to buy inexpensive items, they are highly active consumers and make a large number of purchases.
This brings us to another important trend – today’s consumer prioritises convenience. In Jordan, the value of convenience and the increasingly more consumption-oriented culture has not only supported online merchants, but also retail malls, which combine shopping, food and entertainment in one destination.
Of course, as more consumers gravitate to malls and online sites where they enjoy wide selections and low prices, fewer visit the small “mom and pop” stores that traditionally defined local retail. Indeed, this phenomenon is happening in many countries worldwide, and has both positive and negative social consequences.
Lastly, retail in Jordan has not been severely affected by the global downturn like Western countries have. Our market is not as integrated with the international economy as we would like to think; rather, the kingdom’s fortunes are mostly linked with the performance of the GCC. Due to rising oil prices, GCC nations have been strong performers in recent years, with trickle-down effects supporting purchasing power in Jordan. That said, inflation and a decline in disposable income has also been a factor in the market, due mainly to the increase in prices of goods and services.
How would greater adoption of customer rewards programmes support retail expansion?
ARAFEH: There are very few loyalty programmes in Jordan and the region, so I would argue that this segment has immense untapped potential. Still, rolling out a successful rewards programme is not easy, since you have to create hundreds of merchant relationships and distribute hundreds of thousands of reward cards.
Loyalty schemes are about getting something back in exchange for repeat purchases. For retailers, the value proposition is even greater: a better understanding of what motivates customers. In the aggregate, when customers routinely use their loyalty cards, they create data sets that can be analysed by merchants. When you understand your clients’ shopping habits, you can provide tailored products and services.
Greater adoption of rewards programmes in Jordan and the region would make retailers more efficient and profitable. As it stands, retailers in this part of the world know very little about their customers, and what retailers do know is based on instinct, not analytics. Despite the advantages to loyalty programme adoption, it remains difficult to convince many companies to embrace such solutions for the simple reason that people are reluctant to change old ways of doing business.
What makes Jordan attractive to foreign retail chains looking to invest in the local and regional markets?
ARAFEH: Jordan is a highly attractive market for foreign chains, as evidenced by the strong presence of numerous global retail giants nationwide. International retailers are attracted by the country’s young and aspirational consumer profile, and by the fact that Jordan is an excellent base for targeting regional markets. Moreover, the country is becoming an increasingly attractive market for restaurant and leisure investors. In downtown Amman, both international and local eateries have been multiplying rapidly in recent years.
However, to successfully attract more foreign activity and investment in the local retail business, policymakers in Jordan should look to adopt more generous tax policies. Currently, sales and Customs taxes in Jordan are high, which makes many international brands, especially those selling tangible products such as fashion items and furniture, too expensive for lower-income customers and for large segments of the middle class.
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