Online shopping is slowly but surely on an incline in the Middle East, offering customers a new way to browse and purchase their products, yet, the traditional physical store experience continues to dominate. Could there be a way to reconcile them?
The local and international retail markets
With the advent of giants such as Amazon and Ebay in the west, and undeniably significant online sales at $453 billion last year in the US alone, it is clear that e-commerce is now a veritable presence in the retail market. The Middle East is trying to catch up, with a report by Researchandmarkets.com singling out the UAE as the largest e-commerce market in the region, after the online market’s sales doubled between 2015 and 2017. Saudi is close behind, expected to replace the UAE at the top spot in a couple of years.
Back during the Amazon deal to acquire Souq.com in 2017, it was revealed that e-commerce in the Middle East represents only 2% of total retail sales, so it would seem that online retail has a long way to go before it can begin to significantly rival brick and mortar stores in the region. Note that this same percentage of 2% was last noted in the US more than 10 years ago, in 2004. Currently, online retail sales take a 9.3% portion of total retail sales in the US.
The case for in-store shopping
Increase in monthly online customers – Source: PWC
It is clear that physical stores continue to dominate in the region, with most Middle Eastern customers opting for a more hands-on approach for their purchases. A comprehensive report on the ME retail market conducted by PWC in 2017 reveals numerous customer behavior traits among online and physical shoppers. For example, when it comes to purchasing high-value items like watches and jewelry, those interviewed preferred to visit the store rather than shop online. They want to be able to see and touch these luxury products, and consult the local salespeople for their knowledge of the product ranges.
The report also stated that customers prefer to buy groceries in person, as well as cosmetics and furniture. A major deterrent that makes customers resort to physical over online shopping is the lack of faith in online security, as 62% of those surveyed showed concern and trepidation when considering an online purchase.
The new kid on the block
Despite this prevalence of physical stores, there remains a certain allure to online shopping, a relative novelty in the region. The entry of young men and women who are well-versed with technology provides the greatest boost to online sales. During PWC’s study, Middle Eastern customers revealed several reasons why they opt to shop online, namely:
– cheaper than buying in-store
– a wide array of products to select from
48% of those interviewed explained that social media promotions were a major deciding factor in their purchasing decisions.
The physical-online hybridArgos store in Dublin, Republic of Ireland – Source: Stephen’s Green Shopping Centre
What would happen were we to reconcile online with in-store shopping? Combining the allure of a Middle Eastern novelty such as online shopping with the tried and true experience of in-store shopping could lead to a new hybrid with benefits for all parties involved. Consider Argos’ business model, a major UK retailer. Argos offers online shopping, while at the same time maintaining physical stores across the country. Customers walk in to be greeted by numerous touch screens and catalogs, offering the store’s entire array of products for selection. Customers note the codes of the products they wish to purchase and then go to a reception desk where they receive their item, after completing payment. This model is completely new to the Middle East, yet with the innovations taking place across the Gulf region, this new approach could prove quite new and refreshing, especially to younger men and women who are more technology-inclined.
Restaurants, for example, can install touch screens for customers to place orders in-store rather than wait in a queue to speak to a cashier. This is currently being tested by some international McDonalds’s branches, Kuwait included. Famous UK pub franchise Wetherspoon’s has introduced another version of this, offering customers an even more streamlined approach. Customers are given the option to order their food from an app, eliminating the need for queuing during rush hour. With fast food being a major market in the Gulf region, this is a way for franchisers and franchisees to revitalize their customer experience, while improving service.
On the other hand, online retailers can eliminate their greatest weakness – their lack of the “showroom” experience, as PWC dubs it. Combining 3D modelling technology, 360 degree photography and developing VR and technologies, online stores can offer a new perspective to their shopping experience. An online furniture store for example could have a virtual showroom accessible in VR or through a mobile phone screen. The customer would be able to lean in, zoom in or turn and inspect the product in question.
These are great ways to reconcile online with in-store shopping experiences, and in turn provide a better experience and service for the consumer.