Instant deals and discounts thanks to a growing trend of online shopping is fast becoming all the rage among UAE residents.
And that's what’s ailing physical retailers today, who’re fighting hard to pay high monthly rentals at the malls while keeping a lid on prices to compete with the undercutting online retailers.
A quick online search proves the point.
iPhone 6s, (arguably) the most popular smartphone today, is available at Souq.com for Dh2,259, a 13 per cent discount from Apple’s suggested retail price of Dh2,599.
The price-difference is even starker with Samsung’s hot Galaxy S6 Edge. While the device is being retailed staring Dh2,699 at authorised retailer and distributor axiom, it is available for Dh1,859 at Souq.com, a good 31 per cent off the official retail price.
Now unless you love walking into a physical store and chatting up with the sales person before making a purchase – or don’t trust that the courier will get you your smartphone in one piece – there aren’t many reasons why those looking to buy an iPhone 6s or the Galaxy S6 Edge (or, for that matter, the numerous other electronics available at steep discount at a number of online shopping sites) would buy it off a shelf rather than online.
Tech savvy UAE residents are fast getting comfortable with paying online for their purchases. Coupled with an improving internet penetration, rising smartphone ownership and declining cost of transaction and delivery, they are flocking to online sales platforms like never before.
Local and international e-commerce platforms such as Souq, Amazon, AliExpress, JadoPado and several others are taking this opportunity with both hands and offering discounts and raffles to lure shoppers onto their platforms.
Most recently, Souq said its four-day White Friday sales smashed all previous records, with the online retailer claiming an unprecedented 13 million visits and close to 600,000 items sold during the period in the UAE, Saudi Arabia, Kuwait and Egypt.
Souq.com’s CEO & Co-Founder Ronaldo Mouchawar said the platform sold two items per second on average, and that more than a third (35 per cent) of all sales came from its mobile app.
“Souq.com is seeing continued growth in online shopping. E-commerce is rapidly evolving in the Middle East and has grown tremendously over the last decade. Middle East is one of the fastest growing e-commerce markets,” Mouchawar told Emirates 24|7.
He explains that the UAE and Saudi Arabia are leading the e-commerce sales growth for his company and across the industry within the region, and adds that consumer electronics is the biggest industry vertical amongst this followed by ‘fashion’ and ‘home electronics’.
UAE leads the region's online shopping market
According to a recent report by intelligence provider yStats.com, the e-commerce market in the Middle East and Africa has the potential to grow at small double-digit rates in the next five years, with the B2C segment forecasted to account for close to one-third of the total online sales in the region.
“Led by countries such as the UAE, Internet users in the Mena countries are slowly grasping the benefits of online shopping, while a number of local players compete for their rising online expenditure,” it notes.
“Driven by improving Internet penetration, rising ownership of mobile devices and payment cards, online retail in these countries is set to boom in the near future,” the report adds.
yStats.com says the UAE is leading the region in this domain. “This country has the highest Internet, mobile device and payment card penetration, which all contribute to making the UAE the market with the largest B2C E-Commerce sales,” it states.
“With more consumers shopping online every year, the share of B2C e-commerce on total retail sales of goods in the UAE is forecasted to triple between 2014 and 2019. UAE is also a home market to the major e-commerce merchant in the Mena region, Souq, with the online shops Souq.com and Sukar.com,” it adds.
“Considering the fast growing appetite for consumer electronics, GCC and Mena as a market is obviously substantially larger and is growing faster than rest of the world,” says Sheriff Rizwan, founder of AlShop.com, another regional e-commerce player based out of Dubai.
“With a young population and with one of the highest global internet penetration levels, the online spending potential is quickly emerging as one of the highest in the world,” he told Emirates 24|7.
“For us, tech-specific products amount for approx. Dh120m annually in the UAE; i.e. 90 per cent of overall sales of such devices,” says Ulugbek Yuldashev, Managing Director of awok.com, a UAE-based online shopping portal.
Smashing the bricks-and-mortar model
As UAE consumers become increasingly dependent on their mobile devices, their appetite to make shopping more convenient has also increased substantially. In 2014, 57 per cent of Aimia Loyalty Lens respondents in the UAE said they were likely to use a mobile wallet, and that figure has climbed to 62 per cent in 2015.
“Total e-commerce penetration in the UAE is at around 6 per cent as a percentage of traditional retail, having grown at a rate of 38 per cent annually since 2009,” Dany Farha, CEO of Beco Capital, told this website that.
While 6 per cent may be a small number, the fact that it is growing at an almost 40 per cent rate suggests that it will soon start hurting physical-only retailers where it hurts the most – their cash registers.
Which is why most traditional retailers now follow what is known in the industry as an omnichannel model, which in layman’s terms means using multiple channels of marketing and delivery, marrying online with physical retail to ensure customer convenience.
As per a MasterCard study released earlier this year, online shopping has increased gradually over the last two years, with local websites, such as Souq.com emerging as a popular choice by shoppers.
According to that study, 83 per cent of UAE residents had made a purchase online during the three months prior to the study (published in April 2015) being conducted and four out of five respondents said they were satisfied with the process. Top categories for online spending include airlines, travel and hotels, followed by shopping for home appliances and clothing.
“Our data indicates that as of 2013, the UAE’s total e-commerce opportunity for both goods and services was valued at just under $3.5bn. We estimate that the market this year will be in the $5.5bn to $6bn range. The estimated market for goods is around 60 per cent of that number, giving you a value of $3.6bn,” says Farha of Beco Capital.
Your clicks are killing bricks
“The market is fiercely challenging and competitive. There are various segments of e-tailers and it will not be fair to compare or measure their success generically against each other. For instance a venture funded company like Souq.com is one of the major players in the region, while a self-funded bootstrapped company like JadoPado.com is doing pretty well too. Sivvi, Namshi, MarkaVIP and Wadi.com are some of our strong competitors in the region. There are retail brands like Landmark Group, Sharaf DG, Lulu and Carrefour who are now putting in their money to the e-commerce market share and emerging as online shopping platforms,” says AlShop.com’s Rizwan.
“Souq, JadoPado and Namshi who are all based out of the UAE, some of whom have regional operations, are pioneers in the field,” adds Beco Capital’s Farha.
“It’s a relatively small group of serious players that are vying to scale across the region and beyond. A larger subset of smaller players across various niches also exists,” he notes.
“High GDP per capita, robust mobile penetration rates, younger population, ease of buying are some of the key factors fuelling a boom in online sales in the Middle East. With 60 per cent of consumers being under the age of 25, the region has a growing number of online buyers who understand the benefits of electronic payments such as speed, convenience, security and value for money,” maintains Souq.com’s Mouchawar.
“As more consumers are turning to the largest online shopping destination in the Arab world, expectations are also increasing,” he says.