E-tailers’ battle for market share drives down prices online

With Christmas around the corner and UAE retail prices relatively high, more residents are turning to online shopping for presents, clothes and electric goods. Competition among e-tailers for market dominance will translate to cheaper products and faster services for consumers.

Abu Dhabi resident Nicole Adoranti turns to the web for purchases – driven by convenience, and deals. “But if I need an item faster, I’ll buy instore here,” she said.

Ms Adoranti shops from online stores, such as Lulu’s, for household needs but turns to “random” US shops for clothing. “Even with shipping, it’s much cheaper [than in the UAE] when you find sales,” she said.

Recently a Dh210 sweater at a local branch of a maternity shop caught her eye. She tried it on in the shop but decided to check the US website, where it was on sale.

By using Aramex’s Shop and Ship service, the same sweater was nearly 40 per cent cheaper than if Ms Adoranti had bought it from the UAE outlet.

Hassan Mikail, the chief e-commerce officer at Aramex, said Shop and Ship customers are “looking for deals, the latest releases and more options”.

Shop and Ship allows members to order from global websites and have items delivered to an address in one of 24 cities. This opens the door for customers to take advantage of free shipping, common with US offerings, while paying a fee based on weight.

In its early days, from 2001, customers could make orders from its in-store catalogue. Now with more than a million members, the GCC dominates, Mr Mikail said. He said Shop and Ship really began scaling almost a decade ago and has produced double-digit growth year on year, with the average spend per use at US$119 (Dh437) per customer.

Since October, to attract consumers, it has offered a flexible programme where members are charged per 100 grams. “The UAE is the leader of the pack for this option,” he said.

This has grabbed customers like Omair Saya. The Dubai resident now makes 70 per cent of his purchases via the internet. Recently, he decided to upgrade his phone and wanted the latest device from Google, which was not yet available in the UAE.

“I could buy directly from the US Google store using my UAE credit card,” he said. Google provided free local shipping, so Mr Saya used his Aramex address in the US. It cost Dh40 to have the package delivered to Dubai.

Consultancy PwC Middle East said in its retail report this summer that mall operators may begin offering rent reductions to retailers to remain competitive, as well as franchise agreements, including online retail. The report said: “We believe retailers will move away from traditional transaction-based retail to one of a personalised ‘showroom’ customer experience.”

However, Aramex may face pressure from Souq.com’s tieup with Amazon, which this week opened direct access for UAE patrons to the US Amazon store.

Ronaldo Mouchawar, the co-founder and chief executive of Souq.com, said this integrated service is price competitive and uses fewer steps, which cuts costs. “When we compare shipping charges it is less because … it’s more streamlined,” he said.

Other players on the market include Asos.com, a UK fashion and beauty webstore, that ships free to Dubai for items over £20.

PwC Middle East said mall operators may begin offering rent reductions to retailers to remain competitive