Urban legend suggests that 18th century French emperor Napoléon Bonaparte once disparagingly called the British a ‘nation of shopkeepers’. He was wrong of course, because the Arabs have always been the shopkeepers of the world. Our region’s souqs, markets and bazaars have always far outstripped the shopping hubs of any other nation in terms of their colour, diversity and sheer number.
Fake plastic shops
But this is the age of the Internet and even souqs get a makeover in this modern age. Consumers have become increasingly accustomed to looking into their screens rather than through shop windows. In an age when many shoppers would rather click and swipe than forage and hunt for real, how will the Middle East’s shopkeeping future now develop?
Cloud services and online shopping giant Amazon has this year reached an agreement to buy Souq, the Middle East’s largest web-driven shopping service. Amazon VP Russ Grandinetti claims that both Amazon and Souq share the same DNA in terms of their focus on customers, invention and long-term thinking,
"We are guided by many of the same principles as Amazon and this acquisition is a critical next step in growing our e-commerce presence on behalf of customers across the region," said Souq CEO and Co-Founder Ronaldo Mouchawar. "By becoming part of the Amazon family, we'll be able to vastly expand our delivery capabilities and customer selection much faster, as well as continue Amazon's great track record of empowering sellers."
No plug-and-play
But Arabian online ecommerce is not as simple as it sounds. This is no plug-and-play solution where Amazon can simply replicate its wider model through Souq and reap a greater harvest. Although Amazon will now arguably get a boost into markets where Souq has been strong (and that’s Egypt, Saudi Arabia and the UAE), there are still some thorny issues to be addressed when it comes to Arabian ecommerce.
Many parts of the Arab world don’t enjoy the ubiquitous ownership and use of credit cards. This core deficiency makes online payment a real challenge. Souq has already worked to address this obstacle by developing its own prepayment card, which can be used online and then topped up. Engineering this model upwards into the breadth of Amazon’s massive IT systems could be a big task.
There’s also the difficulty of Middle Eastern addresses; sometimes they simply don’t exist. Souq has developed a network of local couriers who know individual neighbourhoods personally. Once again, developing this sort of informality upwards into a multinational conglomerate’s total business model will not be overnight work.
Amazon Arabia, a new hope
All positive moves yes, but will traditions be too entrenched for any real impact here? According to a report from analyst house McKinsey, only around two percent of Middle East retail transactions take place online today. So is this huge tech deal for the Middle East really going to cause an impact? Can Amazon’s breadth bring positive hope for our region’s consumers and the retailers who seek to become e-retailers and serve them?
“Tackling ecommerce in the Middle East is just as much about addressing variations in culture as it is simply supplying the right technology. Across most Middle Eastern countries, trust remains the single most important factor for any transaction – be it a business deal or a consumer purchase. This trust is built on face-to-face interaction, with many Arab nations considering handshakes, meetings and small talk to all be a vital part of the buying process,” said James Norwood, chief marketing officer at marketing technology firm Episerver.
“In moving to online commerce, these vital cultural signs disappear from the customer journey. As such, technologies need to be introduced to simulate them online in as genuine a way as possible. Online personalisation, customised greetings and live messaging services will all be vital in overcoming this issue and driving ecommerce adoption in the Middle East,” added Norwood.
Episerver’s Norwood clearly speaks from first hand experience; his firm is currently providing ecommerce solutions to UAE companies such as Jumierah International and Dubai Holdings.
Caveat ecommerce emptor
“Poor connectivity and speed due to outdated infrastructure are just part of the challenge. In today’s ecommerce world, it is widely recognised that performance drives customer conversion. Middle Eastern retailers are starting to realise that the promise of Artificial Intelligence, once much lauded but for years unable to deliver, has started to drive higher-level ecommerce customer conversions, customer satisfaction and loyalty,” said Andrew Bartlam, VP, EMEA Instart Logic, a firm specializing in ‘endpoint-aware’ application delivery software.
“The cultural considerations of the region may further fuel both ecommerce and mcommerce, as online retail opens up the art of shopping to all members of society. Today we see mcommerce increasing and the main challenge is how to deal with the growing level of content. To increase traffic, Amazon with Souq inside needs to understand not just who’s visiting their site but give a consistent level of performance to its end users,” added Bartlam.
With Saudi Arabia now backing a competing similar ecommerce venture in the shape of Noon.com, the future is still forming but overwhelmingly positive. The online retail industry in the Middle East is set to spiral and may reach $20 billion by 2020 (it was a mere $5.3 billion in 2015) according to management consultancy A.T. Kearney. And, actually, 2% of all retail is a huge number in absolute terms. Amazon, which makes its billions globally by managing ordering, logistics and inventory so efficiently it survives and indeed thrives on tiny margins, is used to turning tiny percentages into big revenue.
Positive future for for Arab ecommerce
Taking stock of all commentary here, we can perhaps cautiously look forward to a positive Arabian ecommerce future. Despite the caveats, provisos and cultural-technological connection challenges, the general trend points to an upswing in online shopping habits across the Middle East for a number of key reasons and it’s a truth that spans three decades, perhaps more. The region now has the world market leader building its business here and a billion dollar challenger being put together by some of its most respected businessmen.
A decade ago, very few people trusted in the ability and security of their smartphone to make commercial transactions. That time has now passed and young people are looking to their mobile device as their first (and often primary) channel to connect to the Internet. This in-pocket proximity to the web will naturally increase user proclivity to use all connected services, including ecommerce.
Two decades ago, the Internet had barely arrived in the region. And anyone making a success of any new technology launch meant breaking the USA and selling into the American market. That time has now passed and multinationals (including Amazon, clearly) regard the Middle East, Asia and the Indian subcontinent as key growth areas. This if anything validates Amazon’s purchase of Souq and underlines the breadth and scope of its plans for the Middle East.
Three decades ago, the Middle East had a barely significant cadre of its own Arabic-speaking software application developers. That time has now also passed and Souq’s team of technical engineers has grown with the firm’s success in the region. We can expect major platform expansions such as Amazon’s Arab market plans to further foster positive development.
It’s time to go shopping and start browsing around, but this time please stay seated and make your own mint tea and special price promise.