Neelesh Bhatnagar, CEO of Emax
Electronics, wrote a rather mediocre article
for GulfNews last week on the future development of m-commerce in the Gulf
region. His views on m-commerce are hardly ground breaking, and in actual
fact somewhat tunnel visioned.
The idea that mobile is the future
of e-commerce isn’t new, in fact wamda.com reported in 2013 that shoppers in
the Gulf already prefer smartphones to computers or tablets when shopping
outside their homes. Bhatnagar’s opinion on the current state of m-commerce is
‘retail mobile commerce hasn’t yet gained similar traction despite the fact
that the Gulf registers one of the world’s highest smartphone penetration
rates’ and suggests ‘one reason could be that retailers themselves are late in
embracing m-commerce.’ However, taking a look at 2013 PayPal
Insights e-commerce report, mobile transactions already represent 10% of
e-commerce in the Middle East (a level similar to the rest of the world), and
are set to reach close to 20% of transactions in the region by 2015. The rate
of growth is expected to accelerate from
a current 1.3 billion transactions to 5 billion within the next two years.
Given the level of smart phone
penetration in the Middle East, it’s already hard to even define m-commerce in
the region, let alone measure it. Can a customer shopping in one store, who uses
their smartphone to find a lower price at another, and then orders it
electronically for in-store pickup, be considered an m-commerce transaction? Is
it m-commerce if a customer orders from a smartphone or tablet but exchanges
the item at a local store? In a recent report titled ‘The
New Digital Divide’ from Deloitte Digital in the US, 69% of survey
respondents say they already check the web before they head to stores; 36% say
they use digital devices like smartphones while shopping in stores.
Bhatnagar’s puts forward his other
theory that ‘has to do with consumers and retailers’ suspicion of the security
and safety of m-commerce transactions. ’It would seem however, Middle East
shoppers are already relatively comfortable with online shopping and what’s
interesting is trade between online shoppers in the Middle East and
businesses based in the region makes up only 10% of total spend. Most of these
shoppers are not spending at companies based in the Arab world; the
majority of online shopping is done in the US (35%); Asia (30%) and Europe
(25%), with the Middle East accounting for 10% of e-trade. This would indicate
shoppers in this region have long been comfortable with mobile shopping and now it’s up to retailers need to play
catch-up with their already tech savvy customers.
The rise of m-commerce and the
rapid adoption of e-commerce in general goes far beyond the creation of new
purchasing channels, and instead represents a change in overall buying habits. For
companies to really embrace this new era of retail digitization, they need to
realize that a whole new shopping experience is being created – omni-channel
retailing. The name signifies a trend in retailing towards the use of
multi-channel approaches to engage customers - mobile, tablet, television,
direct mailing, physical stores, pop-shops and websites to name a few.
Although I agree with Bhatnagar
that ‘M-era consumers are connected
around the clock, just a click away from browsing stores all over the world and
it takes them only a few clicks to make purchases,’ and his opinion that
retailers need ‘to adapt to the evolving requirements of consumers if they are
keen to seize the huge opportunity provided by m-commerce and sustain the
business in the future’, rapid growth
in e-commerce is not the only issue affecting traditional retailing in the
region. There are a number of other factors that present challenges for foreign
retailers operating in the local marketplace.
With a growing population and
record numbers of tourists flocking to the UAE, retailers seem to be under the
impression customers will always be there. However, in a region where out of
stock scenarios are frequent, checkout lines are long, return policies differ
to European and US standards and stores are staffed by sales associates from South
East Asia whose English or Arabic is most likely to be their second language,
customers are growing more comfortable with onmi-channel and less tolerant of
the experience they encounter in store. This is already evident in 2013 Paypal
Insight report claiming that most of those polled said that they prefer online
to offline shopping thanks to convenience (26%), lower prices (18%), and
product variety (15%).
As foreign companies and brands
require a local partnership to trade outside of a free zone, partnerships are
usually formed with major local Emirati groups such as Landmark Group, Al
Chalhoub, or Al Tayer. By law, the partnership is at least 51% owned by the
local company, hence not under full control of the parent company, which causes
a disruption in the alignment of the business functions. Certain key systems
such as the overall supply chain can become inconsistent, due to non-integrated
IT systems. Take for instance a European customer, used to an onmi-channel
shopping experience in Western retailing, who orders online from a brand’s
global website, but then takes it to be exchanged or refunded at a local UAE
store. Due to the brand’s local independence from the parent company, he will
be told by the store assistant that the process cannot be completed, and
instead must return to the item through the postal service to the global head
office. How can global brands operating in the local market place expect to
offer a seamless, uninterrupted shopping experience when experiences differ
from country to country in what is supposed to be an increasingly connected
world.
Furthermore, Tina Oberoi, Chief Operating
Officer of franchise retail at Lals, recently
stated that ‘UAE retailers tend to
add a certain percentage over the price in the country of origin of the brand,’
highlighting that ‘margins in fashion are definitely good, even in the
mid-market space’. With 18% of shoppers already preferring online shopping due
to lower prices, is this really a sustainable trend in the industry? It would
appear the omni-channel experience for retailers in the Middle East will be
difficult to achieve unless an alignment of all operating policies and
standards is implemented at a global level.
The mere adoption of m-commerce
technology by Middle East retailers is not enough, nor is Bhatnagar’s other obvious
solution of creating ‘the fastest ways to deliver the purchased goods to mobile
buyers’. The real challenge for the retailer will be to create innovations that
sync the online and offline experience, exceeding customers’ expectations to
generate profitable growth.
There is no doubt that Burberry is
one of the most successful examples of a brand that has harnessed digital
channels as a way of delivering unique experiences. Probably the most well
documented integration of the online and offline experience, Burberry underwent
a seven year transformation from a floundering, disregarded, over-licensed, decentralised brand, to
becoming one of the most innovative and desirable luxury brands. From live-streamed
catwalk shows, viral social media campaigns and online communities, all have
been instrumental in engaging fans and spreading awareness.
Digital experiences such as the
interactive ‘Burberry Kisses’ campaign allows mobile users to share ‘kisses’
via a desktop camera or touchscreen device, to ‘Burberry Bespoke’, a service
which allows customers to create their own customized trench coats online, all
serve as a purpose to humanise technology in order to interact with the
consumer in a more personal way. Burberry has become as much a media content
company as a design house, and this content driven strategy appears to have
paid off, with Bloomberg
reporting Burberry sales to have risen 14% to $866 million for the three months
to the end of 2013 compared to 2012.
What today’s Middle East consumer expects
is the advantage of digital platforms to provide broad product selections,
reviews, product information and opportunities to compare pricing and product
specifications online. But with the ‘shopping mall experience’ so ingrained
into the Middle East shopping experience, the traditional advantages of
handling a product and personal service at physical stores will always exist.
Retailers that can learn to harmonize both the online and offline experience
will be the companies that dominate their category in the future.
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