The UAE’s traditional “touch before you buy” approach to shopping is holding back the full potential of online and mobile phone marketing, according to experts.
Despite an estimated 20 per cent a year growth rate in internet users to a current 33.5 million in the Middle East, online marketing technology trails other regions and other forms of advertising.
Antoine Harb, Kingston Technology’s Middle East and Africa business development manager, said the region’s burgeoning marketing sector has achieved strong growth rates in recent years, but its online strategies still lack crucial consumer penetration.
“People are still using the internet but don’t have the facilities to order through the internet, or do their business through it. The internet for them is mainly used for browsing,” Harb said.
“[Online marketing] is not lacking because of concerns over security, but probably because it’s something new and the mentality in the region is more traditional, where shoppers prefer to shop by themselves and look at products before buying,” he said.
More awareness about these technologies may help to overcome the disparity, Harb added.
Some companies have attempted to develop online resources, such as online shopping and online product promotion, which are booming in Western markets such as Europe and North America.
Despite the increasing amount of money spent on e-commerce products by internet users in the region, out-of-date online marketing strategies are denying firms in the UAE a slice of the lucrative spending boom, according to Husam Mohamed Alameri, a consultant at internet services firm WSI (We Simplify the Internet).
Alameri said UAE businesses are failing to capture vital e-revenues from online spending because of the poor marketing strategies.
“More than 98 per cent of the companies in the UAE and the Middle East are not enjoying the benefits of the internet,” he said.
WSI targets companies in the region to help boost profits through better use of the internet.
Alameri said: “[Companies] do not use the internet to its full potential and as a marketing tool because of lack of knowledge and misconception about it.”
Meanwhile, a survey by Arab Advisors Group recently found UAE web users spent more than $1.15 billion (Dh5.5bn) in e-commerce products in 2007.
AAG found the number of e-commerce consumers in the UAE’s “affluent and booming economy” exceeded 1.16 million.
Alameri said companies in the Emirates that do not tap into this market are set to lose revenues, with the amount depending on the company’s overall size.
“If you compare Dubai to the United Kingdom and the United States, [companies here] are definitely very much behind. Last year in the UK, around 50 per cent of the total marketing spending went to the internet,” he said.
Simon Sherwood, Chief Operating Officer of British advertising company BBH, has said that the retail industry has changed forever and that consumers have a much wider variety of purchasing options at their fingertips.
“Consumers can now join group purchasing schemes to get better prices on goods, or they can shop through price comparison sites,” Sherwood said at a marketing forum in Dubai in November.
Despite being the fastest-growing region for internet users – internet population increased 20 per cent between May 2006 and May 2007 – the Middle East and Africa still are a long way behind other parts of the world in internet penetration, according to recent research.
The region hosts just 4.5 per cent of the world’s 1.3 billion-strong internet population, with the Middle East holding 2.5 per cent, December 2007 figures from Internet World Stats show.
The research shows that 51 per cent of internet users in the UAE ordered products and services through the mobile phones in 2007.
According to a recent research by the Arab Advisors Group, 51 per cent of internet users in the UAE reported purchasing products and services online and through their mobile phones last year.
And more retailers plan to add mobile phone commerce (m-commerce) facilities over the next 12 to 24 months as they look to harness improvements in the technology to reach consumers, IT research firm Gartner reported last week.
Hung LeHong, research vice-president at the firm, said that a few of the more likely shopping activities that consumers would want to do on their mobile phones, such as finding stores and checking prices, will be provided by portals and price comparison engines.
“Focusing solely on driving m-commerce revenue will not deliver what customers are looking for when using their mobile phones during shopping. Retailers developing a business-to-consumer (B2C) mobile phone strategy must enable a multi-channel shopping process as well as drive m-commerce revenue,” he said.
However Sabina Khandwani, head of PR and Marketing at BurJuman shopping centre in Dubai, has said that the emirate is very different to Western markets.
