According to Statista, around 1.92 billion people bought goods or services online last year and ecommerce sales hit $3.5 trillion worldwide. Next year, this figure is expected to be closer to $5 trillion.
But while digital retail has made massive steps forward in many countries across the globe over the past few years, Middle Eastern regions have been slower to react.
Despite boasting some of the world’s highest internet and mobile penetration rates, challenges such as regional customs, payment preferences and delivery issues saw them lag behind.
Last year, shoppers in the US were making 19 purchases on average online each year, with MENA shoppers only making between two and four. Meanwhile, 12 percent of consumers in the UAE said their last purchase was online, compared to 47 percent in the UK.
But things are changing rapidly in the Middle East and confidence in online retailers and shopping is soaring. The COVID-19 pandemic has transformed the region’s ecommerce fortunes and allowed it to play digital catch up.
For merchants, there has never been a better time to accelerate their digital strategy, however, they must be quick to move and make the most of this opportunity.
Here, Redbox looks at some of the talking points surrounding the Middle East’s digital story.
Trust grows in online shopping
While many bricks and mortar stores were forced to close as the pandemic took hold at the start of the year, some brands saw huge surges in interest online.
The Middle East witnessed spikes to similar industries as the rest of the world, with the grocery, home leisure and tech markets particularly buoyant. Consumers started to pay more interest in their health, looked to entertain themselves in the home and turned to online supermarkets for their food and drink.
But it is clear that a region that was already growing quickly digitally is now evolving even faster.
A recent report by Kearney Middle East predicts the GCC ecommerce sector will be worth $50billion by 2025 and that ecommerce will be the main source of retail. The Middle East and Africa is expected to grow by 20% in the next 5 years, reaching $26 billion in 2022, outpacing the global growth of 13%.
Kearney Middle East partner Adel Belcaid explained: “COVID-19 caused an unforeseen push and gave a new, accelerated lease of life to the sector, in line with what we have seen in global markets. This is due to a rapid change in consumer behaviour, with unprecedented adoption of e-commerce by all population segments, spurred to a large extent by the new normal of social distancing, lock-downs and reduced capacity in physical stores.”
About 60 percent of Millennials in the region already shopped regularly online, but the pandemic has encouraged the older generations to follow suit.
Easier and more varied payment systems, alongside concerns surrounding the virus spreading in shopping malls, created a new customer segment.
The Kearney survey found 79 per cent of consumers in the UAE had changed their shopping habits during COVID-19, spending more online than they would have previously, with a massive 48 per cent believing they would maintain these shopping habits after the pandemic. Online shopping, it seems, is here to stay in a big way.
More investment in the Middle East
Growing trust in digital and new customer demographics are only a small part of the story.
Better infrastructure and investment is helping online business in the region to flourish and consumer and brand confidence grow more than ever before.
Dubai’s $735million CommerCity project will be the first free zone dedicated to the online market in the Middle East and North Africa region.
CommerCity tenants won’t pay any income or corporation tax and will benefit from a “one-stop shop" of support services such as healthcare, administration, immigration and banking.
They will also be able to make use of the logistics cluster which includes AI-powered warehouses. With logistics often cited as an issue for new ecommerce business, investment in this area is seen as major win.
The first buildings are due to be ready shortly, with Redbox playing an exciting part in the venture.
If successful, expect to see more similar projects across the Middle East in the very near future.
Payment landscape is changing
The pandemic changed many people’s attitudes towards handling cash, seeing a rise in digital payment options.
Meanwhile, as many businesses urgently invested in their digital operations, the payment landscape was brought sharply into the spotlight.
Pre-pandemic, digital retailers in the Middle East encountered difficulties such as differing bank accounts needed for each country, different customer payment preferences and a heavy reliance on cash on delivery (COD) - which could be a more expensive option for retailers with higher risks of returned packages.
Alternative Payment Methods (APMs) have become even more popular since the pandemic hit as consumers with money concerns sought more flexible ways to pay. As more shoppers move online, more payment options are needed over and above credit card, debit card and PayPal. There are hundreds of APMs across the world to consider, including digital wallets, cash on delivery, bank transfers and ‘buy now pay later’ financing.
Redbox partner Klarna offers a number of financing options – and is used by brands like Sephora. Merchants are paid immediately on each transaction through Klarna, while customers can pay 14 or even 30 days later, giving them the flexibility that can make a huge difference to their purchasing power – an important factor in these uncertain times.
Buy now, pay later providers tabby allow customers to buy online and pay back in monthly instalments, or 14 days after delivery – and check-in without a debit card, approving a customer in seconds.
The process gives merchants in the region new payment options for its customers while eliminating its own risks and logistical issues – a big plus as companies start to move on from the COVID-19 pandemic.
Redbox recently provided support in improving and configuring the tabby plug-in for Abdul Samad Al Quashi (ASQ) - one of the biggest perfume retailers and OUD across the globe. It is now being used on ASQ’s online stores in the UAE and Saudi Arabia and could help change online shopping habits across the region.
The surge in online shopping in the Middle East has shown the need for retailers to invest in digital operations that are flexible and can utilise technologies that provide much better customer experiences. From personalisation to real-time product visibility and order updates, customers must trust your brand and have clear communication channels open to them in the face of further disruption. Merchants must have clear 360-degree views of their sales from all locations and be able to adapt quickly if supply chains are down or stores are forced to close due to further waves of the virus.
More brands are looking for digital platforms that can be scaled up quickly in multiple regions, but that can be easily adapted to each region’s varying and particular needs.
Customers are engaging with retailers though multiple mediums and content is more key that ever. They expect a more personalised experience, so the company message, content and messaging must be consistent and quick-moving. The more time customers are spending online, the less time they are willing to spend it on sites that don’t do what they have come to expect.
What does this mean for merchants in the region?
More customers willing to shop online; more investment on infrastructure and innovation; solutions to payment and logistical issues that have hampered progress. There isn’t a better time to be investing in your digital operations.
While every brand has different needs, in today’s pandemic-affected climate, the combination of Magento Commerce and Adobe Experience Manager (AEM) is proving to be a winning formula. It can give your ecommerce operation a robust and flexible framework with a more creative and flexible front-end that is crucial in shaping the personal online shopping experiences that customers want.
With Magento Commerce giving merchants a platform solution known for its quick-to-market agility, it is crucial to have a CMS that offer you the same flexibility for your ever-growing content and asset-list to evolve with the company.
Merchants must leave behind the one-size-fits-all approach to payment, with consumer choice key.
Ecommerce hubs like CommerCity are expected to be the start of an exciting trend as governments invest in the growing need for online business and the infrastructure and logistics around it.
The need for dependable, flexible, transparent e-commerce services has never been greater. Partnering with an agency with the technical knowhow combined with vast experience in navigating the different markets throughout the Middle East is crucial.
To discuss more, pay the Redbox team a visit at Seamless Middle East 16-17th November, stand E30. They’ll be on hand to discuss how you can accelerate your online growth and be part of the new digital chapter in Middle East’s story.