The strong growth in The Middle East compared to the rest of the world is nothing new and even though political instability in the region has been slowing growth recently, e-commerce purchases still rose by 45% last year, compared to growth of just 20% and 35% in Europe and Asia respectively. Strong consumer purchasing power, coupled with the world’s highest internet and smart-phone penetration contribute to such high growth.
There is a lot of potential in 2016 and the upcoming years for ecommerce companies in The Middle East. Let's look at what are the biggest opportunities for retailers operating there are, and hear some expert opinions about what could be the biggest growth drivers in the market.
Opportunity: Highest smart-phone penetration
The UAE sits atop the region for smartphone user penetration - at around 64% of mobile phone users according to the Emarketer. For those looking to connect with online shoppers across the Arab World, brands need to be aware of mobile e-commerce and focus on conversions on smaller screens, particularly from repeating customers.
Opportunity: Internet and Payment Card Penetration
As Internet accessibility continues to increase throughout the region and mobile commerce is naturally growing so fast, more people will trust online payment systems. Cultural differences and a tradition of doing business face-to-face is still deeply rooted in the region, and is a pattern that is hard to break. At the moment, a huge percent of digital buyers are still choosing cash on delivery models, which shows that retailers have to focus on building trust with the online shoppers because it still prevents people from making a purchase.
As attitudes and trends eventually shift, retailers need to shape the innovation in industry: implementing new ways of payment, offering pre-paid methods and emphasizing on less cash-focused approach could be the first way of addressing these issues. What´s more, in order to offer an immediate response and help for customers, more and more retailers are implementing live chat support.
Opportunity: Globalization in the Middle East
The Middle East, like the rest of the world, is expanding socially, economically and culturally in its particular ways. A sure sign of the immense potential of the ecommerce market in a region is international companies pushing deeper with targeted offers, localization and improved shipping methods. As the rapidly growing market has been noticed by top retailers - companies like Burberry, Dolce & Gabana launched collections for Middle East consumers, and started experimenting with luxurious goods. The region is marked by several characteristics that set it apart from other global markets. For example, high-end fashion and accessories represent 35–40% of the market, beauty - 25%, hard luxury representing - 30–35% and ‘art de la table’ accounting for 5%.
The State of Personalization
When it comes to measuring e-commerce personalization at scale, even the fastest growing markets like Middle east have many challenges to overcome. There is still a lack of professionally executed online shopping sites that digital buyers trust and help them convert to loyal customers. For retailers that don't want to let a year slip without reaching sales objectives, it´s time to get focused on data-based, personalized customer experience.
So how can e-commerce merchants successfully overcome these challenges?
In general there is considerable room for growth for retail e-commerce sales in Middle East. Here´s what e-commerce experts all around Middle East think about the most important priorities for every retailer.
Philip Smith, Ecommerce Division Manager at L'Occitane en Provence
Get endorsements for your brand
“The biggest opportunity to give your brand an edge is endorsement! There are still many trust issues when it comes to online shopping in the Middle East. If a brand can establish advocates and encourage people to endorse their products through reviews, social media, influencers and word of mouth, consumers are much more comfortable with engaging and purchasing from your brand. This is however easier said than done! The most powerful way to find brand advocates and gain endorsement is through providing an amazing service. From the moment the consumer engages with your brand, right through to after care. Just providing the right product at the right price is not enough anymore!”
Prabhal Mohandas, Ecommerce Consultant for the Largest Fashion and Sports Goods Distributor in the region
Improve your mobile shopping
“The greatest opportunity is the very high smart phone penetration, excellent connectivity, very high credit / debit card penetration and the very fact that more people live in high rise buildings the geographic area that need to be covered for delivery is very less compared to India specifically. Unlike in most countries where you get charged for every 500gm weight of goods to be shipped, in UAE its flat rate up to 5kg which is simply fantastic and this can help in rolling out plans to ensure high volume purchases.”
