Saudi companies can increase monthly sales by as much as five times by perfecting the use of social media platforms, Chris Folayan, CEO and founder of e-commerce platform Mallfortheworld.com, told Argaam.
The increasing use of social media presents a valuable opportunity for the region’s budding e-commerce sector, said Folayan, whose website serves customers from the Middle East, Africa and the Caribbean.
Social platforms can be a good way to alert customers to ongoing deals and promotions, and attract new buyers without spending much, he added.
According to a report by AT Kearney last year, the GCC is one of the world’s most challenging markets for e-commerce, despite strong fundamentals like high levels of GDP and internet and mobile penetration.
Only 34 percent of major retailers in the Gulf have an e-commerce channel, compared with about 58 percent in the United States.
“However, with the right enablers in place, we believe the GCC e-commerce market could almost quadruple to reach $20 billion by 2020,” AT Kearney noted.
The region’s e-commerce sector has seen some major announcements in recent months, most notably Amazon’s acquisition of Dubai-based Souq.com for $580 million earlier this year, which will give the US tech giant a foothold in the Middle East.
The main factors propelling e-commerce growth in the region are convenience and a wider range of products than conventional brick-and-mortar stores, Folayan said.
“We also see pricing as a key driver. Online prices in general are about 25-30 percent cheaper than in-store prices because the overhead of an online store is much less,” he added.
When asked whether customers in Saudi Arabia and the region prefer to make certain kinds of purchases online, Folayan noted that clothing products seem to dominate online purchases in the Kingdom and the wider Gulf.
Women’s accessories, watches, children’s clothing and toys are also popular categories among online shoppers, he added.
While the growth of e-commerce is promising, it does not necessarily spell the end for conventional retailers.
“Brand advertising by having a brick-and-mortar store is still valuable. You have people who want instant gratification and the ability to buy products right now. Those customers will always be around,” Folayan said.
E-commerce also presents an opportunity for conventional retailers to tap into online shopping, either by developing in-house channels or tying up with existing platforms.
One example of the latter is Kuwaiti retail giant M.H. Alshaya Co.’s acquisition of a stake this week in Noon.com, Dubai businessman Mohamed Alabbar’s $1 billion venture that is 50-percent owned by Saudi Arabia’s Public Investment Fund (PIF).
The size and value of the stake was not disclosed, but the purchase will allow the retailer to sell its products on Noon’s marketplace platform.
Despite the increasing interest in e-commerce, key challenges remain that hinder the sector’s growth. The biggest one is converting from a cash-on-delivery (COD) to a cash-before-delivery (CBD) model, Folayan said.
“Most e-commerce companies globally work on a CBD model because the cost of running a COD model is not only risky but very pricy. It gets expensive when customers are unable to pick up items at specified locations and times, and decline items. There is a cost to all these touch points.”
Nevertheless, the shift to digital is well underway, with many retailers in Saudi Arabia and the region either moving online already, or expected to do so in the future.
“This is simply the only way to guarantee your existence in the future. We are moving into a more online society in KSA and embracing that is necessary to succeed in business in the region,” Folayan said.
Write to Jerusha Sequeira at jerusha.s@argaamnews.com
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