Population change and purchasing power dynamics

Population profile change to affect purchasing power

Report highlights impact on Mideast economic growth

• By Deena Kamel Yousef, Staff Reporter
• Published: 00:00 January 25, 2011

• A report says the Middle East’s falling fertility rate and rapid ageing will affect the country’s economic output necessitating changes in labour rules. Picture for illustrative purposes only.
• Image Credit: Megan Hirons Mahon/Gulf News

Dubai: Changing demographics in the Middle East are expected to reduce the public's purchasing power and increase an ageing population's dependency on the working class in the next decade, according to a recent report by a top fin-ancial audit and consulting firm.

A "dramatically" decreasing fertility rate and quickly improving life expectancy in the region will impact its growth rate, says the report titled Consumer 2020: Reading the Signs by Deloitte Touche Tohmatsu.

"The shrinking of a population in the Middle East consequently results in a similar diminishing of the labour force and national consumption power," said Nasser Sagga, Audit Partner at Deloitte. "As a result the growth potential of the country's economic output becomes weakened."

In the UAE, the fertility rate has dropped from an average of seven children per woman in the 1950s to less than two in 2010, the report showed.

The country's old age dependency ratio — the number of people over the age of 64 dependent on working people — is expected to reach almost 20 per cent by 2050, up from one per cent in 2000, the report predicted.

Long-term issue

"Conceptually, growth is a function of a growth in inputs such as labour and productivity. An older population profile suggests slower growth and, therefore, slower economic growth," said Dr Giyas Gokkent, Chief Economist with the National Bank of Abu Dhabi.

But given the GCC countries' relatively young population, oil-based economies and investment in infrastructure, this is a "long-term issue" rather than an immediate one, he added.

The UAE and the Gulf countries are not affected by these changing demographics in the same way as other countries because of the nature of their labour force, analysts say.

"Demographic dynamics at play in the Middle East and specifically in the Gulf are different from a mere observation of the local fertility rate and life expectancy as it is done in most countries," said Philippe Dauba-Pantanacce, senior economist at Standard Chartered. In countries where migrant workers represent up to 85 per cent of the population, the economic and population growth are not related to the traditional analysis of the local demographic pyramid, he said.

The UAE has been able to use the elastic supply of labour available in neighbouring countries in its drive for economic diversification and growth, Gokkent added.

"Dependency on expat labour is a phenomenon that is already an issue for the UAE, but this is also a strength because it provides flexibility and an edge in terms of competitiveness. I do not see an impact beyond current trends," he said.

In future, the government may have to "ease" labour laws to accommodate a greater number of expatriates into the labour market to make up for dependency, said Samer Renno of Echo Trends, the consumer research arm of Renno Communications Group.

Restrictive rules

Restrictive labour rules are now the biggest obstacle facing the business community in the UAE, according to a recent poll by management consultancy Oliver Wyman and market research firm Zogby International. They were a problem for 43 per cent of senior executives in the UAE, according to the poll of C-level executives in the UAE and Saudi Arabia.

Customer is King/Queen

Shopper's personality: What's your style?

Dubai has eight shopping styles that sum up residents' consumer habits, reveals university research

• By Michelle Sutton, Staff Reporter
• Published: 00:00 January 20, 2011
• Reader comments (0)

Dubai: The perfectionist shopper rules the retail runways in Dubai, university research on resident shopping personalities revealed.

Preliminary findings from the American University of Dubai have been revealed to XPRESS as the Dubai Shopping Festival starts on Thursday. The two-year study revealed that the ‘Perfectionist Shopper' is king in stores, over-taking the ‘Status Shopper', which dominated the market before the financial crisis knocked them from their perch.

The research stated that Dubai has eight shopping styles that sum up residents' consumer habits.

Preliminary findings

Tarek Mady, Head of Marketing Department, American University of Dubai, said preliminary findings showed that residents had become shop-savvy and wanted more "bang for buck". The shopping styles revealed are as follows:

The Perfectionist Shopper: A consumer who spends much time comparing products to get the best deal and quality - the most common shopper in Dubai.

