2020 was a volatile year for most sectors. High touch and discretionary sectors such as leisure, travel, and mobility sector revenues nose-dived.
Overall retail also had a tough year as customers shopped less. On the other hand, online sectors such as e-tail (online retail) including eGrocery, ePharmacy, eBPC, online fashion and online electronics witnessed hyper growth during 2020.
The pandemic proved the utility of the large technology companies. During the peak of lockdown when all malls were partially closed, on-demand delivery of services helped in social distancing, while ensuring essential services were not disrupted during the pandemic.
E-tail had a blockbuster year with year-on-year growth of more than 50 percent in some part of Middle East. For example, eGrocery grew 500 percent during the peak of pandemic as new customers who had never tried ecommerce were forced to adopt it.
Almost a third of consumers in eGrocery were first time e-commerce buyers. Many beauty brands reported tripling on their online revenues – albeit on a smaller base.
In 2020, online retailers benefited from increased adoption from consumers on the back of social distancing.
The supply landscape also got a big boost as retailers expanded their scope and entered into new categories. For example, Noon launched NowNow, a food delivery platform and Noon Daily, a grocery delivery platform while Dubai Government launched DubaiStore, an ecommerce marketplace. Retailers also invested heavily in improving their critical capabilities such as logistics to provide a more seamless experience.
Retailers such as Carrefour and Lulu launch their click-and-collect service, while players such as Fodel created a network of pick-up locations made of local small merchants.
What got them here won’t take them there
In 2020, online retailers benefited from increased adoption from consumers on the back of social distancing. Some online retailers also spent heavily on customer acquisition; especially during critical moments such as the Black Friday sales period in the last quarter of 2020. However, I do not expect a very large customer adoption of online retail, as more than 70 percent of target population of large market such as UAE and Saudi Arabia have already brought a product online.
What was a competitive advantage last year will become a right-to-play in 2021. Retailers will need to find new avenues to differentiate themselves. The focus will shift towards consumer experience, some of the areas of focus that I expect to see are:
* Focus on retention: It is well documented that it is cheaper to retain a loyal customer than to acquire one. E-tailers were growing on the back of high adoption of their services. Now that there has been a step change in adoption of etailing services, these etailers will give focus on retaining and cultivating a loyal base and increasing the share of wallet from them. As an example, even during this Black Friday sales period, large players such as Amazon and Noon focussed on their loyalty programs – Amazon Prime and Noon VIP. There was no free shipping for all orders as was the norm in earlier years. Instead, free shipping was reserved for their loyal/high value customers.
* Logistics enablement: We have already seen new business models in logistics this year. Retailers will increase their focus on these solutions as it improves both unit economics (last mile delivery costs tend to be high) and customer experience (flexible delivery options is a critical decision criterion for customers).
* Integrated customer journeys: Majority of consumers are now discovering products on online mediums such as social media, brand websites, consumer views and online search. The fast emergence of Facebook, Instagram, Youtube and more recently Tiktok as important consumer touch point channels will accelerate this year. I expect retailers to integrate consumer journeys from discovery to purchase to post-purchase along the new consumer habits.
* New experimental formats: Consumer awareness about new formats of interactions such as on chat messengers and live video selling is already above 80 percent in our region. Conversational commerce platforms can enable retailers to reach consumers quickly and at a lower cost to test the medium. SMEs no longer need a website or app to reach customers. I expect both large and small retailers to experiment with such new forms of interaction.
One thing is for sure – e-tailers will have to up their game in 2021 to replicate the kind of growth they saw in 2020.
Sandeep Ganediwalla is managing partner of RedSeer Consulting, a global consultancy firm specialising in online services
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Can online retailers make 2021 another blockbuster year?
Sandeep Ganediwalla says e-tailers will have to up their game in 2021 to replicate the kind of growth they saw last year
2020 was a volatile year for most sectors. High touch and discretionary sectors such as leisure, travel, and mobility sector revenues nose-dived.
Overall retail also had a tough year as customers shopped less. On the other hand, online sectors such as e-tail (online retail) including eGrocery, ePharmacy, eBPC, online fashion and online electronics witnessed hyper growth during 2020.
The pandemic proved the utility of the large technology companies. During the peak of lockdown when all malls were partially closed, on-demand delivery of services helped in social distancing, while ensuring essential services were not disrupted during the pandemic.
E-tail had a blockbuster year with year-on-year growth of more than 50 percent in some part of Middle East. For example, eGrocery grew 500 percent during the peak of pandemic as new customers who had never tried ecommerce were forced to adopt it.
Almost a third of consumers in eGrocery were first time e-commerce buyers. Many beauty brands reported tripling on their online revenues – albeit on a smaller base.
The supply landscape also got a big boost as retailers expanded their scope and entered into new categories. For example, Noon launched NowNow, a food delivery platform and Noon Daily, a grocery delivery platform while Dubai Government launched DubaiStore, an ecommerce marketplace. Retailers also invested heavily in improving their critical capabilities such as logistics to provide a more seamless experience.
Retailers such as Carrefour and Lulu launch their click-and-collect service, while players such as Fodel created a network of pick-up locations made of local small merchants.
What got them here won’t take them there
In 2020, online retailers benefited from increased adoption from consumers on the back of social distancing. Some online retailers also spent heavily on customer acquisition; especially during critical moments such as the Black Friday sales period in the last quarter of 2020. However, I do not expect a very large customer adoption of online retail, as more than 70 percent of target population of large market such as UAE and Saudi Arabia have already brought a product online.
What was a competitive advantage last year will become a right-to-play in 2021. Retailers will need to find new avenues to differentiate themselves. The focus will shift towards consumer experience, some of the areas of focus that I expect to see are:
* Focus on retention: It is well documented that it is cheaper to retain a loyal customer than to acquire one. E-tailers were growing on the back of high adoption of their services. Now that there has been a step change in adoption of etailing services, these etailers will give focus on retaining and cultivating a loyal base and increasing the share of wallet from them. As an example, even during this Black Friday sales period, large players such as Amazon and Noon focussed on their loyalty programs – Amazon Prime and Noon VIP. There was no free shipping for all orders as was the norm in earlier years. Instead, free shipping was reserved for their loyal/high value customers.
* Logistics enablement: We have already seen new business models in logistics this year. Retailers will increase their focus on these solutions as it improves both unit economics (last mile delivery costs tend to be high) and customer experience (flexible delivery options is a critical decision criterion for customers).
* Integrated customer journeys: Majority of consumers are now discovering products on online mediums such as social media, brand websites, consumer views and online search. The fast emergence of Facebook, Instagram, Youtube and more recently Tiktok as important consumer touch point channels will accelerate this year. I expect retailers to integrate consumer journeys from discovery to purchase to post-purchase along the new consumer habits.
* New experimental formats: Consumer awareness about new formats of interactions such as on chat messengers and live video selling is already above 80 percent in our region. Conversational commerce platforms can enable retailers to reach consumers quickly and at a lower cost to test the medium. SMEs no longer need a website or app to reach customers. I expect both large and small retailers to experiment with such new forms of interaction.
One thing is for sure – e-tailers will have to up their game in 2021 to replicate the kind of growth they saw in 2020.
Sandeep Ganediwalla is managing partner of RedSeer Consulting, a global consultancy firm specialising in online services
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