In a world where there are officially more mobile devices than people, mobile technologies are reshaping consumer behaviour with blazing speed.
With the growing number of consumers, across the globe, are looking to mobile phones for infinite reasons – doing online shopping, browsing, finding the nearest restaurant or just a random search – it has become imperative for brands to learn how they can capitalize on this blazing phenomenon.
However, in the Arabian Gulf, the story is telling a different version.
In recent years, GCC marketers have been pushing hard to replicate the similar mobile marketing success model in the region.
The market trends, however, present a dismal scenario ahead.
The reason: the declining number of mobile phones shipments in the region could hamper the ROIs from their mobile marketing efforts.
Following two-quarters of back-to-back growth, shipments of mobile phones to the GCC region declined significantly in the first quarter of the year, according to the latest figures released by IDC.
The decline stemmed from a 19.7% QoQ contraction in feature phone shipments, a reversal of the strong 23.0% year-on-year (YoY) shipment growth these devices saw in 2017.
Smartphone shipments were down 4.7% QoQ, with Q1 2018 representing the fourth consecutive quarter of decline.
Decline across the board
“Poor job security and the introduction of VAT suppressed market sentiment in the region’s two biggest markets, the UAE and Saudi Arabia, with the latter also feeling the effects of a new expat dependent tax that was introduced in 2017,” IDC said in the announcement.
Total mobile shipments to these two markets declined 14.7% and 5.4% QoQ, respectively, in Q1 2018, while shipments to Qatar fell 8.8% over the same period.
Looking at smartphones in isolation, shipments to Saudi Arabia fell for the fourth consecutive quarter in Q1 2018, contracting 7.5% QoQ.
“The size of the overall market in Saudi Arabia is expected to decline over the coming years as a direct result of the new expat dependent tax,” says Kafil Merchant, a research analyst at IDC.
“A significant portion of the local population is expected to leave the country due to the introduction of this levy, with the exodus expected to run into the millions. The full impact remains to be felt, however, as many expatriates are waiting for the school year to end before leaving.”
Smartphone shipments to the UAE and Qatar were also down in Q1 2018, falling 4.6% and 6.7%, respectively, on the previous quarter.
“The UAE market is experiencing a significant shift in consumer spending as evidenced by the first-ever cancellation of the spring edition of GITEX Shopper, the largest bi-annual consumer electronics event in the country,” says Nabila Popal, a senior research manager at IDC.
“The true impact of this shift can be seen in the independent retail stores of Deira, the traditional trading and commerce center of Dubai, where shops that were previously impossible to lease are now sitting vacant. Organized mall-based retail chains that focus exclusively on consumer electronics are also struggling. Businesses in Qatar, meanwhile, will continue to suffer from the prevailing political challenges and import embargos that have already impacted the country’s mobile phone market.”
The performance of the other GCC markets varied considerably in Q1 2018, with Kuwait seeing a 3.9% QoQ decline in smartphone shipments, while Bahrain and Oman bucked the regional trend to post respective growth rates of 3.4% and 6.0% for the quarter.
Looking ahead, IDC expects overall mobile phone shipments to the GCC to decline 6.3% YoY in 2018.
“Given the prevailing market challenges, it will take some time for the market to adjust and for consumer behavior to stabilize,” it notes.
Is it all over?
So, does it mean the passion for mobile marketing in the region is over?
The Middle East region has made significant strides in the digital marketing industry over the past two years, and brands have been upping their mobile advertising spending share.
“Despite the projections of lower mobile phone sales for 2018, mobile marketing is not expected to face a major hurdle as smartphone penetration is already high in the GCC region. The purchase of new mobile phones will more likely be an exercise that replaces the existing smartphones in the market, and hence, not expected to be a major threat for ROI on mobile marketing,” MR Raghu, MD Marmore Mena Intelligence, argues.
By Sunil Kumar Singh