Friday, Mar 22, 2013
Dubai
There is nothing to beat the intimacy and immediacy offered by online shopping. And once the click is made, there is the build-up of anticipation until the merchandise gets delivered at the front door.
But there is another key differential e-com portals are expected to have over their brick-and-mortar counterparts - pricing. Certainly, there is no e-commerce business model that would have a portal offering a product or service at a premium.
But in the UAE the situation is not that clear-cut. Under the legacy distribution laws that prevail in the county, a portal can acquire a branded product only from the official distributor if it wishes to sell it within the local marketplace. What this means that there is little maneuver room for the portals when it comes to pricing as the official distributor, more likely than not, will want to stick to the official pricing list.
Sure, the portal could source the product through the grey channels from outside the UAE and sell at a discount to the showroom prices. “But any portal buying from the grey channel cannot offer a local warranty and certainly not one that would be honoured here,” said Niranjan Gidwani of Eros Group. “It places the shopper at a disadvantage and particularly in tech merchandise as the after-sales side of it vital.
“Whenever we come across flagrant violations of the distribution law we take up the matter legally against the portal. In the current regulatory regime online portals have limited leeway on the sourcing and this, in turn, negates their pricing strategy to a great extent.”
It is unlikely that wholesale changes to the distribution patterns will happen overnight given its disruptive nature. It could be a key factor why several planned e-com ventures failed to materialize. Get the sums wrong on the sourcing side and any portal will soon find itself up against the wall (even a virtual one.)
The lack of choice could also be why UAE’s online shoppers are more likely to park their dirhams with portals outside the country. According to research by Tejuri.com and Nielson, more than $2 billion worth of online shopping annually is attributed to non-UAE websites. This, according to Tejuri.com, results in “revenue leakage”.
What should an e-com venture seek to do? “Start small and then work your way to a scale that can sustain the online side,” said V. Nandakumar, spokesperson for the Emke Group. It was recently that the Group which operates the Lulu supermarket chain placed some of its merchandise (excluding fresh goods) for online sales.
“As of now, the online operations are one way to highlight specific promotions that we have in-stores - we certainly do not see it as drawing shoppers away from the stores. If online sales can build up to be 10 per cent of our gross revenues at some point, it’s a position we can be comfortable with.”
Lulu Group’s online aspirations can always call on the scale that its physical network exudes. The Landmark Group entity Emax also has a similar strategy when it goes wide with online selling.
“Within the UAE, the sales model of a brand-distributor-retailer exists; however, we are in talks with several brands to consider regional buying as Emax is the only retailer with 37 stores across the UAE, Saudi Arabia, Oman, Qatar and Bahrain,” said Neelesh Bhatnagar, CEO of Emax. “Keeping economies of scale and central/direct buying in mind, this is a very good method to conduct business.
“Consumers here need portals which fulfill all their needs at affordable prices. In short, if a portal has to survive the gestation period, it needs to have an extensive product range, best industry prices, right systems for easy and safe online transactions and a systematic logistics process for streamlining procedures.”
Here is the prescription, now all we need to know is many portals make the cut by following it.
By Manoj Nair Associate Editor
Gulf News 2013. All rights reserved.
