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Local supermarkets see the merit in online sales

Monday, Jul 09, 2012

Dubai: The basket of online shopping options for UAE consumers is getting bigger. Leading supermarket chains are now entering the e-commerce space which they now see as opening up a substantial revenue stream in the medium-term.

The Emke Group, which operates the Lulu chain, is putting the final touches to its online initiative ahead of the rollout within the next few days, while Carrefour has already made an entry. For Lulu, the initial launch will be confined to the UAE and subsequently extended to the rest of the Gulf.

“Our forecasts are for online sales to represent 5 to 10 per cent of revenues in the short term; there’s still a long way to go before e-commerce’s potential is fully realised across the region,” said V. Nandakumar, the Emke Group spokesperson.

That may be, but by some measures on-line sales have already made much headway in Saudi Arabia (valued at $650 million in 2011) and the UAE (nearly $230 million). According to Euromonitor International, Internet retailing was valued at close to $1.2 billion in the GCC as of end 2011. Projections are online-led sales would grow by 14 per cent CAGR (compounded annual growth rate) between 2011 and 2016 in the UAE and by 7 per cent CAGR in Saudi Arabia.

“Compared to other countries in the region, consumers in the UAE are technology-savvy and about 90 per cent of the population use the Internet either at home or in public places,” said an analyst at Euromonitor. “Therefore, there is big demand for online sales.

“The main challenge yet for all the players is to deliver on customer service, convenience and also prices to reach a larger audience. Payers will have to make sure they have the logistics right to be profitable and expand their business.

“Internet retailing in the GCC is still in its early stages and quite fragmented with many pure-Internet players competing with bricks-and-mortar retailers.”

So, what could supermarkets bring new to the table and give the established e-commerce platform a further lift? For the moment, food and related items are not on the menu because that would require same-day deliveries.

Lulu’s initial plan is to focus on electronics and allied products with delivery schedules of up to three days. “But it will not just be about having a few listed gadgets on the portal; they will be backed by special offers and promotions exclusively for the web store,” Nandakumar added. “At a later date the merchandising will be expanded to include garments and other non-food items because our customers would by then have had familiarity shopping online with us. A third stage could see the introduction of food products to the online mix.”

It is easy to see why electronics and tech gadgets are part of the first rollout. The margins are easily higher on these and consumers in the region are already quite savvy in ordering these online. They are also getting smart at sourcing the best deals out there on the web.

That could have been the prompt for the group buying website Cobone.com to recently launch an online electronics store. “We can see that customers are definitely willing to adapt to online shopping for both price and convenience,” said Warrick Godfrey, co-founder and chief marketing officer, Cobone.com.

In the months and years ahead, as online deals get bigger and better, the ranks of web shoppers in the UAE - and the GCC - will continue to swell.

By Manoj Nair, Associate Editor

© Gulf News 2012. All rights reserved.

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