E-commerce in the MENA region is a fast-growing industry able to offer opportunities to big and small retailers and set to evolve further as customers are shifting to newer and faster purchasing means.
This industry generated $28.6 Billion in 2018, $34.69 Billion in 2019 and is expected to generate more than $40 Billion in 2020 for an average growth percentage of 20% per year.
What are the principal factors enabling this fast growth?
And what opportunities does this field offer to e-commerce retailers especially after the COVID-19 outbreak that accelerated its evolution?
Principal factors for fast e-commerce growth:
It is a fact that e-commerce is occupying an ever-growing place in the retail industry that is expected to grow further in importance as the MENA population is getting more and more connected.
To understand better what enables e-commerce to reach a 20% growth rate per year and here are some key statistics leading to this evolution:
For the MENA Region, Internet penetration has risen to an average of 62.5% in 2019 with a peak of 99% for the UAE and Qatar creating a good environment for online activities and creating opportunities for entrepreneurs to start businesses online.
Mobile phone connection rates are very high in the MENA region.
In 2019, a 101% mobile phone connections vs. population rate have been registered in 2019.
As we are heading towards a mCommerce era in the whole world, this represents a huge opportunity for retailers to settle down online shops and mobile applications for their businesses that might give a big boost to their sales in the future.
A first observation shows that there is a big gap between the different countries of the MENA region.
Some are new to that retail channel, others are almost mature markets in the region.
The biggest MENA markets such as UAE and Egypt register an average of 55% of e-commerce purchases; this rate represents the people who bought a product online.
As e-commerce is evolving in MENA, more brands are adopting e-commerce in their retail strategies, and as customers are becoming more demanding, they need to offer a wider range of products to attract buyers and to convince them to buy online instead of choosing the traditional purchasing method.
As a result, buyers are given more options on their online shopping and brands are more capable of retaining their newly acquired customers.
It is important to note that not all product categories have reached the same level of e-commerce maturity.
While electronics and beauty and personal care products are almost on the same level as developed e-commerce markets, grocery and fashion still struggle to reach satisfactory levels of retail value but the room for improvement is huge as shoppers are getting more accustomed to online shopping.
Challenges for MENA’s e-commerce industry:
The most obvious challenge that comes to one’s mind is how to boost e-commerce adoption amongst the MENA population!
The answer may revolve around 2 key factors:
The evidence says that shoppers in the MENA region don’t rely on e-payment methods as 62% prefer cash on delivery payment in a region where only 29% of the population possesses a credit card.
The question is: how can we reduce this big rate and convince shoppers to adopt online payment methods?
MENA countries still have cash-based economies even in markets with healthy credit card penetration rates such as the UAE, where an estimated 75% of the economy is still cash-based.
The main reasons online shoppers have evoked to prefer cash on delivery, according to a survey conducted by Google in 2018, are willing to pay only with the product in hand and keeping track of their expenses.
We may conclude that there is a trust issue towards online payments and that businesses need to work hard on acquiring customers’ trust to further develop their sales as the customer experience is pivotal in boosting sales.
Delivering well, delivering on time: This is the first rule to ensure customer satisfaction.
The problem in the MENA region?
Delivering well and on time is quite complicated. Let’s focus on some of the challenges facing the logistics of e-commerce in MENA:
E-commerce players in the Middle-East face numerous challenges related to warehouse operations – like keeping a real-time inventory, getting quicker warehouse replenishment, and suffering from the lack of technology standards
Updating management technologies and redesigning warehouses to match modern requirements may lead to overcoming those challenges to increase the efficiency of the e-commerce supply chains.
First Mile Pick-up Issues:
The first challenge in the delivery operation is the first-mile pick-up.
How to manage to regroup all orders from small and medium businesses to avoid wasting time on the delivery thus reaching customer satisfaction?
Marketplaces such as Jumia own warehouses intended for enabling faster pickups and shorter order processing times.
Last-Mile Delivery Complexities:
Going from the online transaction into offline hand-to-hand delivery is one big challenge for e-commerce companies.
Delivering in short deadlines with the quality expected from the customer is very demanding as companies face numerous infrastructure difficulties like the absence of street addresses and lack of penetration of courier services.
To avoid this logistical challenge, innovative solutions are being adopted by e-commerce delivery companies.
Aramex as an example relies on local people who are more familiar with the local area and able to communicate more smoothly, which can reduce the rejection rate effectively whereas Fetchr relies on the fact that more than 80% of consumers in the Middle East have smartphones and can be detected throughout mobile applications enabling delivery man to deliver without resorting to the postal address.
Expectations show that the e-commerce retail industry in the MENA region is estimated to be worth $48.6 billion in 2022, up from $26.9 billion in 2018.
E-commerce represents a big opportunity for businesses to assess their sales strategy online and to successfully get into a good growth trend since this industry is fastly growing with a 20% average rate.
E-commerce evolution in the MENA region relies on using accurately all the elements to get the most efficient selling scheme: online presence, logistics, and payment methods as well as the creation of a trust relationship between the brands and the customers.
And with the covid-19 outbreak! What will the e-commerce industry look like from now on?