With the non-oil GDP of the UAE forecast to rise to 3.4 per cent this year, from 2.6 per cent in 2018, and over 500,000 new business licenses issued in Dubai in 2018, the outlook looks positive for local businesses. In particular, the e-commerce sector is expected to maintain resilient growth, with a 44 per cent increase in MENA online shopping payments in 2018, according to research by Visa.
Making up over a quarter of the region’s population, millennials are a key factor in this growth, with four in 10 shopping online across the region. Here are the three e-commerce bright spots that businesses of all sizes should focus on to help stay up-to-date with the dynamic retail environment and changing consumer preferences:
Access emerging consumer markets
E-commerce is increasingly multilateral. As consumer purchasing power expands and digital infrastructure becomes more sophisticated, businesses need to identify and access emerging markets with the right potential. Accessing these evolving consumer markets helps businesses diversify revenue streams, which helps build greater resilience and stability when growth slows in other markets.
The Middle East is making a place for itself in the global trade market, with regional growth projected to rise to 1.9 per cent in 2019. Moreover, trade partnerships within the region have been strengthened; for example the UAE and Saudi Arabia — the region’s largest e-commerce markets — have jointly agreed to empower local businesses and recently announced plans to launch Aber, an inter-bank digital currency.
Looking at individual markets, the scale of this opportunity becomes clear. According to 2018 research by PayPal, e-commerce in the UAE has seen an increase with 81 per cent of adults shopping online and online spending expected to reach Dh36 billion as of end 2018. Cross-border online shopping saw extensive growth in the UAE, with 61 per cent of online shoppers shopping from websites in another country, a 33 per cent increase from the previous year.
The UAE being a global market within itself is a pivotal factor for this increase. The US was cited as the most popular cross-border online shopping destination for UAE online shoppers followed by India and China,
Be known for something other than low product prices
Changes to taxation and trade policies related to online goods could potentially affect price-sensitive shoppers, and impact online sales. However, the survey has shown that in the UAE, price is not the only driver for online purchases. According to PayPal’s 2018 survey, the top three markets for online shopping was the US, India and China.
Forty-six per cent of online shoppers believe that the US has higher product quality and access to items that are not available in their home country. Additionally, discovering new and interesting products (32 per cent) and accessing new items (30 per cent) are the top two factors online shoppers consider when shopping from China.
Consumer buying behaviour also informs their online attitudes. For niche products, some consumers are willing to pay a premium. But for mass-market products that have been commoditised, they will search for the cheapest option available from anywhere in the online world. Businesses with the resources and capabilities to do so should investigate the potential for producing their own branded products to offer consumers greater value-add beyond just price as, for example, noon.com did in January with the launch of the ‘East by noon’ label.
Online retail need not be a race to the cheapest item.
Enhance overall consumer experience
Seamless retail and service experience hold the key to succeeding in today’s shopping environment. As a greater proportion of retail sales comes from online, businesses need to understand the changing consumer landscape and constantly improve the shoppers’ experience to cushion against price increases. With e-commerce as an endless aisle, the need to provide an excellent overall experience, which is more important than ever to retain customers.
The research identified the main barriers for cross-border e-commerce as shipping costs, with just under a third of people shopping on websites from India and just over a quarter of people shopping on sites from China selecting more affordable shipping as a reason for doing so. Businesses need to think beyond their narrow dimensions of their own product and ensure they integrate seamless logistics solutions for the delivery and return of goods as well as uphold high standards of customer service to capture market share.
Ensuring payments can be made securely and providing the option to pay in the consumer’s local currency are some of the top drivers encouraging cross-border purchasing.
With an inflow of investments and the rise of e-commerce players of all sizes, cross-border e-commerce opportunities are considerable. Despite the increasing global political and commercial uncertainties expected this year, the fundamentals underpinning e-commerce remain strong, particularly in the region.
With the right strategies, businesses have much to gain from e-commerce’s potential to harness digital changes and emerge stronger than ever.
— Efi Dahan is General Manager, Eastern Europe, Middle East and Africa at PayPal.