“Here it is a very touch and feel scenario. Generally, mall flows are social hubs as well; people enjoy the activity of meeting… Being one-on-one with the store and its products is obviously the key point of interaction and people are used to that,” said Khandwani.
In the UAE, the continuing property boom is also set to boost the demand for technology and internet memory market, said Harb.
“More and more hotels and companies are coming online in Dubai and all of these will require basic computers and upgraded memory, which pushes up demand for the technology,” Harb said.
“We see Kingston playing a bigger role in the region with ongoing property boom.”
“The [memory] market is especially growing in the Middle East, compared to other regions. We have seen big growth from 2006 to 2007 and we’re expecting high growth in 2008 as well, due to the mobile phone sector and the introduction of Vista from Microsoft, which requires a lot of memory.”
Kingston Technology is the largest independent producer of dynamic random access memory (DRAM) modules and is the second largest supplier of Flash memory in the world.
Harb said that mobile phone technology has been pushing growth in the memory market, as people are keen to frequently upgrade their computers, mobile phones and mp3 players.
The firm saw a 100 per cent growth rate in Flash products in the Middle East last year over 2006.
“In general, we have seen a 33 per cent year-on-year growth in memory in the Middle East, and about 12 to 15 per cent worldwide growth,” Harb said. The US-based firm in 2007 reached revenues of about $70 million from the Middle East and $1.1bn from the Middle East, Africa and Europe.
The company – whose actual memory market share is close to 27 per cent of the world’s market – saw worldwide revenues of $4.6bn last year.
Harb added that the company expects to reach revenues of $85m to 90m for the Middle East this year, and is targeting $1.2bn in revenues from Middle East, Africa and Europe. Kingston in 2006 generated revenues of $3.bn, a 23.3 per cent growth over 2005.
The company has been growing at more than 15 per cent for the past eight years, except 2001, when it saw decline in revenues due to global slowdown.
“At Kingston, we follow the market. It’s not us who lead the market and technology, usually we follow the technology of Intel. Whenever there is new technology from Intel, we have to follow up and we have to upgrade. Memory technology is driven by CPU technology.”
The firm has about 90 offices worldwide with three headquarters. Harb said the company is aiming to enter more countries, such as Oman and Bahrain. It is currently focusing on Saudi Arabia, the UAE, Egypt, Kuwait and Qatar.
20%: Growth in the internet population in the Middle East and Africa between May 2006 and May 2007
4.5%: The percentage of the global internet population hosted by the Middle East and Africa
2.5%: The percentage of the worldwide internet users located in the Middle East
$1.15bn: The amount internet users in the UAE spent on e-commerce products and services in 2007
1.16m: The approximate number of e-commerce users in the UAE
51%: The percentage of internet users in the UAE who reported purchasing products and services online and through their mobile phones in 2007
An Arab Advisors Group report earlier this month found that more than 5.1 million people in Kuwait, Lebanon, Saudi Arabia and the UAE engaged in some form of e-commerce in 2007, with the value of business-to-consumer e-commerce exceeding $4.87 billion (Dh17.8bn) last year.
In terms of e-commerce penetration rates, the UAE beat its nearest rival, Saudi Arabia, by more than 10 per cent, according to the report. The UAE also had the highest average amount spent on e-commerce per capita during 2007.
“The UAE’s e-commerce user penetration was the highest among the countries studied,” said Andrawes Snobar, senior research analyst at Arab Advisers Group.
“The UAE’s e-commerce users’ penetration stood at 25.1 per cent, Saudi Arabia 14.3 per cent, and Kuwait followed 10.7 per cent, while Lebanon had the lowest penetration of e-commerce users with 1.6 per cent of the total population.”
However, Lebanon registered the highest e-commerce expenditure per e-commerce users.
E-commerce users in the country are in the “pioneer/early adopter” category, and tend to be wealthier, AAG said.