Iran Market Overview–Digital Arena

لاوان, 3 تیر 1394

Iran economic background

Iran has always been a country of highly importance due to its strategic location, historical background and natural resources. The country has managed to build a resume of influential role in the economy of the Middle East region and consequently the world. Despite the turbulence in the local politics and economy of the nation throughout the past three decades, Iran is yet the second largest economy in the Middle East and North Africa (MENA) with a GDP of nearly USD 406.3 billion, according to the World Bank.
With the population of 76.42 million, Iran ranks 19 in the world coming right after Turkey and 2nd in MENA. With the medial age at 27.8 years, it is quite noteworthy that almost one third of its population is young- ages between 14 to 50. This indeed makes Iran a large market in the eyes of any investor. However, the limitation on foreign investment as well as the ban on importation of a large range of products to the mainland has resulted in the economy to suffer to a great extent. So it is evidential for the residents at the age of high consumption to experience limitation on variety of products or more importantly, more global standard options for both products and services they are in search of.


A high potential market at transition phase

Iran is considered to be in a transitional stage politically and economically. It is gradually transforming from a centrally planned system to a more free market. Nonetheless, the embargoes on Iran for the past 3 years have slowed down this transition. Starting with some reformist plans of the new president of Iran in the house, the economy has been slowly rebounding. Therefore, the success in the recent nuclear talks to result in a form of reconciliation between Iran and the world has evenmore enlightened the future of Iran economy.
Despite a large demand for products and services by this large young population, there supply of such items is yet facing shortage. The lack of presence of global brand in Iran has made the environment a less competitive one for the local suppliers at this moment. However, this is changing toward a more open market status with the ease of international embargoes on Iran economy. Therefore, it is predicted that the emergence of multinational companies would further drive growth whilst changing the current business scheme highly dominated by traditional players within a bazaar system. On the other hand, that requires government policies to be modified in a way to be more supportive of foreign investments for businesses to boom.

On radar of any foreign investor

The latest data of The World Factbook in 2014 shows Purchasing Power Parity of Iran at nearly $1.3 trillion which makes it to the ranking of 3 among other MENA countries. This number is also much higher than the regional average suggesting a higher standard of living of average Iranian households compared to neighboring countries. Part of this is because of Iran being second largest owner of gas reserve and 4th largest owner of oil in the world. This essentially justifies the purchasing behavior of the Iranians having a more extravagant approachwith more money to dispose.

Is it also digitally booming?

In reality, this so-called “isolated society” is very much in touch with the world via travelling and even more importantly, internet. So basically the borders seem to be stricter from outside in, but the Iranian citizens by and large have kept close contact with all happenings in the world. The internet statics are proof of that as it shows 37.8% penetration rate of internet in Iran as of 2014. This number is significant considering limitations of high speed internet in the country as well as filtering issue imposed by the government. Among all users, youngsters account for nearly 60% of total users.The active presence of this crowd on online platforms and their constant demand for new ideas, content, information and products has been translated into an opportunity for the service providers to look for new ways to overcome current filtering issue as well as the slow speed of internet service. The rise of popularity of local social networks such as Aparat, Cloob, Lenzor, etc. is an indication that not always global media and content would be the only solution. Iran Alexa ranking of Aparat to be at 5 is a valid justification that by understanding the environment and its advantages and disadvantages while considering a broader look at the wants and needs of the users, service providers can successfully take the best out of the potential of Iran market.

In the case of e-commerce websites also the numbers are fascinating. The emergence of new e-commerce websites and expansion of the existing ones is an indication of this booming trend in Iran and this is not indeed missed out by any of foreign investors expecting to enter Iran market once burdens are down. Having Digikala.com on top 10 websites of Alexa ranking in Iran is a factor to consider along with its growth rate within approximately 10 years of its foundation. Another interesting element is that it holds the 6th spot on Iran Alexa ranking while its global equivalent e-commerce website, Amazon, also has occupied ranking 6 of the world. As mentioned before, the fact that nearly 60% of internet users are in search for products and services online, make these numbers even more worthy to consider. This has been a motivational factor for foreign investors within the past year to invest in large numbers in this sector. Bamilo.com is a great example of a new player of e-commerce in Iran which has managed to move its ranking from being the 100,000th website of the world to 2,500th spot in less than a year, according to Alexa. It is indeed expected for new players- local and global ones- to enter this yet high potential business sector in upcoming years especially with the possibility of having a more open market to allow foreign investments further.

Unique features of the society build solid ground for more opportunities

On the other hand, the fact that the native language of Iran is Farsi, which is not a broadly spoken language in the world, makes the market online and off-line unique to itself. According to the latest data on the language preference of internet users, nearly 70% of the content distributed and communicated on online platforms is in Farsi. This might seem a constraint to the new players, but we can also consider this as an opportunity to adapt and localize materials available in other languages for the use of Iranian society. This certainly requires a more in-depth gain of knowledge of this unique market in terms of its spoken language, cultural and behavioral factors prior to making a large investment to ensure high returns.

The listed data on the type of devices to be used by Iranians shows that PCs are still very popular. Butthe large growth rate of 61.5% in mobile data users within the past few years portrays a more modern use of devices gaining momentum. This has been a promising future for mobile manufacturers to ensure of a sustainable position in this growing market for even better days to come. There may have been very limited number of mobile brands in Iran a decade ago, but today the range is expanded in a way that even Chinese brands are dominating the market. The strong presence of brands such as Huawei, ZTE, ASUS, etc. in the market has made the competition tougher for the old players such as Samsung and LG. Not only the sales numbers and market shares, but also their strong advertising plans are proof of this change.

Cease the moment & be a first mover

Large population with relatively high PPP hand in hand makes Iran a very attractive spot for any business types to invest in. So it is considered to be a prosperous future for those knowing the market, its complications and the current players well to benefit from being “first movers” of this promising market. However, this requires learning about the sociocultural, political and economic elements of this society in order to successfully operate. In the case of digitally oriented businesses as it is topic of this analysis, it is even more crucial for businesses to not only consider the opportunities such as high PPP, high demand, shortage of supply, etc. but also consider the differences such as language barriers, internet limitations, embargoes, etc. in order to provide proper basket of products and services to the right market of target. And this is also significant to us as marketers to offer the right service along with the right content in the right language. Therefore, not only studying the market is crucial but also gaining first-hand experience of the current players is intertwined to help a business to succeed.

At Lavan Marketing & Advertising Agency, we assist national and international businesses within any industry to learn about the potentials of Iran market in depth. We take a 360-degree view of a business and combines creative thinking, researching, marketing strategy and targeted execution to deliver consolidated multi-marketing solutions which ultimately results in our client’s success. Also as a group historically involved in product marketing in the field of IT, we have a more comprehensive knowledge of digital environment of Iran to develop innovative yet simple e-marketing solutions. Please visit our website at www.lavan.co for more information about our expertise, projects, clients and team members.

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    1. The statistics, facts and numbers used here are extracted from reliable sources such as:

      The World Bank
      The World Factbook- CIA
      http://www.convoi.com
      MIS Iran
      Alexa

      And the rest of the material is basically our analysis of the scene of Iran market. So the factual parts are all from sources and the rest is our observation and analysis.

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