Inflation, Climate Change Drive Consumer Choices

(MENAFN- Khaleej Times) Inflation stands as the primary concern for consumers in the Middle East, with 56 per cent perceiving it as the greatest threat impacting their country and 65 per cent planning to save or invest in the coming year, according to PwC.

Consumers are also becoming more climate conscious, with 70 per cent looking to own hybrid or electric vehicles, PwC's Voice of the Consumer 2024 report said.

According to the International Monetary Fund, inflation is approaching historical averages in many Mena economies - with about one-third now close or even below average - and monetary tightening cycles appear to have ended. After peaking in 2023, average inflation is forecast to ease to 15.4 per cent in 2024 and 12.4 per cent in 2025.

In the UAE, inflation rate decreased to 3.32 per cent in July from 3.85 per cent in June of 2024. The country's inflation rate averaged 1.72 per cent from 1990 until 2024, reaching an all-time high of 12.30 per cent in December of 2008 and a record low of -2.71 per cent in May of 2020.

Environmental factors remain a powerful motivator of purchasing decisions, with 85 per cent of regional consumers worried about climate change, and 83 per cent – compared to 86 per cent globally – noticing climate-related disruptions in their day-to-day lives,” said the report.

“While global economic headwinds are influencing consumer behaviour in the Middle East, creating heightened price sensitivity and a greater emphasis on value, it is a positive sign that this is not translating into a 'race to the bottom.' In fact, the unwavering focus on sustainability presents a significant opportunity for differentiation and premiumisation,” said Norma Taki, PwC's Middle East consumer markets leader.

She noted that the region's savvy businesses are investing in sustainable practices to attract and retain this value-conscious, yet environmentally aware consumer base.“Businesses cognisant of such macroeconomic nuances influencing consumer behaviours will solidify their position in the Middle East,” she added

The PwC survey outlines four key themes being witnessed by consumers in the Middle East.

First, business excellence is seen to determine consumer trust, where customer data protection, fair worker treatment, and transparency around sustainable practices are crucial to earn the trust of 95 per cent regional consumers, compared to 70 per cent worldwide.

According to the report, 53 per cent of regional consumers (compared to 46 per cent globally) are buying more sustainable products. Climate-awareness is influencing consumer behaviours towards mobility, with 82 per cent of regional buyers willing to use public transportation following infrastructure improvements, and 70 per cent willing to own hybrid or electric vehicles in the next three years.

The report finds that AI is gaining a foothold in the shopping journey. There is an evident complex relationship with emerging technologies, particularly artificial intelligence (AI). While more than half of the region's consumers would trust AI to support low-risk activities such as acquiring product information or recommendations, confidence in its ability is lower for high-risk tasks such as stock recommendations, financial transaction management, or making medical diagnoses.

Analysts said a surge in e-commerce is taking place throughout the Middle East with smartphones becoming more widely used as internet becomes more widely available. Customers are turning to e-commerce websites for their requirements. A secure online shopping experience is also seen to be reshaping broader consumer behaviours. While physical stores remain the cornerstone of the shopping journey in the Middle East, with 45 per cent of buyers preferring to make or complete purchases in-store, online shopping via mobile phones are more prevalent regionally, with 44 per cent shopping online frequently (versus 34 per cent globally).

Backed by a youthful and tech-savvy populace, the Middle East's e-commerce business is projected to reach $28.5 billion by 2022, according to a report by Bain & Company. This trend offers businesses enormous potential to engage clients beyond traditional brick-and-mortar stores and tap into the expanding digital economy.

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