What the companies you buy from can do to help you deal with inflation in the Middle East

Learning from the pandemic, retailers can find ways to optimise their purchasing and pass the savings on to their customers

Inflation is at 19 per cent in Egypt this year. AP
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The most sinister impact of inflation is that it hurts consumers’ purchasing power and, subsequently, their quality of life. With many essential goods now reaching unprecedented prices, families are often forced to make difficult choices about how and where they spend their money.

Of course, if the consumer can't afford to buy as many goods and services as previously, spending habits will change, and perhaps non-essential spending will grind to a halt in some markets. While macro-level hardships due to conflicts, geopolitics and climate change, to name a few, may continue for the foreseeable future, there are critical steps available for retailers to introduce some stability and affordability for their customers.

Knowing how to properly manage inflation is vital in maintaining healthy and sustainable economies, and the private sector can play a really significant role. At Majid Al Futtaim, we currently see inflation running at an average of 8.7 per cent across the markets in which we operate here in the region. Country-specific inflation rates vary considerably; for example, 6.3 per cent in the UAE, 7.4 per cent in Saudi, and 19 per cent in Egypt.

Dealing with this situation from a business perspective requires an appreciation of nuance and market-specific insights. To that end, we encourage embedding a culture of resilience and sustainability into operations – evidenced best through developing an expansive stakeholder ecosystem. An example of this in action is assortment optimisation. To eliminate duplicate products that satisfy the same shopper needs, retailers can work with supplier partners to buy larger quantities of a smaller selection to improve efficiencies and lower the cost of goods. Expanding private-label ranges offering locally produced and high-quality items at affordable prices can further support these efforts. However, as I will discuss here, while the day-to-day tactics required to address inflation may change, the overarching strategy remains steadfast – and the data proves the effectiveness of this approach.

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Knowing how to properly manage inflation is vital in maintaining healthy and sustainable economies

The reliance on a robust, trustworthy business ecosystem can help mitigate inflationary impacts by effectively developing and leveraging a network of suppliers, distributors, investors, tenants and government departments. Notably, the unpredictable supply chain issues started by the pandemic reminded us that companies must all work closely with our ecosystems to ensure continued existence and prosperity. Failure to adhere to this stakeholder model will be felt acutely across the business and ultimately by the consumer.

In practical terms, strengthening these ecosystem relationships builds networks that develop credible, united voices on issues, products and services that are important to organisations, particularly in times of crisis. This is a massive undertaking when considering that retailers are also assuring ample supply of their products all year round. The effectiveness of a group interacting with each other is greater than when acting in isolation from one another. This allows companies to adapt and pivot swiftly when market forces change. The outcome is clear, and results in better service for customers.

Together with the broader retail ecosystem, orchestrating numerous consumer-focused initiatives has become feasible. Each further embeds resilience into operations, along with the support of ecosystem participants, to ensure customers have access to all the goods they require at a price point and quality that remains attainable. To illustrate, one of our company's primary concerns is service level agreements (SLA) for consumer goods. These are the agreements that dictate the minimum level of goods ordered that should be received. Year-to-date, in August 2022, the overall SLA figure stands at 44% across the 16 markets we serve. This challenge began pre-pandemic, was amplified during the pandemic, and continues today. We responded by strengthening our local supply chain relationships, supporting local producers, deepening our network of suppliers, engaging with governments, and more. We also order in greater volume and from multiple different sources to ensure a stable supply and meet customer demand. Through such an ecosystem response, retailers can begin to address the impacts of inflation and limit the impact on consumers, ensuring their quality of life is maintained.

Retailers need to start seeing themselves as the drivers of stability and continuity in modern society. Whether we experience an immediate, delayed, or prolonged impact, macro-level issues like inflation are often unavoidable disruptions that truly affect all aspects of societies and economies. Therefore, a passive approach to such harmful issues cannot serve the people justly. Prudent business management strategies based on resilience and sustainability that incorporate stakeholders throughout the business ecosystem are the most comprehensive and reliable approach to ensure the desired outcome for consumers. I hope that by sharing this insight, we can all make new connections that will lead us all through the bad times and into the good, together.

Published: December 06, 2022, 9:00 AM