AN UNMISSABLE DEAL, UP FOR GRABS
For many brick-and-mortar retailers, e-commerce is the enemy. Online retailers have much larger warehouses and can sell cheaper. But there is no war between online and offline shopping. These two channels in fact can complement each other, but doing so is a challenge. It implies that the power is in the hands of the consumers. Brands will have to meet these empowered consumers where they want, and on their own terms.
The ZMOT has given rise to the phenomena of Showrooming and Webrooming (Figure 2). Each plays on a different set of consumer psychologies:
Showrooming allows consumers who are in store to go online for reviews of products they are interested in. It also offers a variety of price points that might be cheaper than brick-and-mortar. Offers, vouchers and coupons are more available online.
Webrooming on the other hand plays to the strengths of the physical experience. Consumers want to try the product and walk out with it on-the-spot, instead of waiting for a delivery.
In 2012, the MENA e-commerce market grew at the fastest rate worldwide (45% yoy) to USD 9B. By next year, it will surpass the USD 15B mark. But this compares to an offline market of USD 425B, as only 15% of brick-and-mortar retailers have an online presence. MENA also has a big gap to bridge compared to other global e-commerce markets. The UK market, with a population of 64 million, is valued at USD 94B (Figure 3).
So what is holding MENA back? Will 2016 be the year of e-commerce?
In 2014, 50% of MENA consumers said they were planning on making an online purchase. This level is up from 20% in 2011. So the issue is no longer ‘if ’ MENA consumers will make online purchases. With the introduction of new technology and safety measures, security concerns relating to using credit cards online were allayed. So internet users now buy not only games and music, but also physical electronics, apparel and services (Figure 4). The UAE, in particular, accounts for about two thirds of the MENA ecommerce value ; fueled by a large millennial population.
With internet and mobile penetration high, it’s now a matter of e-tailers catching up, especially on the user-experience front. The question is whether the Middle East retail market can catch up to demand. We identify the key elements necessary for e-commerce to reach a tipping point in 2016.
1. Improve the user experience:
Significant improvement needs to be made on the user-friendliness of e-commerce sites. Search is limited to keyword text with no richness in context, such as including category management. Tags and categorisation of metadata is necessary to facilitate results, especially for comparisons.
Souq.com is one of the region’s largest e-commerce aggregator. But comparing