A version of this article was originally published in Gulf Business.

“Customer first” has always been a mantra in the retail industry. But it has taken on new meaning in an increasingly competitive and connected environment. Retailers must embrace a laser-like focus on understanding, evaluating, and responding to ever-changing consumer expectations. Those that put customers at the core are more likely to thrive and become market leaders in the years ahead.

Here are seven strategies, based on data from our Customer Perception Map (CPM) survey, that businesses wanting to gain a competitive advantage need to address now, or risk being left behind.

1. Embrace generative AI to enhance customer experience

Generative artificial intelligence (AI) has the potential to reshape the consumer experience by helping companies better tailor products and offerings. By analyzing large amounts of data in real-time with AI, retailers can tailor consumer offerings based on their shopping habits and interests. 

The potential impact on customer experience is huge: Imagine a store where 40% to 60% of human tasks can be automated, allowing resources to be reallocated to drive cost and productivity improvements while fuelling innovation and growth. By streamlining repetitive tasks, employees can instead focus on higher-value activities such as customer interaction, sales opportunities, and personalized offers.

Customers in the GCC are excited about the prospects of generative AI with more than 50% believing that it can help boost their online and in-store experience.

But companies have to manage inherent risks that come with AI, including confidentiality, security issues, and bias. There can also be a disconnect within companies about the pace of generative AI adoption, as illustrated by the recent Oliver Wyman Forum survey which revealed that while 69% of executives surveyed said they see broad benefits of adopting generative AI, 70% of non-executives said their company was not ready to put the technology in place.

As generative AI reshapes customer experience, companies that act decisively will gain a vital head start on the competition. However, it is also essential to have a solid, well-communicated strategy on AI, and upskill workforce accordingly.

2. Boost engagement via personalized customer interaction

More than 60% of customers are interested in tailored promotions and recommendations, according to our research. In the GCC, where many companies are a part of large conglomerates, it is essential for retailers to integrate and personalize offers across multiple physical and digital assets.

Consumers increasingly expect businesses to go beyond generic interactions and truly understand their unique preferences and needs. According to our research, personalized experiences can deliver a 5%-7% revenue boost for retailers.

Harnessing generative AI, retailers can deliver more personalized experiences, which can boost brand loyalty and drive revenue growth.

3. Master your digital strategy with social-, content-, and e-commerce

An integrated digital strategy is key for any company to become customer-centric and drive growth. Companies must leverage technology and digital platforms to engage with consumers, as more than 50% of consumers said that they are interested in using technology to improve their experiences and offerings. 

This requires being more strategic about the so-called 3Comms: e-commerce, social commerce, and content commerce. This is especially true in the GCC where e-commerce lags more developed markets by 15%-30%.

Social commerce will be the key that unlocks and accelerates extra growth in e-commerce in the region, especially with the rise of nano-influencers and social connectors as an effective sales force. Today, roughly 60% of customers in the GCC make use of online retail channels for convenience and speed, and social commerce in the GCC is expected to see a growth of 28% CAGR from 2024 to 2029.  In addition, more than 50% of purchases are influenced by social channels.

Against this backdrop, it is critical to drive effective and integrated digital strategies with social media campaigns, influencer partnerships, digital marketing and search engine optimization.

4. Pioneer value plays to meet customer expectations

GCC consumers are tech-savvy and exposed to greater choice than ever. Still, businesses must deliver perceived value beyond the lowest prices, which can be in the form of superior customer service, frictionless experiences, and better-quality products.

Misconceptions about value in the GCC market prevail, which means there is a real opportunity for businesses. Take grocery retail, for example. While discount chains account for roughly 23% of the market in Europe, there are no large regional discount chains in the GCC comparable with those seen in Europe, based on our analysis of data from Euromonitor. Yet eight out of 10 customers in the GCC say they would be interested in a discount retailer, according to the CPM survey.

Companies that are first to market with a value-centered format at scale will exert significant price pressure on competitors and create a distinct value proposition.

5. Put customers above suppliers to boost sales

Putting consumers first when it comes to dealing with suppliers can boost like-for-like sales by 5%-10%. That is the mantra facing consumer-centric businesses, especially when it comes to retail in the GCC.

Rising costs have encouraged some retailers to squeeze the back margin — leveraging discounts from their suppliers so they can make greater profit on products sold or pass on the discount to customers.

Suppliers also use back margin incentives to gain prime positions in stores, both physical and digital, which means consumers are encouraged to purchase items based on back margin rather than merit.

Businesses need to make the right decisions from the perspective of customers to develop a differentiated proposition and continue to attract new customers.

6. Expand your ecosystem to stay relevant with customers

The increasingly blurred boundaries between industries and channels are pushing retailers to rethink their position to stay relevant. Consumer preferences are evolving with more than 60% of customers in the GCC interested in adjacent services from their current retailers.

The Oliver Wyman Forum survey also found that 62% of Gen Zers are willing to use alternatives to their preferred brand. With brand loyalties changing, it is imperative for retailers to shift to a customer-centric mindset and explore how they can capture share of wallet beyond their core proposition.

Retailers can develop and tap their ecosystem of partners and suppliers to maximize their ability to develop new products, services, and experiences.

Building an ecosystem necessitates having a clear vision, an open mindset for collaboration, and a balanced agenda aligned with the company's risk tolerance and firepower.

Pursuing an expansion strategy into adjacent areas anchored in customer preferences such as innovations in new business models, or developing digital marketplaces, can enable companies to create enormous competitive advantage with minimal risk. However, when doing this, retailers should start with the customer in mind and work backwards to ensure their investments have the best chance of success.

When developing products and services in conjunction with partners, business leaders must prioritize solving customer needs, presenting a win-win for both parties, and, of course, for the customer.

7. Understand why consolidation is inevitable in the retail industry

For a consumer-centric business, consolidation can deliver greater market share and a bigger customer base, while also minimizing costs and maximizing synergies.

Consolidation is almost certainly coming to the GCC retail grocery market, where the top two players command a market share of just 25%-30% versus 53%-65% in more developed markets.

The days of smaller businesses being able to trade punches with the heavyweights are numbered and consolidation is inevitable, with opportunities for bigger, more successful retailers to acquire their smaller counterparts.

But making acquisitions also has challenges, especially around the integration of technology platforms, brands, and work cultures. Retailers should carefully consider their integration plans and keep their customer needs in mind before taking the leap into mergers and acquisitions.

Read the original piece here.