January 6, 2012

A Postcard from the Middle East & Africa

Now a digital mall boom in the Middle East

Shopping malls in the Middle East, such as this one, may see much smaller crowds in the future if e-commerce continues to gain momentum in the region.

Retail therapy may or may not make the soul happy but it sure does make the feet sore. Young Middle Easterners though have warmed up to a retail format that promises to keep both soul and feet happy.

E-commerce and online retail are getting bigger by the day across the Middle East for several reasons. For one, the region recorded the world’s fastest growth in internet usage between 2000 and 2009, and it is now home to more than 60 million internet users, which makes it a huge market for online transactions. Moreover, a relatively large percentage of the region’s population is young and fashion-conscious, consumers whose buying habits have been influenced by the West. These buyers are tech-savvy, with considerable spending potential, and they recognize that buying online can save them money and give them variety. Of course, the convenience of online shopping is a given — good riddance to queues and parking charges.

Nonetheless, the biggest impetus to online retail in the Middle East has come from the region’s women. In ultra-conservative societies like Saudi Arabia for instance, buying on the internet spells freedom for women who are burdened with several restrictions when they go out shopping, including strict dress codes and constant chaperoning. In fact, Ahmed Alkhatib, who runs MarkaVIP in Jordan, a highly successful online shopping club that offers designer labels and branded goods at bargain prices, says lingerie is one of the club’s most popular products as Arab women prefer to buy intimates online rather than be chaperoned to lingerie shops managed by men.

Alkhatib’s site has an impressive 600,000 members, and it offers discounted prices on more than 1,000 brands, many of which are not available at outlets in the Middle East. The retail website’s 21-day return policy and cash-on-delivery system are a big draw, as is the quality of its products. In a recent interview to the Wall Street Journal, Alkhatib said that he planned to diversify into selling lifestyle products such as apartments and cars. Another unique online store that is cashing in on Middle Easterners’ love for branded apparel and accessories is toujourschic.ae, which allows bag aficionados to register and rent designer handbags. The UAE-based store was set up by Reema Al Khomeiri, a purse addict herself, from her home in Abu Dhabi in 2009. After the customer signs an email-based rental contract, a woman can enjoy every kind of designer bag, from the high-end Chanel and Louis Vuittons to the more affordable Coach bags. Some of the other popular online shopping outlets in the region are sukar.com, an invitation-only private shopping club that operates across nine countries, nahel.com, a Dubai-based website that claims to offer more than 10,000 products across 1,500 categories, and souq.com, the Middle East’s very own eBay.

However, e-commerce in the Middle East is not just about women buying lingerie online or the fashion-conscious getting rental designer bags. Business Intelligence, a website that analyses the Middle East market, has reported that travel and gaming are the region’s top two e-commerce segments. Many low-cost airlines have been routinely deploying sophisticated e-ticketing systems to gain market share, while online gaming has been benefiting from the introduction of newer versions of popular gaming consoles that enable users to download multi-player online games. In the years ahead, rising internet penetration and the strong government focus on online services in the region promise faster growth for the segment. But it is unlikely to be smooth sailing.

E-commerce faces many obstacles in the Middle East and one of them is the lack of region-wide laws for the sector. With internet usage increasing rapidly, there is growing fear about the security of users’ financial data. Further, political unrest, especially in Egypt and Syria, has heightened the risk of operating an online business across countries. According to Alkhatib of MarkaVIP, cross-border transportation is a big logistical problem online retail firms routinely encounter. He says MarkaVIP is trying to overcome this challenge by working closely with government agencies. On a similar note, the Saudi Arabia-based online payment solutions provider, OneCard, believes that if robust security measures and government policies are put in place, e-commerce could scale greater heights in the region.

Indeed, if that happens, retail therapy will not just make the feet and soul of many more Middle Eastern shoppers happy but also invigorate the sales of many global consumer brands. Watch out Amazon, the Middle East online shopper is about to become unleashed.

Image Credit: Pyb under Creative Commons License