The Signs Are in the City – The Internet of Things is Shaping the Future of Retail in Key Markets Across the Middle East and Africa
Aug 19, 2015
It is still early days for the Internet of Things (IoT), both here in the Middle East and Africa (MEA) and globally. But, according to IDC, signs that it will soon be mainstream are already appearing.
For retail, this is literally true. All those digital signs popping up in shopping centers and airports in the MEA region are the most visible element of a market that is taking off. According to a recent IDC study looking at four key markets (Saudi Arabia, South Africa, Turkey, and the UAE), spending on IoT solutions among retailers will grow by an average of around 19% annually for the foreseeable future, representing nearly $1.6 billion in spending from 2014 through 2018. While this growth is a bit slower than for IoT across all industries in MEA, it is in line with global trends, where IoT spending in retail and overall is soaring by an average of around 19% per year.
Despite the visibility of the signs, the great majority of IoT projects will relate to in-store promotions and personalized promotions as well as ad-hoc improvements to supply chains, in-store inventory systems, and transportation or delivery systems. This stems from a need for basic infrastructure and process optimization. Retailers are also seeking online and mobile sales channels and customer relationship initiatives, all steps on the path towards the creation of true omni-channel shopping.
For the three Middle East markets involved in the study (Saudi Arabia, Turkey, and the UAE), IoT goes hand in hand with high-end retail. While digital signage tends to be employed more equitably in terms of location, and IT more generally is working its way into lower-end shops (even if just as a PC or a mobile phone), the bulk of IoT solutions are being installed in large, midrange, and upscale shopping areas, particularly in the Gulf Cooperation Council (GCC). Indeed, IoT products can undoubtedly help convey a 'luxury feel', a crucial element of the region's high-end value proposition.
For all four markets, international brands will be the driving force. While high-end brands are already spreading throughout shopping centers and airports in the region, the markets remain underserved. The great majority of retail sales still happen in small, independent shops (in Sub-Saharan Africa, this proportion can be up to 90%). But where regional and global chains are present, competition is fierce, particularly in larger cities. Anything that enhances the customer experience – such as IoT – will be essential for long-term loyalty.
Despite IoT's uptake in retail both regionally and globally, the term is not widely used in the region's retail sector. While forward-thinking retailers in MEA readily embrace cutting-edge technology, they do so with an eye towards streamlining operations, reducing costs, and enhancing the customer experience. A point-of-sale system integrated with a customer-relationship-management system that connects web and mobile access points may be based on cloud technology or it may be located on client servers. For the retailer running it, the task it performs comes first.
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