Understanding e-commerce challenges in the Middle East
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Understanding e-commerce challenges in the Middle East

Understanding e-commerce challenges in the Middle East

Amol Kadam explores the challenges faced by online retailers, and how to take pole position in the growing industry


We have seen some game-changing developments in the e-commerce industry in the region of late – two significant events in this time were the entry of Amazon with Souq, and Noon taking over JadoPado.

It was reported during the Amazon deal that e-commerce accounts for just 2 per cent of retail sales in the Middle East, while according to a report published by BMI Research, the Middle East is one of the fastest-growing e-commerce markets in the world. The report also projects that the sales volume of this region will expand to $22.3bn by 2020.

But when looking at the current state of the market, Gartner reports that only 15-18 per cent of businesses in the region have an online presence and 90 per cent of online shopping import products from outside the region. These numbers show the challenges and the opportunities that lie ahead for the online retailers.

I believe many of these issues or challenges are related to the users, but ultimately, they unearth some real business challenges.

I want the best price, always – users’ motivation to go online

You may think ‘how would user motivation be a challenge for the e-commerce industry?’ The problem is that motivation – if wrongly placed – can work against the industry’s growth.

As per PwC’s 2017 e-commerce report, 40 per cent of respondents in the region said ‘cheaper price’ is the biggest motivation to buy online. Outside the region ‘convenience’ has always been the biggest motivation.

It’s known that e-commerce stores incur less overhead costs and can pass on those savings to shoppers. However, at this stage of the industry and for its growth this motivation is pulling the industry into the wrong lane. The fight seems to be to become the cheapest online store, whereas other factors such as service and end-to-end user experience are lower on the priority-list for business owners.

I want it now – logistics and delivery

Based on the research we have been doing for our e-commerce clients and research papers, users always voice their frustration about delivery delays and lack of transparency in lead times. Delivery time has often been the deal-breaker for users wanting to get the product sooner.

Using GPS technology for machine learning or automation is virtually impossible in most cities in the region since no home delivery postal system exists. This means there are no street addresses for residential or business locations in the town. Delivery drivers in most cities must be familiar with the city’s layouts since locals commonly provide buildings and landmarks as a means of navigation.

This becomes a hurdle for e-commerce platforms to automate the delivery timings, estimates and planning of these deliveries to be transparent and accurate. E-commerce players have to spend a lot of time, effort and money in finding and working with different logistics partners.

It’s just not easy – user experience of the platforms

Historically, less importance has been given to a platform’s user experience, with a business’s focus being more keenly trained on cheaper product pricing and set-up costs.

Business owners tend to want to save money on everything. Taking readily available platforms and customising the colours and branding were the fastest way to go to market. It still is. This is done without understanding how and if the target market is different and if they have their own specific needs, behavioural patterns and as result e-commerce platforms are not unique or innovative in the experience.

In our region, expats account for a significant portion of the population and at the same time locals have been exposed to many international platforms. Unless business owners spend time in understanding their niche target and addressing their needs before crafting an experience for them, it will still be a problem area. We are yet to come across an innovative user experience in this part of the world.

It’s not me, it’s you – creating loyalty

Loyalty is still a myth when it comes to e-commerce in the region. With price and urgency of getting the product in their hand as the primary drivers for users in the region, sticking to one platform remains a challenge.

To add to this, almost none of the significant platforms offer any loyalty schemes or incentives for repeat customers. Few brick and mortar retailers have tried to link their offline loyalty programmes to their e-commerce stores, which hasn’t helped to develop loyal customers.

Users still lack a platform that rewards them for being loyal. Sending personalised newsletters or product matches does not cut it.

I am everywhere, come to me – being true omni-channel

There are two categories of e-commerce players in the region: Pure-play and brick and mortar retailers’ platforms. Pure-plays have been leveraging the advantages they have so far, and now with omni-channel being the buzzword, brick and mortar businesses are trying to create their differentiation through that.

However, no one has the omni-channel experience of any substantial quality just yet. There is still a considerable gap and opportunity when it comes to this.

E-commerce players need to catch up with today’s user who, by nature and by available avenues, is becoming more and more omni-channel. In fact, the user’s journey in the rest of the digital world is becoming very much so, where the lines between digital and physical worlds are becoming more blurred every day. It is imperative for e-commerce players to move quickly in this area.

You don’t get me – personalisation, rich relevance and gathering insights

This is another critical area that, if done right, can provide insights to help tackle the rest of the challenges mentioned here. Users in the region do not feel unique enough; e-commerce players do not spend enough time and effort getting to know their users. There is no real personalisation for product discovery in the region yet, and rich relevance is barely being used as a strategy to aid user decisions or to up-sell.

Businesses do not spend enough time gathering the right metric or insights from proper channels.
Qualitative and quantitative research methods; tools to understand real user patterns, data and other insights are still not used effectively to target users. E-commerce players are yet to come to terms with these insights so must learn how to use them effectively for conversion rate optimisation methodologies. Ultimately, they must make every user feel unique by personalising their journey.

While these (and other) challenges exist, e-commerce in the Middle East is still poised for growth, and these are exciting times to be related to this field – especially for those ready to grasp the opportunities at hand.

Amol Kadam is co-founder of usability and digital marketing agency RBBi


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