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As the developing and maturing markets in the Middle East look to provide us with increased amounts of retail space in the coming years, the questions that are typically being asked as we move forward are usually associated with brand and market saturation.
"How long before we have too many malls" and "don't we have enough shops and brands already" are often the kind of things that I hear from friends, colleagues and clients. Yet in such a wildly diverse and rapidly emerging market, these questions often require lengthy and detailed explanation.
However, such sector-wide ambiguity is not necessarily the case in other markets, where product saturation and market absorption are reaching levels that suggest that future market share growth may well be negative without drastic changes to product or distribution strategies.
The US is a market that we typically try to benchmark ourselves against. However, it is also this market that is showing signs of stagnation when looking at some of the most well-known and well-branded products of our time.
Never have there been two more symbolic images of modern-day consumerism than the Starbucks disposable coffee cup and the two white in-ear buds of Apple's iPod. However, despite their marketing drives and ability to infiltrate our lives so easily, they now find themselves battling against a wave of products and companies all desperate to get a slice of the pie.
Recent announcements from Starbucks have stated that the brand is soon to start rolling out a $1 coffee as well as offering free re-fills; these new strategies are off the back of the share prices having nearly halved in value over the past 12 months. Such changes have been brought around because of the aggressive roll-out and pricing strategies of Starbucks' rivals and increased global competition.
Consequently, this new price point from Starbucks undercuts all of the current competition's prices.
Likewise, shares in the iPod manufacturer have recently taken a turn for the worse as traders are increasingly worried about Apple's ability to continue to shift increasing numbers of units per year; this strategy is off the back of flat year on year sales.
Apple's answer to this is much like that of Starbucks, i.e. product diversification. Consequently, they view the iPod not simply as a music player, but much more so as a multimedia device. As a result, the iPod is now as much about video, photos and lifestyle as it is about music, resulting in a broader addressable market and a more diverse product range.
Lessons
There are key lessons to be learnt here, especially for emerging markets, such as those in the Middle East. In the main, what these two examples show is that, although the road to maturity can be both challenging and quick (Apple released its first generation iPod only in 2001), the underlying problem is that without constant re-invention and product diversification, the outlook can quickly become stale.
This message can be easily transferred into the current strategy of mall development in this region, whereby a long-term strategy that allows for brand and product mix diversification will almost certainly witness increased market longevity than other less aware malls and brands.
- The writer is Head of GRMC Retail Services, Dubai.
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