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Iran Digital Retailing
Sci & Tech

Iran Digital Retailing

In the post-sanctions economy in the Islamic Republic, digital retailers are hoping for a resurgence in sales.
Companies like LG and Samsung have upped their game during 2015, grabbing key storefronts across the country to increase their total market share.
However, newer entrants and those companies slowly moving back in, namely Chinese and European, hope to shake up the current status quo.
In a new report by Business Monitor International, the report notes that Persian Gulf retailers were reported last year to be preparing to launch operations ahead of the expected deal around Iran's nuclear program.
Dubai retailers have been well served by the dependence of Iranian consumers demanding US vendor products, or those using US components, and as spending patterns change, they are looking to capture new business within Iran, according to the research firm.

  Consumer Electronics
Retailer Emax is reported to be planning to enter the market, while supermarket brand Al Maya Group is also reportedly looking at options for expanding into Iran.
The report notes the historical bazaar structure in Iran acts as an impediment to the growth of larger retailers in that market. In comparison, the UAE and even smaller Persian Gulf countries have far more organized retail outlets such as hypermarkets and specialist electronics stores have come to account for around 40-60% of sales.
However, Iran is only starting to develop this structure with the introduction of western-style malls across the country.
In Tehran, a number of smaller areas of the bazaar specialize in products such as AFV systems (Jomhouri) and small domestic appliances (Shariati). Large hypermarkets and retail chains do not really exist in Iran in the same way as the rest of the Middle East region.
This fragmented channel means higher prices for consumers, while eating into margins for retailers and distributors. Certainly, the situation presents a challenge to tier-one distributors and vendors, which would usually aim to build share in a country by working with the "power retailers" and hypermarkets.
Instead, vendors have to identify key players in each city and then create marketing and sales programs. The lack of an organized retail channel also means lower service levels, which undermines the ability of official goods to compete with pirate products.
There is hope, however, of more structure in the retail channel. Three larger government-owned retailers, namely Refah, Etka and Shahrvand, have expanded their consumer electronics ranges and offerings.
Some consumer electronics vendors, such as JVC, have outlined plans to launch their own networks of retail outlets in Iran in conjunction with local distribution partners.

  Local Production
Iran responded to the tightening sanctions by trying to restrict imports of non-essential goods and boost local production.
In the 1970s, Iran had an emerging electronics industry, which was considered by some to be on a par with that of South Korea, the report notes, but goes on to say that since the 1980s, it has put its emphasis elsewhere.
In the past few years, as the domestic consumer electronics market has grown, a number of industrial complexes have been retooled for the domestic market. Typical products include TV sets as well as computer products and peripherals. These include Pars Electric Manufacturing, one of Iran's oldest electronics manufacturing establishment, which has fallen out of favor by most in the country.
Local consumers prefer to buy foreign branded electronics like TVs that offer better quality products and servicing contracts.
Another is Iran Electronics Industries, one of the leading electronic firms. The firm makes a range of consumer electronics products and for a while assembled mobile handsets under license from the Belgian company Sagem.
However, the top domestic consumer electronics manufacturer is Maadiran, a distributor of multinational brands such as LG, which also assembles products such as handsets and LCD monitors for those brands, in addition to having its own brand in several product areas.

  Upping Local Assimilation
Two major factors have encouraged the development of consumer electronics production in Iran over the past few years.
First, the government has taken steps to encourage domestic manufacture of products for which there is sizable domestic demand, notably mobile handsets.
Second, Asian manufacturers in particular have made moves to establish CKD assembly operations in Iran. The decisive factors for these companies have been the growing local market, reduced competition from US rivals and a desire to avoid heavy import tariffs. The report noted that a number of multinationals have set up production facilities in special economic zones, including Daewoo, Samsung and Panasonic.
In January 2015, it was reported that Iran produced 1.5 million mobile phones a year, through the award of licenses to 11 firms by the government. However, it was also reported that only two of these firms were active. These brands sold Android handsets to the lower end of the market.

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