Faheem Ahmad, Digital Marketing / Ecommerce Specialist, Styro
Create a great delivery system
“Quickly delivering a product as described in your website & Incorporating genuine product reviewing system in your e-commerce echo system will be a big advantage as not many businesses are currently doing that. E-commerce industry in the middle east is still premature given that geographic location of UAE. Amazon and Ebay are still very far from this area. I don't think most of the Amazon, Ebay or ETSY sellers deliver their products to UAE. There are big gaps and the opportunity for local e-commerce businesses is big, to grab the market before giants come in from the rest of the world."
Mike Bermingham, Head of Merchandising - Ecommerce at Landmark Group
Personalization is the key
“With so much competition in the Middle East retailers must find a way to stand out and create a unique selling proposition. The key is to embrace e-commerce as more than just another channel of distribution but rather as a platform that can enhance the overall shopping experience for the brand. A 2015 IDC Study shows that omni channel shoppers have a 30% higher lifetime value than single channel shoppers.
The new generation of shoppers wants more than a one-size-fits-all shopping experience. Personalization is key to satisfying this customer and the data that can be captured through online and offline shopping habits can enable this. Creating an experience that connects these two channels can create a unique & powerful personalized experience. Think of browsing items online that have been recommended based on your previous online and offline shopping behavior, selecting items, and then going to the store that has them ready for you to try on (with some additional suggestions to complete your wardrobe).
Retailers should not be concerned whether the sale happens online or offline as long as it happens with them. The online shopping experience has the potential to influence more sales offline than it generates online giving the retailer a much bigger share of wallet.”
Gaurav Agarwal, Digital Marketing Head, EsuBuy.com
"E-commerce is getting flooded in UAE as it seems to be a very promising market but in reality, there is a cut-throat competition. With a population of nearly 10 million it is a multi-ethnicity market so Emotional marketing based on cultural segmentation hardly yields results & creating a predictable strategy is difficult. The mass market is not so good in English (so the lack of uniform language also creates an issue). Only solution boil downs to direct marketing (build to show build to grow) and Facebook is the savior. So the best possible low-cost marketing is “Display via Facebook”(all above is applicable if your e-commerce business is B2C.) Now in this market, if you want a competitive edge, you should have a niche because most of the e-commerce websites in UAE are selling everything under the cloud and here's where the problem comes in, they are not able to differentiate their brand perceived value and audience are confused. So without an identified and well-researched niche it’s hard to sustain for a longer term."
Nadeem Khanzadah, Head - OmniChannel Retail, at Jumbo Electronics Co Ltd
Create a great omnichannel experience
"As an Omnichannel Retailer, I feel there has never been a better time than today to refresh the way the consumer sees and experience a brand. Today, with the internet and mobile penetration we are more clear on the impact of e-commerce and the role of technology in retailing than yesterday. With so many e-commerce businesses opening physical stores, and many traditional retailers bolstering in-store technology, the mass migration of shoppers from offline to online has not been as straightforward as has been predicted. The consumer today is Omni-present and engages and interacts with brands across mediums, devices and channels and platforms. Hence it important to offer an Omni-channel consumer experience and assist the consumer shopping across all touch points.
To ensure a sustainable bottom line we still treat e-commerce as an extension of our brick and mortar stores as we believe the future of retail sits at the intersection of e-commerce and brick and mortar. The two experiences should be seamlessly integrated and complementary. The ultimate goal for each shopping experience is the same: to make the process of buying as easy and fun as possible. Traditional marketers who have now grown to be part ‘Data Scientists’ part ‘Story Tellers’, have access to enormous amount of rich information that can create and assist sales and business strategies. Omnichannel Marketers are creating an edge by building brands and creating lifetime value of customers.”
Andre Van Niekerk, Digital Marketing & E-commerce Manager, Nespresso
Maximize profits on cross-sell and up-sell
“Consumers who want to spend their hard earned cash in your online store want to know what else is available or similar, without having to look for it. Brands should take this into consideration when planning their activities. Last but not least, e-Commerce needs to be simple without complications. Users care less about what you sell to them, but more about their experience with you as a brand.“