GCC online retail has always fought the so-called ‘shoppertainment’ factor of malls. Of the consistently high footfall levels, not many turn up solely to shop.
Malls, especially in Dubai, have always offered more in the way of experience. Whereas in the West shopping is often the most efficient way to get what you want. So it’s no surprise that Europe and the US witnessed a rapid adoption of shopping through the web over the last decade.
Because of the Gulf’s mall addiction, it is often still seen as the laggard trying to catch up to global trends. Yet, there is a positive growth story to be told in the region.
Shopping online in the Middle East will double in the next five years, according to the latest figures. Web customers currently spend about $1.1 billion, but by 2016 this figure will hit $2.2 billion, according to Euromonitor International. This will make it one of fastest growing rates in the world.
Oddly, one catalyst is the restrictive rules and regulations of the local malls themselves.
Ramzi Nakad, managing partner at marketing firm Brag, an online specialist, said: “For women in Saudi Arabia, in some locations there are no changing rooms, so online shopping is more effective. Often these sites have flexible returns policies too. Plus, prices are more competitive without the expensive overheads of running a bricks and mortar shop.
“In Saudi Arabia, there’s a lot of what you can’t do in terms of marketing in malls, newspaper and TV. But it’s different for online. That’s why we’ve seen such a pick-up in e-commerce there.”
High internet penetration has spurred online retail growth in generally. For marketers, it also means they can measure e-campaign results more effectively than mall promotions.
Still, there is reticence towards online shopping stemming from a lack of trust, particularly around credit card fraud and logistics. Commercial websites in the Middle East, even banking sites, have been hacked, and the public remains wary of parting with financial information online. In response, Gulf governments are backing local firms to encourage online shopping.
Summer Hamad, an analyst for the Middle East and Africa at Forrester Research, said: “In the UAE, the government awards a seal or certificate to a local e-commerce business as proof that this site is legit and safe to use.”
Meanwhile, many residents do not have shipping addresses – so packages are usually delivered after someone is reached by mobile, and cash is paid on delivery.
This is beginning to change. Louis Lebbos, co-founder and managing director of full-price online retailer Namshi, believes the fast adoption of coupon sites helped to build confidence in the system.
“There’s always been a big trust issue with web shopping in the Gulf, but with a $5 coupon there isn’t really much risk. This therefore has driven people to the internet.
“These sites helped the overall e-commerce cause. But we felt there was still a gap in the market for a traditional online retailer. We bridged this gap but made sure to remove the shipping risk from the equation. So we offer free shipping and free returns.
“Ultimately, our goal is to take a chunk out of the actual retail offline market. We’re never going to replace the mall; it will always be a percentage of offline commerce.
A lot of Namshi’s orders originate in remote parts of Saudi and Oman. And for the customers that get access to mall, Lebbos said not all are happy. “If you’re looking for a particular type of shoe or size you can spend 15 mins walking around looking. Why not spend 15 seconds on our site and find it.”
Recently, pressure has mounted on sites like Namshi as international brands and e-tailers start to ship to the Gulf. But overseas firms will struggle to compete with the speed of local delivery.
Namshi operates out of an Aramex facility in Dubai Logistics City. Products are shipped from designers around the world to the Dubai warehouse and then sent to customers’ locations in the Gulf.
But establishing an online presence in the Gulf doesn’t come without dangers. Malls have strict rules on decency and, as such, customers know their limits. For online, there is more to consider.
Yousef Tuqan, CEO of Flip Media, a Dubai-based advertising agency, said: “The Gulf is unique because of its various sensitivities, particularly around political, religious and social issues. Whatever you do online needs to be packaged up with a robust content management system. You must be able to monitor the conversations taking place around your brand.”
He added: “Brands need to make themselves the network or platform rather than using social media as a channel. Instead of hundreds of different channels, they need to create a meaningful brand experience.”
For many, e-commerce is still a brave new world in the Gulf. It will take some time to wean the local population off their diet of shopping malls. Few will be able to compete with the entertainment value of these retail establishments, but online shops are beginning to find success on pricing and convenience.