Written by Malav Karia; MGB (Master of Global Business – Contemporary Marketing Management) student. SP Jain School of Global Management – Class of 2017.
E-Commerce has transformed almost all industries and will continue to do so – those who do not get with the flow will be left behind. With high mobile and social media penetration, along with strong world class logistical infrastructure, the middle east is set for joining the global E-Commerce boom with billion-dollar investments coming in locally and globally and the industry in the region set to be valued at $20bn in 2020.
Middle East ‘fertile soil’ for E-Commerce
The middle east is often deemed as ‘fertile soil’ for E-commerce to rapidly grow in due to the expanding internet users, high social media penetration, and strong logistical infrastructure of the Gulf. What sets the middle east apart is that E-Commerce is not just replacing bricks and mortar stores, but is in fact complimenting them. More and more brands and local business owners are set to opt for ‘click and mortar’ to take advantage of both, as the E-commerce market continues to grow.
While the E-Commerce industry does have its challenges in fully reaching its potential in the middle east – such as the need for quicker deliveries, bigger product portfolios and trusted sellers, it still has the advantage of knowing there is a massive need of a local E-commerce giant, as 58% of the online consumers in the UAE buy their products from outside of the region. It is now not a matter of if you adopt E-Commerce for your business, but when you adopt it. Most businesses are seeing that if ignored, they could fade and fall behind their competitors. This can be seen with many major brands such as Sephora, Under Armour and so on. These brands are using E-Commerce and complimenting it with their brick and mortar stores to fully realise its potential and reach its audience.
The battle of the Giants
Mr Alabbar, the Dubai based real estate tycoon, invested $1bn in Noon, an E-Commerce start-up with investment from Saudi Arabia’s Public Investment Fund. It a part of the vision of Mr Alabaar and Saudi Arabia’s deputy crown prince Mohammed bin Salman, to invest in technology. And what better way than to have a homegrown tech giant in the industry, which is to be valued at $20 billion in 2020.
The other tech giant it faces competition is from Jeff Bezos’s Amazon. Noon was set to launch in January, but has been pushed to end of the year. During that period, Souq – the current leading E-Commerce giant in the gulf has been acquired by Amazon. In response, Mr Alabbar has acquired Jadopado, an upcoming E-Commerce start-up and the team is now dedicated towards launching Noon at the earliest. The stage is now set for the two to battle it out and see which is crowned as the ruling E-commerce giant in the middle east.
Large but untapped market
While the region boasts of a relatively large market covering around 50 million consumers across the several countries, only about two percent of all retail spend today is made online, according to a report from McKinsey. The middle east is known for its massive and numerous luxurious malls, but it is also known for its scorching heat in the summer. So, it comes as no surprise that Namshi, the Dubai based fashion online retailer, were the first E-Commerce company to be profitable in the region last year. With major investments coming locally and globally, the untapped E-Commerce industry in the middle east is no more a secret, as investors are set to create a local ‘Amazon’ in the region.
With everything set in place, the key will be how the market is captured. Here are some of the things they will need to focus on; As most online consumers are accessing websites using their mobile and tablet devices, having a customer friendly and easy user interface is crucial. Free home deliveries need to be a norm and a basic serviced offered to all, along with an option to pay a bit more for 1-day delivery. The last but certainly not the least, will be how customer centric the company will be, as seamless returns and toll-free numbers to reach customer friendly representatives for pre & post sales is key to capturing new customers and retaining loyal customers. Nevertheless, the expansion of E-Commerce has started and there is no stopping it now. Companies will either make or break, depending on their ability to create and maintain an end to end customer centric approach.
About the Author
Malav Karia (MGB ’17) is an alumnus of SP Jain Global having specialised in E-Business. Collaborating his love for technology and social entrepreneurship, he worked on Donate2Educate during his Master’s. Malav’s main areas of interests include digital marketing & E-Commerce and he looks forward to contributing and making an impact in the industry.
This article was first published in the September 2017 issue of ‘Business in Gulf’ magazine.