Are Middle East shoppers finally getting online?
E-commerce set to grow rapidly as businesses gain customers’ trust, reveals report.
October 30, 2013 10:23 by kippreport
While malls still reign as the ultimate shopping destination in the Middle East region, e-commerce is quickly gaining pace and is set to become one of the biggest growth areas for business in the region, according to a new report released by Aimia, a global leader in loyalty management and the company behind Air Miles in the Middle East region.
The study, titled: Smart, Savvy and Set to Soar: Customer Loyalty in the Middle East, looks at consumer behaviour and its implications on business, and is based on the results of months of in-depth research into Middle East consumers’ shopping habits and buying behaviours.
Releasing the report during his keynote speech at The Marketing Show in Dubai, Paul Lacey, managing director of coalition development at Aimia ME, said: “Businesses in the Middle East region need to rethink how they’re speaking with their customers, who are generally young, tech savvy and ready to engage with brands online through email and social media. They are our new customers and businesses need to understand that their expectations are higher than ever before. As long as companies embrace this changing environment we’re working in, there is ample opportunity to grow in leaps and bounds ahead of other markets.”
Malls are magic, but ‘e-tail’ is fast impending
Even though Middle Eastern consumers are leading the way in the use of technology, unlike other markets, this has not translated into online shopping yet. However, there are signs that this is about to change. Today, more than $1.1 billion is spent in the Middle East region over the internet annually and, by 2016, it is predicted to grow to $2.2bn.
“We face an interesting situation here, where everyone has a smartphone in their pocket and they’re generally not afraid to use it in relation to new social connections or contacts, but the one area they are still wary about is shopping online,” adds Lacey. “Retailers need to significantly build their trust before consumers are willing to part with more information, or trust online shopping to deliver a similar experience in the shopping mall.”
The study also found that shoppers across the region use the internet to compare prices and read reviews that influence their shopping behaviours. Estimates suggest that 20 per cent of in-store sales are influenced by pre-purchase digital touchpoints, adding that 46 per cent of Middle East consumers use their mobile devices to make price comparisons inside stores, 44 per cent seek out user reviews and 44 per cent take opinions from social networks before making purchases.
“In the future, building more profitable customer relationships will not simply depend on direct contact through smart technology, it will also depend on influencing social networks,” says Lacey.
The research recommends that businesses will need to continue building trust among their customers to encourage them to shop online. One of the main apprehensions that Middle East consumers expressed was about sharing personal data, with 70 per cent voicing concerns about websites using personal data to serve targeted ads, compared with only 41 per cent in the UK and 34 per cent in the US. Seventy three per cent in the Middle East region listed hackers accessing their private information as the second top concern, (especially the UAE at 76 per cent), when compared with 52 per cent in the UK.
As a consequence of this behaviour, some internet retailers, such as Souq.com and Namshi.com, have adopted a ‘pay on delivery service’ to mitigate concerns over the safety of online shopping. Like with most Western markets, this reluctance to embrace online buying will gradually erode as consumers become more familiar with it – perhaps earlier than what might be expected.
“While the report shows that data privacy concerns are slightly higher than in other regions, which may explain why browsing has not yet translated into online transactions, the region’s high engagement with technology is a strong signifier of the potential for online shopping to grow. It is now up to businesses to create a more interesting experience for the shopper to attract more online engagement and increase those trust levels. Our Middle East consumers are ready and willing to engage. The region continues to offer new and exciting commercial possibilities, with a vibrant youth culture and strong growth forecasts,” adds Lacey.
The report shows that loyalty marketing is still new to the region, but with the rapid technology adoption by consumers, there is potential for businesses to embrace and overtake other markets in loyalty programme developments.