Dubai: Most consumers in the Gulf Cooperation Council (GCC) countries buy from international online retailers, but that is likely to change in the next few years, according to an industry expert.
As more local retailers set up eCommerce sites and offer a wider variety of products, a larger number of consumers are expected to buy from these sites, said Sirish Kumar, chief executive and co-founder of Telr, a payment service.
“More merchants are coming up so you will have a variety of products,” he told Gulf News on the sidelines of the eCommerce Show at the Dubai International Convention and Exhibition Centre on Wednesday.
The increasing availability of “mobile-friendly” sites and local payment solutions “that use a funding source other than a credit card” are expected to boost the number of buyers too, according to Kumar.
eCommerce spend is currently valued at $39 billion in the Middle East and North Africa, he said.
Currently, between 10 and 12 per cent of consumers in the region buy from home grown sites including Souq.com and Marka VIP, while the rest shop on the likes of Amazon and eBay, he said.
“The number of online merchants [in the region] isn’t enough to give [consumers] variety … and there is a lack of [payment] solutions that are available, other than credit cards,” he said.
eCommerce is growing in the region but faces challenges including a lack of transaction security, poor delivery services and a lack of affordable and reliable payment platforms, according to an SME survey cited in a report by consultancy Deloitte entitled ‘Technology, Media and Telecommunications Predictions 2014 Middle East’.
“E-commerce in the region is relatively nascent as the Middle East is still a cash-based society, especially in the GCC where business-to-consumer (B2C) sales represent only two per cent of overall retail sales volumes,” Deloitte said in the report.
Another challenge is the additional cost associated with cash on delivery (COD), according to Alan Dempsey, CFO at Marka VIP.
“[COD] is inefficient. Drivers have to handle cash and when the cash comes back, we have to count it and lodge it to the bank. It creates an additional cost that doesn’t exist in other markets,” he said.
Marka VIP wants to reduce COD and switch to electronic payments, he said. In the second half of this year, the online retailer expects to use electronic payment platform Sadad, which is based in Saudi Arabia, he added.
