UAE consumers are looking for security and continuity
By Georges Berzgal, VP & Managing Director, Global Ecommerce – EMEA, Pitney Bowes
The Middle East is regarded as one of the most exciting regions in the world for retail opportunities. With a traditionally dynamic, young and wealthy population, some of the highest internet penetration levels at 90% and ongoing connectivity via smartphones, we would expect the same, if not similar support, for ecommerce.
According to estimates however, ecommerce equated to just 1.5% of the overall retail industry spend in the UAE during 2016. This low penetration for ecommerce proves it has a long way to go before it becomes a true contender in the battle with traditional bricks and mortar stores. However, its relatively immature ecommerce market represents a fantastic opportunity for growth.
Ecommerce has been held back in part in the UAE by the enduring popularity of malls as both shopping and social destinations, making old shopping habits hard to shake. Shoppers around the region questioned by survey group Effective Measure found that the inability to touch and see a product before purchasing it was the biggest factor putting people off buying goods online.
Another contributing factor is that, unlike their peers in Europe and the US, many customers in the UAE are reluctant to purchase goods and services online using a credit or debit card. It has been recorded that only 20% of online shoppers used their credit cards to pay, while a huge 70% paid for purchases with cash on delivery. There are real security fears when it comes to consumers making payments online.
However, 2017 saw an exciting venture being made, which could set the ecommerce ball rolling in the UAE wider region. In March of last year, commerce giant Amazon acquired Souq.com, the region's largest ecommerce venture, for $580 million. Amazon is one of the most popular ecommerce sites around the globe, so it set to only grow and settle very comfortably into the Middle East. Its fame will also help dispel fears about payments online as its success will speak volumes.
So, while UAE consumers have concerns about buying from local retailer online, they do not seem to have the same fears when it comes to international ecommerce offerings. One source has suggested that more than 60% of UAE consumers shop online internationally – with the UK ranking second as most preferred country to buy goods from. It would also appear that UAE citizens have a number of reasons for looking to foreign retailers. 76% believe foreign sites have better prices, 65% say they get access to items they cannot buy at home and 50% say they shop on foreign sites because the shipping is so affordable.
With this trust in foreign brands and the arrival of Amazon, we believe ecommerce will drive a new wave of development and innovation in logistics as well. There are plans for new distribution facilities to be developed around major transportation nodes, such as the Shaikh Maktoum International Airport (Dubai South), which is where IKEA’s new warehouse has been delivered. The majority of the population also live in urban areas meaning that the transport routes and logistics are already well developed.
The ecommerce market may still be in the development stages, as consumers in the region have generally been slower to adopt online shopping than those elsewhere in the world. There is no denying that in-store shopping is still currently preferred, but there is opportunity for change, presenting an exciting prospect for international ecommerce professionals.
Understanding a nation’s specific nuances and behaviours is a must for success. To thrive, retailers must put in place processes that answer consumers fears about security. Although UAE citizens have already proved they enjoy shopping from abroad, further reassurance is needed. PwC’s Total Retail survey found that the online shopping experience would be improved if retailers integrated their online and instore offerings more effectively. In fact, 34% would have a better instore shopping experience if they could access real-time personalised offers on their mobiles or could see screens instore showing a wider range of products. Retailers are already doing this in Britain, so we believe the UAE would welcome the sophistication of British retailer with open arms, and that this is an opportunity in the making.