by Mohammed Hajjar
Retail has emerged as one of the fastest growing sectors in the Middle East, driven by rising affluence, changing lifestyles, and a young and increasing population. However, online retail is still a relatively subdued concept in the region.
In Saudi Arabia, online sales accounted for a mere 1% of total retail sales in 2011
Nevertheless, with demand in retail expected to remain strong in the coming decades, the sector appears the most lucrative of all e-commerce opportunities in the region. This is especially true for the Gulf Cooperation Council (GCC) region given its high internet penetration and mobile density.
Retail sales in the GCC and online (2011)
Existing trends seem to favor online retail in the Middle East, especially with the entry of a number of pure-play online retailers such as jadopado.com, groupon.ae, yallabanana.com, souq.com and markavip.com. However, pure play is not the only retail e-commerce avenue; existing ‘brick-and-mortar’ stores can also create parallel online portals, thereby grabbing a bigger share of an increasing retail pie.
Currently, electronics and fashion products dominate the online retail space in the Middle East. However, greater acceptance of online shopping and developments in e-commerce infrastructure are likely to encourage other segments (such as groceries and medicines) to go online as well. Already segments like hospitality and travel have a very strong online presence and hence there are significant opportunities to replicate success in online retail and the wider e-commerce sector.
Hospitality and travel already have a strong online presence which indicates the acceptance of customers to shop online
Percetage of people shopping online: MasterCard 2011-2012 Survey
Early entrepreneurs would definitely enjoy the first-mover advantage. However, regional firms would require the right strategies to succeed over the longer term, especially if greater liberalization of the sector attracts leading global players. Yet, the most important strategy for online retailers is to:
1. Focus on a specific niche and adapt to the its needs. Don’t try to sell for everyone; it won’t work as different customer segments have different preferences. For example, UAE-based shopping platforms such as jadopado.com, aido.com and namshi.com distinguish themselves by delivering the product the same day as opposed to the global average of three to seven days. Similarly, Mumzworld.com distinguishes in terms of product offering; it caters solely to mothers and children. In addition, the company offers an advanced comparison feature which displays key product information such as price, weight and color of up to 12 different products.
2. Develop intuitive and easy to use websites that cater to the taste and behavior of the niche market.
3. Advertise and keep track of the latest trends in popular online social media forums (like Facebook and Twitter).
4. Engage your target customers and develop a sense of one-one-one dialogue. You will be surprised how much insight they will give you about the business and their preference. This is far better than hiring a marketing consultant to develop a marketing strategy. Your clients will tell you what they are looking for, so listen to them.
Yet with all the marketing strategies and tactics, retailers must make it easy on the customer to shop and pay. In fact, given the inability to create impressive walk-through experiences, customer friendly options assume even greater importance in online retail. A user friendly website, varied and lucrative discounts, cash on delivery, and easy return policy are some factors that could enhance the shopping experience. Interestingly, a few online stores have already leveraged this opportunity. Online store markavip.com offers better bargains with an easy 21-day return policy and a cash-on-delivery system. In fact, a better payments platform is the key to not just online retail, but also e-commerce in the region in general.
Online retailers can tie up with global names such as PayPal to reassure buyers about the security of transactions.
Lastly, but importantly, the entire e-commerce experience should be supported by excellent logistics and back-end operations. In fact, customer service, including online and telephonic guidance on product policy, usage and repairs, is one of the keys to a successful retail arrangement. Without an elaborate and efficient back-end system in place, online retail is not likely to make much headway.
Online retail has just started picking up in the Middle East providing a lifetime opportunity for companies to attract new customers from neighboring countries and even international ones. Such opportunity was only a dream, to some, few years ago. Yet by focusing on the total shopping experience, purchasing value and convenience; the dream can be realized.
If you are planning to launch your online business or you are interested in learning more about this sector, please contact us and send your enquiries.