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GCC
RE
THINKING RETAIL
In a region where physical retail stores have dominated the scene for decades, e-retail is slowly beginning to reserve a seat at the table By Shereen D’Souza, Doha
V
ibrant shopping malls, traditional souqs, international stores, a variety of boutiques, bargain markets and mega shopping festivals nicely sum up the GCC’s physical retail market. Constantly changing consumer demands and access to technology have led to a revolution in the retail industry with e-commerce and e-retail. Over the past few years, the MENA region has witnessed quite the storm with regard to internet penetration and usage. The penetration still differs widely, with over 86 percent in Qatar to as low as under 15 percent in countries like Algeria, Yemen and Iraq. Although, the GCC easily has the highest internet penetration with over 50 percent as compared to a mere 30 percent for the entire MENA region. Recent figures from Oorjit reveal that the current volume of B2C e-commerce sales in the MENA region is USD 9 bn and is expected to reach USD 15 bn by 2015. Online shopping in this region is ever-evolving. “Simply put, e-commerce is driven by convenience. The factors that have facilitated its growth however can be listed as rise in the number of devices connected to the internet, better and faster internet connectivity, wider availability and usage of credit cards and payment channels that are vital to online trade, and of course the resurgence in the economy,” says Pradeesh, general manager at ESET Middle East.
“The usage of e-commerce for purchasing goods and services is at the start of great expansion in the Middle East region as companies are now building more trustworthy and secure e-commerce websites” JUNE 2014
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ONLINE SHOPPERS BY AGE & GENDER ONLINE SHOPPERS BY AGE & GENDER
52-53% 52-53%
68% of the 68% of the are online shoppers male remaining onlineand shoppers are male andfemales remaining 32% 32% females
of shoppers who are of shoppers areonline older than 26who shop older than 26 shop online
53% 53%
68% 68%
52% 52%
53% of them are above 53% of them are above 35 years of age 35 years of age
52% of them are between 52% of -them aregroup between the 26 35 age the 26 - 35 age group
41% 41%
31% 31%
41% of them are between the 41% of them are between the 16 - 25 age group 16 - 25 age group Source: Oorjit
31% of them are less 31% thanof 16them yearsare of less age than 16 years of age
Male Male
32% 32%
Female Female
e-Commerce sales in the country (UAE) reached USD2.8 billion while the total retail sales were USD116 bn
Source: Oorjit
Most Popular online Shopping Categories Most Popular online Shopping Categories
can benefit from all the new attractions and benefits of online Online Games Computer Software Electronics Clothes Entertainment shopping, blended with Online Games Computer Software Electronics Clothes Entertainment the traditional benefits and trust aspects of store based shopping. 14% 13% 13% 11% 14% 13% 13% 11% For example, a customer can visit a local physical Accessories Books and Magazines beauty and Health Home appliances Accessories Books and Magazines beauty and Health Home appliances Source: Oorjit store/showroom, view, Source: Oorjit touch and feel products, Stores versus online then using their smartphone instantly view price Brick and mortar locations have a competitive comparisons to see where they can purchase advantage when it comes to same-day service, the same product at the lowest cost,” explains however, e-commerce ventures are leaving no John Andrews, CEO of IORMA (International stone unturned in ensuring that customers are Omni Retailing Members Association). not deterred by logistical hurdles. The major Customers can also resort to regular online drawback of e-commerce is of course, the lack shopping and have the merchandise delivered of personal attention and the tangibility of the to the nearest retail outlet for collection, in entire experience. Retailers that have increased case the customer is not available all day at the cross-channel measures and taken the plunge given address for delivery. Andrews adds: “The into e-commerce seem to be better placed as consumer can order products online but return compared to those who haven’t. Major chains them (for reasons such as ‘does not fit’, ‘colour around the world have shut shop due to their not right’ and so on) to the retailer’s local store inability to proactively react to the moves without the inconvenience of having to return e-commerce giants are making. items through a post office or arranging a collecSpeaking about the GCC in general, Pradeesh tion at home.” comments: “Online sales will at some point “Providing customers with multi-channel sales take a piece of the pie of the total retail sales as model accommodates the needs of persons that we have seen this happen in various countries are more familiar with purchasing online rather where e-commerce is at a more advanced than going to a store. Moreover the usage of phase.” Retail stores can breathe easy, however, e-commerce for purchasing goods and services as brick-and-mortar is not dead. In fact, it plays is at the start of great expansion in the Middle a leading role in building customer loyalty and East region as companies are now building more supporting financial performance, according to trustworthy and secure e-commerce websites,” a report from A.T. Kearney. says Pradeesh. 41% 41%
31% 31%
Omni-channel commerce
28% 28%
17% 17%
In response to the e-commerce boom, driven by technology enabled consumer demand, several retail outlets unable to compete with the low cost and more eco-friendly way of shopping, moved and adopted the omni-channel approach. The customer can shop via his preferable method at any given time. “The customer
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a large gap between retail and e-retail figures. “Even though the sector is booming, it significantly lags behind traditional retail in terms of total revenues. Consider the UAE for example – IMRG, in its MENA B2C e-Commerce Overview 2012, found that e-Commerce sales in the country reached USD2.8 billion while the total retail sales were USD116bn. Clearly there is a large difference here,” says Pradeesh.
15% 15%
Slow and steady
It is no surprise that the region is still trying to cope up with international markets. Understandable of course, given that this is a fairly new and upcoming concept. The retail sector in general in the GCC is one of the better performing sectors, almost as good as finance or even real estate and construction. There however is
Internet penetration is high in the region. A lot of factors can be attributed to the sector lagging behind and Pradeesh seems to believe that trust is one of them. He also adds: “Any eCommerce provider that ultimately delivers a product would agree that logistics and shipping are the biggest challenges they face. This is evident as most buyers would opt for cash-on-delivery given the option.” In July last year, Qatar National Bank (QNB) partnered with PayPal to give QNB retail customers the chance to shop safely and conveniently along with several premium services from PayPal – a step forward in instilling trust in the minds of customers. “All they need to do is either link their debit or credit card once, and they can shop freely from any online outlet. Offering PayPal as a payment option shows consumers that this is a credible website, and adds a layer of trust knowing that their rights are protected and that they don’t have to share sensitive financial details,” says Laurent Wakim, regional manager, PayPal MENA in a media interview. The MENA region (as other parts of the world) is going through the stages of coming from a cash-oriented society underway to a digital payment society. Recent surveys conducted in the region indicated that one of the main reasons that e-commerce is not growing at a faster pace is ‘fraud’ related to card payments. E-retail in this region faced with many hurdles is still developing. Although these are common problems faced by different countries in the world, lack of trust, a cash-oriented society, the need for safe and secure payment options, high costs of internet usage and logistical issues might be reasons for not being able to deliver at international standards. With a range of new online businesses opening and even governments taking steps to enter this segment, the sector definitely has a bright future, and is moving ahead slow and steady. What better way to win the race.