The Status Shopper: A consumer who is interested in the latest trends and is compelled to buy high-end products like bags, cologne, phones, etc. This shopper formed the main chunk of the market during pre-recession, but is now a smaller group.

Price Conscious Shopper: An increasing group of shoppers who pays more attention to prices and value, or on whether they need an item or not. These consumers rarely admit to this shopping style, but sub-consciously use it.

Brand Conscious: A consumer who likes to choose an item based on brands.

Novelty or Fashion Conscious Shopper: Purely influenced by fashion rather than price or need.

Recreational Shopping: Shopping is a routine activity for these consumers — something they do for recreation rather than for need.

Impulse or Careless Buyers: Shoppers who buy on spur of the moment, with little or no browsing to compare options.

Confused or Overwhelmed Shopper: More likely a male than a female consumer who shies away from shopping because he is overwhelmed by the number of choices.

Habitual or Brand Shopper: A consumer who buys brands out of loyalty and familiarity.

The research conducted in 2008 and 2010 will be published later this year and includes a survey of 300 shoppers at Dubai malls.

Mady said residents today have become more sophisticated consumers than they were before the recession. Shoppers have adopted more price-conscious habits as the market evolved. He described retailers' marketing as "pretty bad" and non-existent for some. Companies operating in the city need to improve marketing strategies to tempt consumers into spending, he said.

They could no longer rely on Dubai's avid consumerism, living the mall lifestyle, which began shrinking last year due to the financial crisis, he said.

Samer Renno, Chief Executive of Renno Communications Group, said a greater focus was needed on customer relations. He said stores needed to offer improved products and services to tempt consumers to part with their money as shoppers held the power in the retail market, which witnessed the main change since the financial crisis. Shoppers also had greater negotiating skills so service was as important as price, he added.

Customer Service Needs Image Management in the Arab World...

I usually get a disapproval look from my wife when I demand at a restaurant or a clothing shop to be given the attention I deserve as a customer. I constantly remind her that as a paying customer, I deserve to be served in the utmost professional manner, much like the service I provide my clients at my PR agency. For over 11 years, I managed to serve my clients in the manner that supersedes their expectations, hence succeeded due to that policy in creating a good reputation across the region for such rarely matched service. 

So if I apply it to my clients, why wouldn't the regular B2C businesses do the same? A question that I am sure a lot of companies across the region - and worldwide as well - have attempted to answer, which is why the post of Customer Relationship Manager was created. But, is that enough? I believe more needs to be done, especially with businesses that cater to fast turnover in customers - retail shops, restaurants, etc. Such businesses should focus on applying a personalized program to ensure their regular customers are retained and their new customers become regular.

It might be my US education and upbringing but I find myself whenever I enter a retail shop or a restaurant to make sure I ask for the name of my waiter/waitress or clerk. I address them by their names and I make sure there is plenty of friendly and courteous communications with this person; however, this attitude/behavior should be reciprocal. I rarely find a waiter/waitress or a shop clerk ask for my name, which would fly with me better instead of calling me Sir!! This example is only tip or beginning of any customer/business relationship.

Much like the Image Management service that I have introduced years ago in my Agency, which mainly targets key decision makers in the public and private sectors, I am confident that a similar service needs to be applied with entry level (front line) staff, who are in direct contact with the customer.

It is surely frustrating to be served by a non-courteous clerk, especially if you are paying for the service/product, whichever it is. How can the business owner justify the loss of a customer - any customer? Once a customer is lost, his/her return to shop again at the same outlet becomes an uphill battle.

So what is the solution? Adopting Customer Retention, along with Image Management programs for the staff and management in order to ensure the business is based on a long term strategy of maintaining the largest number of satisfied customers, who make up the backbone of any business.

To be continued...

SMR