Will e-commerce eventually overtake retail store shopping?
It’s hard to ignore the shift inflicted by the internet in our collective consumer psyche.
Case in point: You need to buy something but instead of heading over to the shop, you simply turn on your computer or mobile device to visit a website. A few clicks here and there and you’re done – and all that in less than five minutes.
This e-commerce phenomenon, while innovative and convenient, has also taken its toll on traditional retail businesses. Just last March, it was reported that 24 big retailers including Abercrombie & Fitch, Claire’s, Foot Locker and Guess are closing down many of their stores across the US to manage declining revenues. Meanwhile, Toys ‘R’ Us announced its liquidation after profits drastically fell from 2016 to 2017.
All this makes us wonder: Are the days of retail stores numbered? How will this affect the UAE in the short and long run?
A study last year by consulting firm AT Kearney showed that the UAE’s e-commerce industry is poised to grow by 25 percent year on year until 2020. Given the country’s high disposable income, internet accessibility and smartphone usage – which was the highest in the world as of April 2017 at 80.6 percent – the projection makes sense.
“This country is a melting pot of societies and this is very much reflected in the consumer habits of online buyers,” observes Harry Lonergan, digital marketing manager at Sun and Sand Sports.
“While certain categories may attract one demographic more than the other, they are in no way negated to the rest.”
In some way, the current trend fits perfectly with the consumer mentality that was developed here even before the dawn of the e-commerce boom.
“This region is incredibly price sensitive and has very much grown accustomed to the multitude of lengthy mark-down periods and flash sales,” Harry points out. “So when you pair this with the high level of smartphone penetration, consumers are now much more enabled to find the best deal.
“The ‘everywhere delivers’ mentality has also become the norm in this region so removing the need to physically go to a mall has been replaced with shop-on-demand.”
With all that said, it’s no wonder that the country has seen an increase in online shopping platforms over the years, with familiar homegrown names such as Awok, Aido and Mumzworld popping up.
The acquisition of local start-up Souq by the US e-commerce giant Amazon last year has seemingly opened the floodgates for other players across various industries to join
Just the same, this shift in buying behaviour has encouraged retail brands to incorporate online selling into their business to remain relevant and competitive.
“While competition is fierce and growing at an incredible rate, there’s still enormous room for growth with an expected rise in demand in the next two years within this region,” reasons Harry.
Tech entrepreneur Paul Kenny, co-founder and managing director of AYM Commerce, an investment firm that helps companies set up digital platforms, says that more and more businesses in the UAE are now treating the e-commerce model as a necessity to stay significant.
“The UAE’s young population, a third of whom are under 25, is an optimal market for e-commerce,” Paul points out, adding that the local industry is growing at a much faster rate than the US and Europe.
“This, of course, doesn’t mean that all online shoppers are young; more than 50 percent of UAE consumers have reported using an e-commerce platform.”
Despite the trend, the majority of local businesses feel that having both online and brick and mortar stores is more advantageous as it allows them to cover all the bases.
“If done correctly, the relationship should be of mutual benefit,” Harry stresses. “Yes, online platforms may generate revenue that might have been spent in a retail store. But, if, like us, a business has both an online and offline presence, you can interact with your consumer in a multitude of ways that online platforms simply can’t. Having a physical store in strategic locations is an incredible way to maintain consumer relevance.”
Factor in the strong mall culture here – with more shopping centres expected to open in the coming years – and it’s hard to imagine retail outlets completely fading out in this country. Proof of this are the mall projects currently in development in Abu Dhabi including Reem Mall and My City Centre in Masdar.
Neighbouring Dubai isn’t slowing down either with numerous projects already in the works including the AED 6.1 billion mega complex Deira Mall, touted to become the biggest mall in the Middle East.
“I think physical stores will continue to play a role but most likely in a very different manner to which we’re accustomed,” envisions Harry.
“A lot of retailers can see the change in trend and are starting to focus towards consumer engagement and the actual shopping experience itself.”
Paul adds that many consumers in the UAE and the region are still reluctant to shop online for various reasons, including fear of fraud, product quality and return policies.
“Perhaps the toughest issue to navigate for most market entrants is the resistance of consumers to let go of the social aspect of traditional shopping,” he says.
“This is why I’ve always maintained that a crucial element of every e-commerce business is to look for ways to engage with and give back to the community. For example, host concerts, sponsor youth football teams, have giveaways at universities with redemption codes and build effective loyalty programs,” Paul advises.
At the end of the day, Harry says it’s all about putting the consumer first: “The future of online shopping is anyone’s guess but the focus now is tying in all the various touch points a consumer has and trying to provide a truly unique customer journey that is suitable to them and them alone, based on things like interests, habits and personal preferences.”
Make the most of your online shopping experience with these tips…
- Shop at reliable sites: Do your due diligence and research the e-commerce platform before signing up. It’s helpful to read reviews and ask others who have purchased products from the site.
- Compare prices: Don’t buy the first thing you see. Check other websites
to compare the prices of the item you have your eye on – you might find a good deal elsewhere.
- Keep an eye on promotions: Most shopping sites offer cash back and voucher codes to repeat customers for discounts. Sign up to the mailing list to get regular updates.
- Be wary of promotional ads and emails: It’s always best to go directly to the actual website to check special promotions and sale announcements before making a purchase.
- Shop on a secure connection:
Avoid making transactions using public wifi to protect vital information from
- Change passwords: Update passwords, including credit card pin numbers, regularly to keep sensitive personal and bank details safe.
WORDS Ferdinand Godinez