Ben Crawford, CEO of CentralNic, discusses the rise of e-commerce in the MENA region.
It’s a pivotal moment for the retail industry in the MENA region. After some sluggish initial growth in the early 2000s, the rise of e-commerce is finally set to transform the face of business in the region. Growth opportunities today are ripe for not only the large and small retailers, but also the new generation of e-commerce players.
Some might say it’s wishful thinking to believe that the region will become the next global e-commerce hub, but let’s take a moment to look at why e-commerce is at a pivotal point right now.
Firstly, it’s important to realise that mass internet adoption in MENA only really took off by the mid-2000s, led by the Gulf Cooperation Council (GCC) countries, and driven by the smartphone, social media and faster internet. Businesses have generally been quite late to join the fray, with digital only becoming more central to business strategy after 2010.
Since then, things have gotten progressively more interesting though, fuelled by the region’s high spending potential and high per capita income, especially in the UAE, Saudi Arabia and more recently, in Egypt as well. These are countries which today boast some of the world’s highest internet and social media penetration rates. In fact, according to Deloitte’s Going Digital Report, the UAE currently has one of the highest penetration rates in the world at 80%.
But this is just one part of the story. Favourable regulations for online commerce, especially in the GCC, are also key factors that have boosted the potential of e-commerce. In the UAE, for example, government has made it easier for tech businesses to operate. This can be seen with some of the latest e-commerce regulations from the Dubai Free Zones Council, which were set up to promote more foreign direct investment into the e-commerce sector.
March 2017 also became a key moment for e-commerce development in the region with Amazon announcing the acquisition of “Souq”, the leading MENA e-commerce company, for US $580 million. That same year also saw the birth of “noon”, a new e-commerce venture with US $1 billion of funding supported by both Emaar and the Public Investment Fund of Saudi Arabia. These are essentially the MENA region equivalent of Alibaba, the Chinese e-commerce giant, and have marked the start of a new digital phase for the region. Food delivery apps have also seen big success in the region, with Careem Now initially launching in Jeddah and Dubai before expanding to Amman, Riyadh, Dammam, Makkah, and more recently, Karachi.
As new e-commerce brands continue to spring up, these are also becoming more sophisticated. A great example is how e-commerce firms are realising the importance of language and localisation, which are key given that Arabic dialects vary across markets. Companies are now understanding this much better and have begun to model their presence online according to each market’s tastes and preferences.
Despite all of this, there are still some challenges that the region needs to overcome before it fulfils its potential. For example, with the exception of the GCC, other countries in the Middle East have yet to standardise online and mobile payments. Cash on delivery is still the preferred mode of payment in many countries. In fact, around 62% of MENA online shoppers prefer this method of payment when buying online, compared with less than 5% in the UK and France. Other key challenges include the lack of area codes and lack of last mile postal services in many MENA countries, which can make delivery a real problem. This is further compounded by the fact that e-commerce development in the GCC countries is more advanced than in some of the other parts of the Middle East or North Africa. When looking at the figures for e-commerce, there is also a disparity in categories, with electronics and fashion leading the charge, while other areas like personal care and groceries are not very well developed yet.
In conclusion, there has never been a more exciting time to be in e-commerce in MENA. The market is valued at approximately US $8.3 billion today and this is expected to rise to US $28.5 by 2022. The region’s consumers are increasingly digitally savvy and are looking to make their purchases online, using their smartphones as the preferred way to do so. Recent research from PwC has shown that 56% of Middle Eastern shoppers were on mobile devices while shopping online.
While the future certainly looks promising, it’s now down to the MENA region to capitalise on all this potential.
All rights reserved to the initial publisher for Business Chief.