Consumer connectivity gives a boost for e-commerce

Sunday, Jun 02, 2013

Dubai: The increased connectivity of consumers is allowing e-commerce to gain momentum in the Middle East and North Africa (Mena).

“E-commerce sales in Mena and Africa grew by 45 per cent in 2012 to reach $15 billion, and analysts forecast an annual growth over 20 per cent over the next three years. That makes Mena one of the fastest growing regions in the world,” said Ronaldo Mouchawar, CEO of Souq.com, the region’s largest e-commerce site.

Souq.com has grown by 300 per cent from last year, while traffic to the site and sales have gone up between 15 to 20 per cent every month of this year, according to Mouchawar.

The growth is fuelled by the site’s expanded product offerings-which now include fashion items, among others, alongside consumer electronics — and the increased connectivity of customers, he said.

Last year, the Middle East accounted for 6 per cent of global smartphone shipments.

Tablets have also seen strong demand, which is boosted by low-cost options and the increased use of social network sites and online videos on these devices.

A survey conducted by Deloitte and Ipsos showed that 16 per cent of the UAE’s population shop online.

Mouchawar said that the e-commerce space has seen new players, boosted in part by the higher internet penetration in the region.

“When we started Souq.com in 2006, internet penetration was low — between 15 to 20 per cent in the UAE. Businesses were not keen on exploring the internet then, maybe because of that. Now, internet penetration is at 80 per cent,” he said.

He added that new players can help strengthen e-commerce in the region.

Despite the growth of e-commerce sites, consumers in the region still prefer physical shopping. The survey indicated that 84 per cent of buying in the UAE is done physically.

Some of the UAE’s property developers, such as Nakheel and Majid Al Futtaim Properties, have been flexing their muscles recently with announcements of new mall development and expansion plans.

Challenges

Meanwhile, there are a number of challenges that are hampering the growth of e-commerce in the region.

Consumers are still hesitant about using credit cards online. Their lack of trust in online transactions has pushed e-commerce sites to look for alternative payment options.

Consumer electronics retailer Sharaf DG gives customers ‘cash on delivery’ option, allowing them to pay for their purchases that are received via courier.

There are a number of courier service providers in the UAE, including Aramex, FedEx and DHL.

Although the ‘cash on delivery’ service is a good (albeit temporary) solution to consumers’ lack of trust in online transactions, it can hinder the growth of e-commerce in the region due to difficulty in coordinating home delivery services, according to a report by Deloitte entitled ‘A Middle East Point of View — Winter 2013.’

The report indicated that tickets, deemed less risky in comparison to electronics and fashion items, make up over 60 per cent of online purchases in the region.

Sharaf DG does some checks to ensure online transactions are made securely.

The checks are done for “various elements of the transaction, namely IP details, contact details, ID proof, billing [and] delivery address to confirm the identity of the customer and linking him with the credit [or] debit card used. For suspicious transactions we also cross check with the fraud control department of the issuing bank on the genuineness of the transaction. For urgent and immediate deliveries, we may also confirm on transactions basis an authentication code match available in our records with the one provided by the customer,” said Nilesh Khalkho, CEO of Sharaf DG.

By overcoming such challenges, e-commerce in the Middle East is expected to record double digit growth in the coming years, according to the report.

By Sarah Algethami Staff Reporter