ALKHOBAR, 14 February 2006 — These days, with the Kingdom experiencing extremely high levels of liquidity, there is a huge demand for the latest in everything, including information and communications technologies (ICT). This demand, coupled with the recent signing of the accession to the World Trade Organization (WTO), has touched off a feeding frenzy. Companies that never set foot in the Kingdom before have sent their sales reps to investigate the market here. Riyadh’s hotels are packed with IT executives hoping to land a huge win.
Most of these companies want to sell to the enterprises and ministries. In this market there are an extremely small number of those organizations. Enterprise customers can be counted on one hand, perhaps both hands if the definition is stretched. Doing business with the ministries is an involved process, even for firms with decades of Saudi presence, and at the end there’s no profit guaranteed. Both enterprises and ministries want the best of everything at the lowest prices and they demand service. Thick contracts ensure that the terms are met. It is difficult for a vendor without local market experience to make a success of such large deals. The only exception may be for a vendor with a very unique and desirable offering.
There are other markets in Saudi Arabia and making a profit from those groups can be much easier. Small businesses and consumers have often been served poorly in the past. They are delighted with vendors who provide even adequate service. The majority of small businesses buy the same ICT goods, software and services as consumers.
A visit to the retail ICT showrooms in the Kingdom gives a quick insight to several market problems. At first glance it seems that the showrooms are packed with goods. Take a closer look though and notice that most of the products are far from cutting edge. Real variety is lacking. Everyone is selling the same old things. Mark this down in part to a limited tradition of entrepreneurship which results in risk aversion.
This situation is complicated as well, by the fact that most international vendors openly admit to marketing a limited product range in Saudi Arabia. They often cite import regulations and service costs as the reasons behind this policy. The vice president of a hardware company told me that it is simply too expensive to translate the manuals for all their products into Arabic. So this vendor only translates the manuals for the items that they believe will be the biggest sellers in the Kingdom. As for the rest of their product line, it will never come into the Kingdom — except perhaps in the gray market.
Disconcertingly, Saudi consumers tend to be presented with older stock masquerading as the latest and greatest. Let’s consider the small example of a tech toy. Visiting London during the winter holiday, I noticed that Wow Wee’s Robosapien II robot was on sale. Returning to the Kingdom I chanced upon a toy store touting the arrival of the “new” Robosapien — Version 1 of course. In London, to a fascinated crowd, sales staff were enthusiastically demonstrating the robot’s abilities — and making sales. In the shop in Alkhobar, the Robosapiens were piled up at the back of the store, shoppers passing them by without a second glance. No one even knew what they were.
Take another instance. Sometimes I track the arrival of certain items in this market, especially inexpensive accessories which should have broad market appeal. While visiting Hong Kong about six years ago, I found small mobile phone charms that flashed to indicate an incoming call. I bought two dozen for SR2.5 per charm and brought them home as gifts. Everyone who saw mine was desperate to have one. This was an indication that the item would be a hit. A year and two months later the first of these charms were on sale at the Saudi mobile phone shops for SR10 each. Why the long wait and much higher price? No one put forward a plausible excuse.
The lack of market awareness can be compounded by shoddy market research. When I ask major ICT vendors about market research they advise me that they know the Saudi market well. They state that they frequently talk with representatives from their distributors and channel partners. I am always surprised that such discussions are considered all-encompassing market research. Many of the salespeople in the Kingdom are not Saudis, yet they are deciding what this market needs and wants. Personally, I believe it is difficult to predict the demands of the youth market — which makes up half of the Kingdom’s population. I happen to live with a 22-year-old Saudi and I have found that I should not assume anything when it comes to his wants and desires. It is also a challenge for expatriate salesmen to understand what Saudi woman want, because their exchange of ideas with Saudi women is usually restricted. True market research with surveys, mystery shopping and focus groups would serve the market much better than the current policy of mind reading. However, few ICT companies take the time or make the investment to get to know this market well.
Finally, we come to the issue of after-sales service. It may be difficult to predict which new ICT products will sell well in the Kingdom, but what is certain is that Saudis have become intolerant of inadequate service. Local consumers now avoid buying some brands because of the poor after-sales service provided. People have admitted to me that they were interested in purchasing a specific notebook, printer or camera but they bought a different brand instead. Why? Service issues. Software is also plagued with nasty service problems. When I hear people in other geographies complaining about long waits on software service hotlines, I have no sympathy. The majority of software vendors selling consumer products provide no service specific to Saudi Arabia or the Middle East. The Kingdom’s consumers and small businesses are forced to turn to international online resources to try to solve software service issues — with limited success.
How do Saudis cope up with the local ICT market mess? A glance inside the suitcases of vacationers and businessmen returning to the Kingdom tells the tale. Online purchasing is also catching on fast. Saudis are familiar with the global marketplace, perhaps too familiar. While the WTO agreement has opened the door to the Saudi market, companies motivated by greed won’t find a permanent niche here. The real opportunities now are for those ICT vendors choosing to make available desirable products and services at a fair price, with good after-sales service. That sounds like advice from an entry-level business course but for the consumers in this market, no concept could be more exciting.
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