If wisdom comes from experience, then it is little wonder that Dikran Tchablakian can offer deep insight into the trends impacting consumer tech retail in the Middle East.
Tchablakian was awarded the Retail Executive of the Decade honour in 2016 by DISTREE Middle East, in recognition of his achievements and position within the retail channel. With vast experience across the region, spanning physical retail and e-tail with CompuMe, Tecbuy and now also letstango.com, Tchablakian’s views on the structural dynamics of the Middle East retail channel are more important than ever as we enter a period of accelerated change.
Tchablakian’s association with the Middle East technology market stretches back to the 1980s when he was involved in the development and marketing of the famous Sakhr computers in the region. Sakhr Computers produced an Arabic-language version of MSX computers in the 1980s and the company was also the first to convert the BASIC computer language to Arabic.
Retail Evolution
With many physical retailers grappling with how best to adapt to omnichannel models, maintaining a sense of perspective regarding the development of business models remains vital. The trend towards online purchasing – especially among younger generations – has put the spotlight on what exactly constitutes a sustainable consumer tech retail business in the region.
“I look at the changes, but there aren’t any surprises – it is the normal transformation of an industry,” said Tchablakian. “It was back in 1998 when we opened the first CompuMe store and we were ahead of the market. The souk was the dominant retail format and people said, ‘What are you doing?’ We were even ahead of the malls.”
“What we’ve seen is natural progress. We then saw the malls being built and hypermarkets and major specialist stores flourishing and many new retailers emerged. A few years ago, we saw that we were in a position where there were also big players like Jumbo, Emax, Sharaf DG, E-City and others. They had money to spend and could open new stores with no limits,” he added.
When the CompuMe store in Mall of the Emirates in Dubai was bought back by the mall owners, Tchablakian saw the opportunity to launch a different approach to retail. The company formed a highly successful relationship with Virgin Megastores to sell IT products within the retailer’s outlets, using a concession model run under the Tecbuy brand.
Tchablakian explained: “We understood what Virgin wanted and what expertise we needed to provide. We work with the consumer, we understand where they are going and where the trends are taking us. The service we provide to Virgin’s customers has always been a strong backbone for the relationship.”
“By working with Virgin, it meant we weren’t going out and spending money opening big stores. The relationship has worked perfectly and we are seeing tremendous sales growth year-on-year,” he added.
Focus on Margins
In consumer tech retail, margin remains king. Chasing top line growth achieves very little, unless it is profitable business. The focus on margin is a philosophy shared by both Virgin and Tecbuy.
Tchablakian commented: “For us the sales figure is important, but ensuring profitable sales is most important. It is the margin – the bottom line – that matters and this is what we learnt from Virgin, because they are one of the most profitable retailers in their sector. We realised from them that we had to sell electronics as part of a full lifestyle concept, and by doing this, it helped us grow our margins.”
“We left the volume business behind and we focused on value, because that’s our strength,” he added. “We have never feared the competition, because whatever other retailers are doing does not have a direct impact on our business. We have chosen to focus on a completely different consumer channel.”
Retail success is intrinsically linked to positioning, according to Tchablakian. When you have created your unique retail position, you must work hard to maintain it and ensure that your proposition remains unique in the market. There is no point becoming a ‘me too’ retailer that replicates what other retailers are doing, if there are no benefits attached to this behaviour.
“Today, staff may come in and say, ‘we must do this because retailer X and Y are doing it and are selling more’,” explained Tchablakian. “I say no, if we don’t make margin, we don’t care. The iPhone is the most sellable product, but it won’t make us a viable margin. Apple have their own stores, they have ownership and they want to control it. We say OK, let’s move on and find a product or a brand that we can have ownership of.”
Customer Connection
There are still multiple specialist retailers and hypermarkets selling consumer tech products in the Middle East. Finding a unique and differentiated retail experience can be a difficult proposition, with vendor policies driving similarities between retail store formats.
“The supplier engages with the electronics retailer, they say this is my display and this is how it should look, and they pay their money to get the in-store space,” said Tchablakian. “Then you copy and paste the format across all retailers. It’s the same and there is no involvement or connection with the customer.”
