Dubai: Internet sales in the UAE account for 3.9 per cent of the total sales in 2015 and is forecast to reach 4.6 per cent in 2016, which is being driven by a larger variety of products, according to research firm Euromonitor International Middle East.
However, the company says it does expects e-commerce to accelerate.
“We have small number of retailers who are holding a large part of the market and, at the same time, we are seeing an explosive growth in e-commerce”.
According to the Euromonitor report, the variety of products available in UAE brick-and-mortar stores is very poor by comparison. “In Europe and North America, consumers are spoilt for choice, and here the retailers have limited number of models and every retailer will carry the same.”
The omnichannel strategy [unifying online and physical retail stores to lure shoppers] by retailers is not profitable because they have been using online primarily as a marketing tool. That is why, “we are seeing a growing trend of people buying from Amazon, eBay and other online portals”, he said.
Retailers disagree, saying the main driver of online sales is price.
“If the price difference between online and offline is big, then people buy online otherwise, people would prefer to buy offline,” said Deepak Babani, CEO of Eros Group.
At Gitex, he said the offers keep changing so customers wait for these kinds of events to get good deals.
Preference for malls
Nadeem Khanzadah, head of omnichannel retail at Jumbo Group, said the limited variety of products here is due to limited distribution and a general avoidance of “grey market” items. The grey market refers to products sold from third parties and not the original distributor.
Mahesh Chotrani, assistant vice-president of Jacky’s Electronics, said that people are looking online but they still want to go to the malls and that is their favourite place to visit over the weekend.
He called online sales a “loss-making” business and cited India’s largest online retailer, Flipcart, which posted a loss of about Rs20 billion (Dh1.1 billion) in 2015 as the retailer spent heavily to fund discounts to win customers and stay ahead of rivals — Snapdeal and Amazon India. On the other hand, brick-and-mortar prices in India grew 16 per cent in December and January.
“Online on its own will not survive, according to my reading. As long as they are getting investment it is fine. The moment the investment stops, we have to see and that is what is happening in India,” he said.
We called American retailers Amazon and eBay a “different ball game” altogether, and the UAE’s infrastructure makes online sales less attractive.
“We have a mall every three kilometre. In the US, there is a mall every 30 miles [48 kilometres]. Traffic, parking and petrol prices are not an issue in the UAE. Why everybody doesn’t want to buy online is the “touch and feel” factor. Price is not the only factor that people buy offline,” he said.
Factbox: UAE consumer electronics market to grow 5% this year
The consumer electronics industry in the UAE is expected to grow more than five per cent this year, driven mainly by wearable devices and organic light-emitting diode (OLED) TVs, industry experts tell Gulf News.
According to research firm Euromonitor International Middle East, the UAE consumer electronics industry was worth Dh12.8 billion last year and is expected to be worth Dh13.5 billion this year and Dh15.7 billion by 2020.
“The UAE retail industry is dependent on major shopping events, and they are giving a boost to sales. But what we are seeing is that sales are actually slowing down, which indicates there may be a fatigue with these kind of events,” said Nikola Kosutic, Research Manager for Euromonitor International Middle East.
So, in the long run, “we see a little bit of slow down here but there can be exceptions like if new products are launched just before the event. If new products are launched, then sales will pick up in that category,” he said.
He said the industry here is quite consolidated.
