Wednesday, Dec 21, 2011
("Gulf Group Discount Websites Eye Opportunity As Econ Backdrop Darkens," first published at 0600 GMT Tuesday and repeated at 0351 GMT Wednesday, misstated the dollar figures in the 14th paragraph. The correct version follows:)
--As economy worsens, Gulf-based group discount website's eye business boon
--GCC's e-commerce industry seen worth about $3.3 billion in 2010, $5 billion next year
--Arab Spring has provided boost for internet use in the region
By Shereen El Gazzar
Of ZAWYA DOW JONES
DUBAI (Zawya Dow Jones)--An expected economic slowdown in the Persian Gulf next year has local group discount websites excited about the opportunity this could offer to grow their businesses at a time when consumers in the region are looking for ways to maintain their current lifestyles, but in more austere ways.
"Our experience is that the worse the economic situation, the higher demand for websites such as Sukar," said Muhammad Chbib, the chief executive officer of Sukar.com, an online private shopping club that offers well-known brands at discounted rates. "If people are used to a certain lifestyle, they would like to maintain this despite the economic situation. They start looking for explicitly good deals for lifestyle products and services and this is where Sukar comes into place."
Group buying websites are still a relatively new concept in the Persian Gulf but have quickly found favor amongst the cost conscious as well as consumers keen on bargains. U.S.-based Groupon started operations in the United Arab Emirates in 2010, while Living Social, another U.S.-based online deals company, acquired Dubai's GoNabit in June 2011.
The appeal of the region is obvious. Business-to-consumer e-commerce totaled about $3.3 billion in the Gulf Cooperation Countries, or GCC, in 2010. This is expected to reach $5 billion in 2011, according to a study conducted by Visa Middle East and IMRG International. Another study conducted by GoNabit and YouGovSiraj showed users are positive towards online shopping in the region and group buying websites serve as a consumer entry point for electronic commerce.
And while many businesses in the region are hunkering down for an expected dip in economic activity next year, industry experts say any slowdown could act as a catalyst for group buying websites.
SLOWING GROWTH
According to the International Monetary Fund, economic expansion for oil exporters, which includes the GCC, in the Middle East and North Africa region is likely to slow to 3.9% in 2012 from 4.9% this year.
"In a recession what you do is you cut all your necessary budget. You shop on discounts for your basic needs...what you do is that for your unnecessary stuff you look for bargains and these websites are designed for bargains," said Karl Nader, a principal at management consultancy Booz and Co. in Beirut.
Paul Kenny, the founder and chief executive of local group buying website Cobone, said that a deteriorating economic environment is perfect for his business as people are now looking for ways to save money. He said his firm's website has sold 434,000 coupons since launching in July 2010, saving its users about $25 million compared to full prices.
"For 2011 it is a $30 million industry in Mena (Middle East North Africa), the expected size in 2012 is $80 million," he added.
One of the major drags on the economies of the Middle East this year has been the dramatic political upheaval witnessed throughout the region. The so-called Arab Spring has also highlighted the importance of the internet in peoples everyday lives and it is this appreciation of the world wide web that has many electronic retailers upbeat about the year ahead.
In Egypt for example, the number of internet users grew to 26.5 million by the end of July, up from 23.5 million at the end of January when an uprising led to the overthrow of the country's President Hosni Mubarak.
"With regard to the Arab Spring that is technically still going on, more and more Arab users are using the internet to communicate. Egypt is a perfect example of coming online," said Kenny. "Only 6% of the Middle East internet users are active buyers online, compared to 51% in the United States. I think there is a significant growth potential in the next three to five years within the region".
With large parts of the western world facing a bleak economic landscape in 2012, relatively high growth regions like China, India and the Middle East will provide the big opportunities for e-commerce retailers and group discount providers alike.
Since their launch in the Middle East, Living Social has what it terms as good days where transactions have totaled between $200,000 and $300,000, according to the firm's managing director Dan Stuart.
"Not every day is like that, but the potential exists," he added.
-By Shereen El Gazzar, Dow Jones Newswires; +971 444 61684; Shereen.elgazzar@dowjones.com
Copyright (c) 2011 Dow Jones & Co.
(END) Dow Jones Newswires
21-12-11 0430GMT
