The Middle East has had a complicated relationship with e-commerce. Lack of accurate street addresses, a preference for face-to-face interactions, alongside consumer preferences for cash on delivery – instead of credit cards or online-payment systems – have all contributed to a relatively slow adoption of e-commerce.
Recently this has begun to change. The $580m acquisition of Souq.com in 2017 by Amazon – now rebranded as Amazon.ae – coupled with new platforms like Noon, and the growth of mobile wallets in Egypt, the region’s biggest market, have played pivotal roles in this changing picture.
E-commerce’s day of retail reckoning
As a result, US management consultancy Bain & Co predicted in 2019 that: “The retail industry in the Middle East and North Africa (MENA) is on the verge of a pivotal shift.”
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“E-commerce is becoming a reality,” it wrote, “reinventing consumers’ path to purchase, forming new customer experiences, disrupting business models, and creating growth opportunities for large and small retailers as well as for a new generation of e-commerce pure players.”
Noting that Middle East consumers, and particularly those in the Gulf states, are “among the most connected and digitally savvy in the world,” a study from Bain & Google identified high levels of internet and smartphone take-up in UAE and Saudi Arabia, coupled with the eight hours 10 minutes a day that Egyptians spend online, as a strong basis for growth in the region’s three biggest markets.
Firm foundations for e-commerce
Now, the coronavirus pandemic is helping to usher in a new era of e-commerce, accelerating trend lines that had already become apparent.
Efforts to grow e-commerce have included new laws and regulatory frameworks, moves to encourage e-commerce startups, as well as ongoing investment.
Ventures such as Kuwaiti beauty e-commerce startup Boutiqaat, and specialist providers like the Dubai-based Sprii.com – “The #1 shopping destination providing everything for Mums in the Middle East” – are just two businesses to have benefited from recent funding rounds.
Last-mile challenges, which have historically been an issue for fulfillment of e-commerce in the region, also appear to have been overcome.
MarkeetEx, an Omani online marketplace, offers delivery within two hours for Muscat-based customers and a few days if you live elsewhere in the country.
Over in UAE, online fashion platform Namshi even promises that, “If you are on a vacation in Dubai, staying in a Rove hotel and need to do online shopping; do not worry as Namshi is now delivering the orders within four hours at all the Rove Hotels.” For everyone else, they promise next-day delivery in Abu Dhabi, Dubai and Sharjah “for orders placed before 10am”.
COVID-19’s catalytic effect
These elements, coupled with China’s interest in the region, have driven further interest in the Middle East’s e-commerce potential.
Since the pandemic began, ZON, which describes itself as “the region’s first fully decentralized mobile-only e-commerce network,” raised $8m in seed funding, ahead of its launch later this year. Meanwhile, Mumzworld, an online baby shop, reported an 800% increase in activity across some verticals.
Physical retailers, not wishing to be left behind, are also rapidly developing their online presence.
SME10X, a publication for smaller businesses, revealed how, “Emaar Malls has partnered with Noon.com, to open The Dubai Mall virtual store that will support its retailers and the community to address the unprecedented challenges from the COVID-19 situation.”
Historically, the mall, the biggest in the world, has been open 24/7 during Ramadan. This year, instead, customers can visit a virtual version on Noon.com, “make their purchase choice online, and have the purchases delivered to their homes by noon across the UAE”.
Other retailers are following suit, with many launching their own portals.
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MG Motors announced plans to launch an e-commerce platform for the region during Ramadan, a time of year that typically sees deals being offered on new vehicles, while the food and drink provider Fresh Del Monte launched an e-commerce store.
Before the COVID-19 outbreak, online groceries were already seen as an untapped market in the region. Wamda commented in 2019, that, “The e-groceries market is currently worth $200m in the [Gulf states] and Egypt, accounting for less than 1% of the e-commerce market and so there is room for rapid growth.”
That’s begun to change as a result of the coronavirus. As Wamda notes, “Food delivery platforms like Deliveroo, Otlob in Egypt and Careem NOW in Saudi Arabia [are] to start offering groceries on their platforms alongside their roster of meals from restaurants.”
More traditional food retailers are also benefiting. BinDawood Holding – the Saudi retail company behind the Kingdom’s BinDawood stores and Danube hypermarkets – says average e-commerce sales on a 10-day basis had increased by 200%. Meanwhile, Logistics Middle East reported, “its average order value rose by 50% and app installations by 400%.”
Looking ahead at Middle East e-commerce
Whether the Middle East’s e-commerce sector can maintain the momentum triggered by COVID-19 remains to be seen. After all, malls and markets are a key part of life for many people in the Middle East.
Moreover, as Racha Ghamlouch, chief aggregator at the Digital Digest, recently told ZDNet, many players in the region are investing heavily in retail tech. These efforts are designed to offer a more personalized, and perhaps enjoyable, in-person shopping experience.
As Ghamlouch observes, companies are exploring innovations such as robots, smart mirrors and AR apps; as well as analytic-based tech found in facial-recognition programs, and heat maps, which can track and improve store layout and flow.
The big question, then, is whether once restrictions are lifted, consumers will return to their previous habits, or if new online behaviors will have become more ingrained.
Certainly some are betting that this will be the case.
In March, Nana Direct, a Saudi online grocery app, raised $18m in series B funding, after seeing a rapid rise in usage, encouraging investors to back its potential expansion into other markets.
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As StepFeed’s Leyal Khalife, explained, “The app allows users to pick and choose groceries from different supermarkets or stores and have them delivered to their doorstep in one go.”
It’s likely that some customers – especially if they’ve had a positive experience using a technology forced on them due to shop closures and public-health concerns – will continue their online shopping habits. Having acquired a taste of e-commerce, these consumers may be more willing to do it permanently.
The continued rollout, and adoption, of 4G and 5G technologies across the region will also help, by speeding up the online process and unlocking a new series of apps and enhanced digital retail experiences.
If that’s the case, Bain’s prediction that e-commerce in the region would be worth $28.5bn a year by 2022 – up from $8.3bn in 2017 – with a penetration rate of 7% of total retail sales, may turn out to be an underestimate.
E-commerce’s time in the Middle East may finally have come.