“The customer connection is vital with the younger generation and they are the spenders,” he added. “Today, most of the time it is the kids that influence the tech that the parents buy. They are the influencers in the family and those younger generations are shopping online or in Virgin for tech. They are not visiting hypermarkets and specialist chains unless they are really price conscious.”
The younger generation will lead to e-commerce channels becoming ever more important for consumer tech retail in the Middle East. Tchablakian’s business operation also includes e-tailer Letstango.com, allowing the company to develop its online presence. What is clear is that new channels and changing market conditions are forcing all physical retailers to review their current set-up and the costs of maintaining retail space in the region.
Tchablakian stated: “There has been some softening of business levels in the region and that will continue but will hopefully stabilise. My guess is it will drop a bit more but will then level off. Retailers must adapt to this new reality. The buying habits are going to change.”
“The younger generation is growing fast. I have kids and I see what is happening. They don’t like to shop and go to a store. They are on their smartphone and they order things. I know because my kids use my credit card,” he added.
Retail Transformation
Tchablakian expects consolidation of large format consumer tech stores because of the high costs involved in running these outlets. A similar transformation has already occurred in major European markets such as the UK and France, reducing the physical tech retailer space to just a few chains and a few specialist retailers.
Tchablakian explained: “I think we will need specialist retailers in the Middle East for IoT products. People need to be educated on how these products operate and how solutions work. You don’t need a huge retail space to do this, but you do need a physical presence.”
“Some of the big consumer tech retailers came in and built up their operation when tech sales were soaring. Now they need to have a serious rethink and may see that they can make more money by closing some outlets,” he continued.
Consumers remain fickle and while they may be emotionally attached to a specific product brand, they are less likely to have the same level of attachment to a specific retailer. It is possible for a consumer to visit an expensive specialist store, receive high-touch expert advice and product demonstrations, and then leave to purchase the product for a lower price at a hypermarket.
“It could be the right time for two or three companies to come together and form a consortium,” commented Tchablakian.
Business Lessons
“The biggest lesson I learnt is that you should never be affectionate about your business,” said Tchablakian. “I learned that the hard way with CompuMe. Business is business and you have to generate profit and income – you can’t continue losing money.”
“The same thing is happening now with online businesses with people spending money to create the brand. They are not looking at profitability, they are looking at the value of the business if someone comes and buys it,” he added.
Letstango.com is trying a different approach, working hard to build a business that generates a sustainable level of profitability, backed up by high quality customer support and services.
Alex Tchablakian, Dikran’s son, is operations manager at letstango.com. The future growth and development of the online business is a critical part of the overall long-term business plan.
Letstango.com is making a multimillion dollar investment to revamp its website, shifting to a new platform and a new design that will make browsing easier for online shoppers. Letstango.com is a member of the Dubai Chamber of Commerce and Industry (DCCI) and is now in its fourth year of operation.
Letstango.com has ambitious expansion plans including adding online marketplace functionality to the site. The company also plans to expand its geographic remits and has set its sights on Saudi Arabia as the next country it will cover.
Tchablakian’s team has built strong foundations for letstango.com. With high levels of interest in Middle East e-commerce operations, letstango.com is an attractive investment proposition in the region. Letstango.com is open to working with external investors to fund its future growth plans.
Vendor Strategy
While retailers have learnt lessons as the Middle East market matures, the same is also true for vendors, who may finally now look beyond volume when dealing with retail partners.
“The vendors evolved,” stated Tchablakian. “It was all about quantity, quantity, quantity – who wins the market share game. Now they are more focused. They come and talk to us and want to do certain things. It has been a learning curve because some vendors lost money when they were only focused on market share.”
“Vendors are listening to us because we are between them and the consumer. They have to understand the consumer, because it is the consumer who will ultimately determine how well their products sell,” he added.
Vendors now understand that balancing volume with consumer perceptions, while also maintaining brand equity is the tightrope they need to walk.
Tchablakian’s vision for the future of tech retail seems clearer than ever. From the expansion of Tecbuy’s relationship with Virgin to cover new countries, through to the development and growth of Letstango.com, his energy and commitment to the region remains as strong as ever.
