Challenge
In the lead up to the introduction of VAT in UAE in January 2018, the client—a leading mobile handset manufacturer—approached IDC to understand and quantify the exact degree of change in the market's potential for the following two years.
The client therefore required an in-depth assessment of the likely impact that the introduction of VAT would have on the mobile handset market in the UAE. Specifically, the client sought these viewpoints to reset their annual targets and rework the price bands of their various models.
Approach & Methodology
IDC provided qualitative insights into the industry as well as an overview of the macroeconomic situation, ensuring that the report guided the client's handset team on recalibrating their targets and strategies for the post-VAT environment.
IDC's methodology for this project incorporated the following components:
- Channel Interviews: IDC scheduled meetings with key channel players and VAT specialists to understand the implementation structure of the new tax, its impact on business, and the approaches being taken by various stakeholders.
- In-Country Insights: IDC utilized its in-country analyst team and relationships to gather inputs and present a detailed view of the market.
- Analysis of Macro/Micro Factors: The IDC team extensively analyzed various macro and micro factors, drawing on the best possible knowledge base to provide direction and supporting arguments.
Key Findings
IDC's in-depth analysis of the situation revealed the following market dynamics:
- Excess Inventory: Many of the distributors for the market's key vendors were sitting on large inventories.
- Lack of Major Sell-Out Bump in Q4 2017: The channel was not expecting to see any large increase in sell-out ahead of VAT implementation in January 2018.
- Sell-In Targets: Distributors were struggling with vendors to reduce their targets for Q4 2017.
- Leaner Operation Models: Most channel players did not want to hold on to extra inventory and were actively pursuing leaner operation models.
- No VAT Incentive: There was no incentive to stock up in Q4 2017 prior to the implementation of VAT (i.e., no VAT exception for stock purchased before January 1, 2018)
- Low Market Sentiments: Channel players and vendors were not too optimistic about 2018 sell-out post VAT due to shrinking consumer disposable income and lengthening refresh cycles.