Large companies dominating the retail and hospitality sectors in the Middle East are driving ambitious agendas around new customer ecosystems and platform businesses. We recently had the opportunity to discuss these trends with Joe Abi Akl, our newly appointed head of the Retail and Consumer Goods Practice in the India, Middle East, and Africa (IMEA) region.
Joe has more than 17 years of experience and recently held key positions at Majid Al Futtaim, a leading consumer and lifestyle conglomerate across the Middle East, North Africa, and Pakistan, where he was instrumental in transforming the business and creating its integrated customer proposition. Joe has also served on the boards of leading startups and on several councils at the World Economic Forum, further enriching his diverse experience in the retail sector. A significant part of his contribution is the establishment of Xsight Future Solutions, a platform anchored in the most comprehensive customer data platform across the region, which has been instrumental in driving transformation and fostering accelerated growth in the region’s retail sector.
Sirko Siemsen, global practice leader for Oliver Wyman’s Retail and Consumer Goods Practice, spoke to Joe about industry trends, operator challenges, and “build the future” strategies.
Sirko: What excites you about the retail and consumer sector in the IMEA region?
Joe: Everyone knows about the region’s strong retail and consumer sector growth in terms of transactions and value. But what I have been focused on are the emerging customer ecosystems (Exhibit 1) and platforms in this region and the blurring industry lines. They are big in ambition, differentiated in terms of customer experience, and effective in driving new income streams — even by global standards. And this is just the beginning: I believe we will see more acceleration of these trends and eventually advanced convergence of retail with entertainment, hospitality, food, banking/payment, communication/media, transportation and travel into a holistic, seamless customer experience across all channels.
Why am I confident? Because the region provides a unique combination of demand and supply characteristics. Demand is rapidly growing, driven by a young, affluent population and increasing modernization as well as by more visitors coming to the region. In addition, consumers in the region are used to digital engagement and personalized services. Even after the end of the COVID-19 pandemic, the region is still seeing steady growth in the adoption of digital and omni channels. E-commerce sales are expected to grow at a compound annual growth rate of more than 20% from the current level of US $35 billion. Furthermore, regional customers expect personalized products and services by more than 30% than their global peers and they believe these will significantly influence their in-store and digital experiences.
The supply side deserves special attention, too. We see an ever-growing supply of real retail destinations that builds on the demand growth and delivers genuinely different and experiential shopping experiences. Also, what makes the region different from others is the number of companies active in multiple customer-facing verticals, including different combinations of retail, entertainment, and hospitality as well as real estate development. They are naturally keen to leverage and connect these touchpoints into a holistic customer experience.
The result? This ecosystem approach will have the potential of enabling a revenue pool of $1 trillion across the Middle East North Africa (MENA) region. As Jack Ma said, “I always believe we shouldn’t build an empire. Instead, we should build an ecosystem. Every empire will be toppled someday, but an ecosystem is sustainable.”
Sirko: What challenges do operators, especially incumbent conglomerates, face in the retail and consumer sector?
Joe: Despite the Middle East’s overall opportunity and strategic promise, companies active in the region face significant challenges. The lack of economic integration across the region makes operations complex and difficult to navigate. Retail and consumer companies working in the MENA-region, with its more than 500 million consumers, face varying market dynamics and regulations. Therefore, the Middle East’s retail industry remains somewhat fragmented, and many small and midsize operators struggle to tap into economies of scale.
Larger conglomerates, on the other hand, face siloed customer, data, and tech infrastructures. On top of that, given its growth and inherent promise, the region attracts more competition — from both inside the region and from global leaders, including lots of direct-to-consumer businesses. In addition, many family-owned enterprises are also facing questions around governance, the viability of their operating models, and succession as they mature and grow. All these companies are battling for the same customer, talent, and profit pools.
Putting it all together: most operators in the region face three overall strategic needs: 1) Transform and protect the core to deliver on its full potential; 2) Build for the future through the design of winning ecosystems and by tapping into new income streams; and 3) Upgrade capabilities to deliver both.
Sirko: What is an effective approach for enhancing core operations, and developing necessary underlying capabilities?
Joe: Companies should aim for a strategy with three horizons (Exhibit 2). Horizon one is focused on accelerating the core, which is very much about better insights, decisions, and results in all key customer, commercial, and operational areas. Flawless execution and ruthless follow-up are a must to get the bottom-line improvements needed to fund investments into the future. Horizon two is about augmenting and complementing the core by corner stoning into adjacent verticals or partnering with third parties aiming for a broadening of customer touchpoints and relevance.
Very much linked to this is horizon three, which aims at establishing ventures on the foundation of that broadened customer appeal, the extended customer reach, the intensified customer engagement, and the underlying data and insights. Both horizons two and three need to happen in sync, with a strong focus on growth, business cases, the right balance of investing and generating funding, and traction measurement.
Given lead times and the speed at which demand, and supply are evolving, I’m afraid all three horizons need to be addressed now. This in turn requires a clear vision and roadmap, ruthless prioritization, and very tight resource and financial management.
Sirko: In a “build the future” strategy, what are the key success factors to keep in mind?
Joe: First and foremost, this kind of strategy requires commitment from leadership, beginning with a bold vision that extends beyond mere financial targets. Of course, the vision also needs to be relevant to external stakeholders. Developing a magnetic customer platform proposition also requires scaling an ecosystem that expands into new external footprints. In addition, success is predicated upon five further factors:
- Developing scalable and integrated digital and analytics capabilities to deliver a personalized customer experience. Personalization is the single most effective lever for scaling, starting with unifying and harmonizing data across all touchpoints and building digital twins of customers, which can be used from process optimization and customer lifetime value maximization to developing common customer engagement platforms around loyalty, payment, and customer value management.
- Monetizing existing capabilities and expanding into new adjacent verticals. Companies should pursue diversification opportunities that complement existing businesses. By adopting an asset-light approach, they can drive synergies, deepen customer relationships, and build higher-margin revenue streams across data, digital, and fintech solutions.
- Leveraging and enabling the ecosystem. Companies should embrace an open ecosystem mindset by establishing strategic partnerships with engaged customers at the core of the ecosystem. By leveraging external capabilities and actively collaborating with disruptive startups, companies can tap into a wider range of offerings and enhance convenience for their customers. This approach not only increases customer stickiness but also fosters stronger network effects by capturing a more comprehensive and diverse set of customer data. Ultimately, building ecosystem coalitions can attract a larger customer base and drive business growth.
- Employing an active portfolio approach. To achieve this requires dynamic capital allocation to balance between a short-term return on investment and experimentation. Companies should remain committed to their long-term visions but embrace adaptability in divesting, investing, and allocating resources to established businesses versus new ventures, while considering the differences in risk, timeframe, success rate, and value creation potential.
- Championing talent as a competitive advantage. Companies should adopt a dual approach to human capital: Build the right positioning as an employer of choice to attract talent across the globe, and nurture a learning culture by reskilling, upskilling, and developing future leaders, delivered through internal academies and partnerships with academic institutions. Having said that, innovation can’t be confined to a select group. Instead, it needs to be a collective effort leveraging the entire organization and its partners.
While the adoption of a winning ecosystem mindset is often associated solely with tech giants, I firmly believe that applying this approach and its fundamental principles can prove even more impactful for well-established companies operating in the retail and consumer sectors.