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Thu 15 Mar 2018 03:32 PM

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Middle East e-commerce to deepen its inroads into retail

Already an established part of the region's retail scene, there are more big changes to come in the growth of online shopping

Middle East e-commerce to deepen its inroads into retail

Last year was a time of game-changing developments for the e-commerce sector. And it also acted as witness to an influx of industry players who were keen to tap into the burgeoning GCC and MENA market.

According to analysts Frost and Sullivan, the e-commerce industry in the UAE is expected to hit $10bn by 2018 compared to the 2014 figures of $2.5bn, equating to a staggering 400 percent growth by the end of this year.

This certainly comes as good news to UAE online retailers, most of whom are currently in the process of monetising and revamping their online presence to reap maximum profits and maintain their status in this highly competitive e-commerce era.

Additionally, the launch of projects like Dubai CommerCity – an AED2.7bn ($735m) joint venture between Dubai Airport Free Zone Authority (DAFZA) and Wasl Asset Management Group to form the first dedicated e-commerce free zone – will further accelerate the e-commerce ecosystem’s growth.

The GCC’s e-commerce sector will, according to reports by the American global management consulting firm AT Kearney, be worth around $20bn by 2020. 

What’s triggered this growth? 

The region’s youthful demographics, with their high levels of disposable income and high internet and mobile penetration rates, are the prime factors for this growth.

According to reports from Google, for instance, the UAE leads global smartphone penetration at 73.8 percent and the country’s internet usage statistics show that 91.9 percent of the population has internet access.

Hence, it’s no great surprise that the use of smartphones as a shopping and purchasing device continues to surge in popularity here.

PwC released a Total Retail Survey last year in which it interviewed more than 24,000 people across five continents in 30 countries.

In the Middle East, they asked 1,000 online shoppers geographically spread across the UAE, Egypt and Saudi Arabia about their shopping behaviours and expectations, and 56 percent of the respondents referred to the smartphone as their main tool for online purchasing, with 41 percent having already used their smartphone to pay for purchases.

The findings also revealed that customers preferred online portals that are mobile friendly rather than downloading an app. 

This switch in customer shopping behaviour from offline to online in the last couple of years has also led to luxury brands like Gucci, Prada, Versace, Coach and Breitling, among others, to focus on boosting their sales through their e-commerce platforms and designing mobile sites that can be easily navigated to make online mobile shopping an effortless and enjoyable experience.

Additionally, attractive online promotions like the US import Black Friday are additional reasons for customers choosing to
buy luxury products.

Obstacles in the road

We’ve spoken about the rapidly increasing growth of e-commerce in the Middle East, but every success story has its own share of hurdles. So, what are the challenges to e-commerce in the region?

Keeping customers’ loyalty is a key priority for any retailer but it is not without its challenges. The biggest issue for e-commerce is retaining customers by personalising their online shopping experience and constantly working on improving that experience.

Additionally, due to smartphone and tablet penetration, it is hard to predict on which device and which screen the purchase will be made, which makes it difficult for players to engage users across devices.

The role of retargeting

This is our speciality, a mechanism by which ads are tailored to the behaviour and preferences of particular internet users. Retargeting has shown a breakthrough in the number of purchases because it works on targeting users with products they were viewing and interested in.

RTB House uses deep learning to help e-commerce players gather information and gain insights into their customers. This has helped enhance the online user shopping experience and more efficiently deliver the most valuable customers to e-commerce shops – and as a result better and more efficiently managing the client’s budgets.

E-commerce trends for 2018

As the world of e-commerce continues to be dominated by emerging technologies, a picture is emerging of greater penetration that will lead to new technologies and trends entering the GCC scene.

As consumers have come to expect a deeper shopping experience, so typical floor sales and discounts are not enough. Brick-and-mortar players will have to digitise their physical infrastructure and begin implementing new store features and formats based on customer convenience, with a strong digital flavour. To keep up with the competition, e-commerce brands with retail stores will need to trend towards connecting their physical spaces with their digital infrastructure.

Personalised messages and product recommendations are also crucial in today’s customer journey and retargeting campaigns should present only relevant offers to the most promising clients. Last year showed us how Artificial Intelligence (AI) disrupted the world of digital services and that machine self-learning processes are offering outstanding results.

With these technologies in hand, the future belongs to brands that can use AI efficiently to match customers’ expectations.

The role of AI has already appeared in all industries, but the truth is that there is still a lot to improve and achieve in this field. Data-driven marketing, based on deep learning – the most promising subfield of AI – can now help estimate user-basket value. However, new screens like virtual reality and augmented reality offer novel uses for day-to-day life.

This is a great time to be an e-commerce company in the Middle East. The region may be a late adopter of e-commerce, but it has managed to become a new and thriving market in a short span of time. But it’s also a challenging time, given the greater competition, hence it is essential to retarget in a nuanced style.

Let’s face the truth: in the time when almost all of e-commerce players use retargeting as a way to multiply their revenue, the smarter your approach is,
the better. 

Shady Francis is Regional Country Manager MEA, RTB House.

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