The challenges and the future: what comes next
One of the prominent challenges faced by the MENA e-commerce sector – as the report by Bain & Company reveals – is the preference for cash on delivery (COD) due to low trust levels, which remains an impediment for e-commerce players. Around 62 per cent of MENA online buyers prefer to pay cash on delivery for online purchases, vis-à-vis less than 5 per cent in the UK and France. COD is also common in the UAE, despite credit card penetration being at 57 per cent, higher than in the UK and France, the report adds.
“Lack of digital payment adoption – while it is increasing with initiatives such as Mada in Saudi Arabia, cash on delivery remains popular across the region. This may seem convenient to the customer, but it places a great deal of strain on the merchant, raising failed delivery rates and returns, increasing the cost of business, which will eventually impact the consumer,” says Khalid Khan, managing director, Astound Commerce Middle East.
Souqamal CEO Ambareen Musa adds: “A patchy product selection, inconsistent delivery times and last mile delivery challenges due to lack of area codes, along with a preference for cash on delivery over online payments, are three of the biggest factors restricting e-commerce growth in the region.”
Additionally, fragmented regulations between countries may lead many to reconsider regional expansion prospects. “If you operate in the UAE and want to target the MENA region, you have to separately enter and build up Saudi Arabia, Egypt and other countries, making it difficult and expensive to scale – but also an advantage, as it becomes a barrier to entry for large international players who would rather acquire than build up,” Yuldashev noted.
Lastly, while value-based pricing is significant and if incorrectly done, could tank one’s e-commerce business but to secure customers long term, a combination of multiple factors such as product quality, delivery, customer service and a greater B2C relationship is warranted.
“E-commerce players will eventually run out of money if they compete solely on price. Players should differentiate themselves on the shopping experience, delivery and customer service. By allowing third-party sellers to sell on their platforms, quality control and the authenticity of products should be ensured and guaranteed by the platforms. And, e-commerce platforms should be more transparent about product return and refund,” sums up Shamsh Hadi from ZorroSign.
Strong prospects
The drivers here are: people and technology. Certain brands have cottoned onto the differentiators early and strode ahead of the competition. UK-based e-commerce platform Farfetch unveiled the ‘Store of the Future’ concept with a few of its applications including a universal login recognising customers entering an outlet, a (radio-frequency identification) RFIDenabled clothing rack to detect products being browsed and auto-populating a customer’s wishlist, and a digital mirror allowing the customer to view her/his wishlist as well as calling for products in varied sizes and colours. A host of companies (Burberry, Harrods, Chalhoub Group) have partnered with Farfetch to use its infrastructure to help drive expansion.
Regionally, in the years to come, products and technology infrastructure will go hand-in-hand with the e-commerce ‘experience’ expected to be more personalised, and every individual garnering a different experience based on key differentiators. Value-added content will hold more relevance to the customer and drive him towards the right purchase while customers’ digital encounters may transcend traditional screens, moving towards an all-inclusive future with additional touchpoints (voice, wearables, etc.).
Wearable tech may trigger next-level personalisation and could be very effective in fuelling e-commerce growth such as smart glasses, which use augmented reality (Google has a patent on pay-per-gaze which will be able to track which adverts customers paid heed to, and which they don’t).
Lastly, more e-commerce brands may adopt pre-emptive shopping – such as the partnership between British retailer Tesco and the IFTTT (If This Then That) platform – backed by automation software, enabling consumers to set rules on which items can be added or removed from their carts.
“Data and AI will be more and more important, making the difference in all e-commerce components. Personalisation will be key to better serve customers. Knowing what the customer would like to purchase and being able to deliver that option to them before they even make the decision is key,” opines Yuldashev.