Retail Disruption – what’s the outlook for the Middle East?
37% of customers
pay for purchases online using their smartphone
51% of shoppers
surveyed in the region have never used Amazon
67% of respondents
consider WiFi with fast simple login an important attribute of the in-store shopping experience
64% of ME customers
use Facebook and Twitter to find inspiration for purchases vs 39% globally
We only have to look at Amazon’s high profile acquisition of Souq.com to know that the face of Middle Eastern retail is changing. At the time of the deal, Goldman Sachs labelled the acquisition ‘the biggest M&A deal in the Arab World’.
If we add to this that 51% of this year’s survey respondents told us that they had never shopped with Amazon, we start to paint a picture of an investable Middle Eastern market ripe with opportunity. It was publicly reported during the Amazon deal that e-commerce accounts for just 2% of retail sales in the Middle East and the appetite for investing in online retail continues with the announcement of the acquisition of JadoPado.com. Noon, another estimated heavyweight player, will launch operations during 2017 and is also expected to have a big impact on e-commerce within the region.
With the retail landscape changing on a daily basis, both retailers and investors need to truly understand the dynamics behind these changes - What is it that online consumers seek? How can retailers effectively engage with them? What online challenges do retailers face? And how will the brick and mortar retail outlets compete in the growing world of online retail?
In early 2017, PwC released its previous Total Retail survey in which it interviewed over 24,000 people across five continents in 30 countries. In the Middle East, we asked over 1,000 online shoppers who were geographically spread across the UAE, Egypt and Saudi Arabia about their shopping behaviours and expectations. This report takes a closer look at the Middle East consumer and sheds light on the latest trends and preferences facing the retail sector.
Since we began issuing our annual Total Retail survey for the Middle East in 2013, we have noticed a gradual trend increase ‘year-on-year’ in those shoppers who are frequently shopping online. The increase in monthly online customers has risen 6% from 23% to 29% in 2016.
Shopper behaviour continues to vary by age throughout the region. 36% of those surveyed between ages 18 and 24 shop online monthly compared to those aged 55 years and above which comes in at 13% in comparison.
When we asked respondents about their motivation for buying online, 40% stated that it was due to lower pricing and 31% said it was due to the product selection, while only 17% cited convenience compared to buying instore. In contrast, 36% of respondents globally stated lower price and convenience as their motivation, which suggests that there is a significant opportunity for Middle Eastern e-retailers to further develop and enhance the convenience of their service.
It’s likely the impact of e-commerce will be felt much quicker here in the region due to the young age demographic who are actively using their smartphones and heavily engaged in what’s trending on social media
Retailers are facing one of the most competitive environments in decades with preferences shifting to online shopping. We've identified five key investment areas that can act as a guide for Middle Eastern retailers when making future investment decisions.
When asked whether the Middle Eastern online shoppers prefered to buy from single brand or multi-branded websites, the findings indicate that customers like to shop from single brand websites for better service, while they prefer to shop from multi-branded websites when they are seeking better prices and promotions.
When we look a little deeper at buying preferences by product category, most of those surveyed preferred to buy books, music, movies and video games online, followed by consumer electronics and sports and outdoor equipment. However, grocery shopping is still lagging behind with only 27% choosing to purchase online vs 58% still preferring to buy their groceries in-store.
|Single brand website||Multi-branded website|
|To get the best selection||58%||73%|
|To get the best price||45%||82%|
|To get access to the best promotions||52%||76%|
|For better delivery/logistics||60%||70%|
|To get the best customer service||75%||61%|