Euler Hermes: Digital risk rising in GCC retail sector


DUBAI, UAE: Euler Hermes (Middle East), the world’s leading provider of trade credit insurance solutions, said in a recently launched study on the global retail sector that amid the ascent of disruptive digital technologies such as mobile e-commerce, the non-payment risk is on the rise in most countries of the Gulf Co-operation council (GCC).

In the last two years, Euler Hermes downgraded the United Arab Emirates (UAE), Saudi Arabia and Kuwait in relation to their retail sector risk to “medium risk” from “low risk”.

“Medium risk” means there are signs of weaknesses and a possibility of slowdown in these three GCC economies.

Commenting on the digital transformation in the retail industry in the region, Jules Kappeler, CEO Euler Hermes Middle East, said: “Retail must undergo a painful-yet-necessary consolidation phase. Technology has transformed the ‘Walmart’ experience to an ‘Amazon’ one: faster, closer and in some cases easier.”

The impact of the digital shift is already visible to the Euler Hermes’s 1,500 risk experts who track 40 million companies worldwide. Globally, cumulated revenues of top 10 major retailers’ insolvencies in 2016 amounted to USD5.2bn, according to Euler Hermes. “Even worse, the number of insolvent retailers with a turnover of USD10mn or more soared plus 66% year on year in 2016,” explained Jules. In a recently conducted digital survey conducted by Euler Hermes for the first time, respondents identified Big Data as an important challenge.

Euler Hermes, an Allianz Company, has identified three game-changers for retailers, said Jules: “Omnichanneling (a cross-channel approach to sales), the cost of online presence (soft and hard infrastructure, double marketing budget) and mobility (where to shop, how to pay).” 

Kappeler added: “Interesting to note two of the top three challenges are about growing the top line and only online presence is about the costs.”

Retailers have two choices, according to Euler Hermes: “Adapt or close”.

Kappeler: “The crucial question is whether retailers – be they traditional, online or both – can determine how to upgrade their business models in the most efficient way before it is too late, bridging brick and mortar and online sales, old tricks and new needs. That’s the new Digital Equation.” 

About Euler Hermes:

Euler Hermes is the global leader in trade credit insurance and a recognized specialist in the areas of bonding, guarantees and collections. With more than 100 years of experience, the company offers business-to-business (B2B) clients financial services to support cash and trade receivables management. Its proprietary intelligence network tracks and analyzes daily changes in corporate solvency among small, medium and multinational companies active in markets representing 92% of global GDP. Headquartered in Paris, the company is present in over 50 countries with 5,800+ employees. Euler Hermes is a subsidiary of Allianz, listed on Euronext Paris (ELE.PA) and rated AA- by Standard & Poor’s and Dagong Europe. The company posted a consolidated turnover of €2.6 billion in 2016 and insured global business transactions for €883 billion in exposure at the end of 2016.

In the GCC, Euler Hermes provides professional credit insurance services to: protect companies from unanticipated financial risks, accelerate growth, and help businesses expand while keeping peace of mind. Euler Hermes has been present in the Middle East since 2006. We serve our customers through a network of offices & local partnerships in the GCC countries.