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Five Dominant Technology Trends Shaping the Future of Online Retail in MENA Region

With high spending potential and per capita income, the MENA region is ripe for online business. How can this potential be capitalized on?

June 17, 2020

8 mins read

With the total number of internet users in MENA region surpassing 150 million, it continues to be one of the world’s most underrated “emerging” economies. This region that has almost as many digital buyers as India – a country with more than 1 billion people – remains the fastest growing for eCommerce globally.

A run-through the MENA eCommerce market in 2020

Considering the climbing internet penetration rates (including the aggressive expansion of 5G networks), and dynamic young population, MENA countries have extraordinary online spending power. Additionally, e-government initiatives integrated with online payment platforms are building user confidence and trust in transacting online, which is helping develop consumer awareness and maturity.

Thanks to advanced technologies helping people in MENA countries shop and buy online, innovative retailers may plug into the region’s untapped eCommerce spending potential.

The government of Dubai anticipates that eCommerce growth is likely to continue, as the authorities are pumping their dollars ($870 billion to be precise) into Dubai Commercity, a free-trade zone for e-commerce retailers set on 2.1 million square feet of retail space.

Online retail sales in the region are still relatively modest compared to the USA or China and, currently, MENA region only captures a fraction of its e-commerce potential. Nevertheless, the revenue numbers show steady and prominent growth, from $18 billion in 2015 to the forecast $48.8 billion in 2021 (Deloitte).
Five Dominant Technology Trends Shaping the Future of Online Retail in MENA Region

Online retailers pushing the envelope in MENA countries

Online selling has become one of the top priorities for the local and international retailers that seek to boost their profits from online sales in the region.

The burgeoning MENA market has already caught the attention of global eCommerce players, such as Amazon, eBay, and Walmart, and international retailer brands like Zara, H&M, Lacoste, Sephora, and Carrefour. Brick-and-mortars in the region are launching online stores on their own or forging distribution partnerships with the local eCommerce pure players to establish their online presence faster.

Here are the most disruptive brands in the region that are leading the charge in online retail:

  • Noon. Noon is a $1 billion regional digital marketplace that allows local and international brands to open their own online stores on the platform.
  • Basharacare. Basharacare is one of the leading online stores focusing on skincare and haircare.
  • Souq. Now owned by Amazon, Souq is the largest e-commerce website in the MENA world, selling over 30 million products in categories spanning from consumer electronics and household goods to fashion and beauty.
  • Dubizzle. With over 240 million users, Dubizzle is the number one classifieds app in the MENA region.
  • The Luxury Closet. This is GCC’s leading luxury online marketplace that buys, sells, and consigns personal luxury goods at a discounted price.
  • A leading Saudi grocery-delivery platform acquired by Carrefour in 2019.

79% of consumers in the UAE and 95% in the KSA are spending more online amidst the COVID-19 outbreak. Most of them plan to maintain their shopping habits after the pandemic.

Retail Me

Key challenges facing eCommerce and retail in MENA region

Despite many factors favorable to eCommerce growth in MENA region, retailers in the region have their fair share of unique challenges to tackle.

  • Delivery. The lack of postal codes in much of the region is seen as one of the primary obstacles to eCommerce development. To resolve this challenge, delivery service companies deploy mobile apps that allow customers to use the GPS on their mobile phones to send location coordinates to couriers. Additionally, the outbreak of COVID-19 pandemic has urged eCommerce sellers in the region to accelerate the adoption of autonomous delivery robots and vehicles to decrease the risks of exposure.
  • Logistics. Inadequate warehouse coverage is another issue that hampers the rapid delivery of products purchased online. Many retailers don’t necessarily have distribution centers in all the regions they operate, which increases the shipping costs, impacts delivery times, and affects the availability of some products (e.g. fresh produce). The storing and shipping of goods across borders adds another layer of complexity to logistics and might discourage some buyers from shopping for fear of potential issues with their order. Especially in the current crisis, the cross-border trade remains affected, as many countries have adopted temporary export restrictions and are operating at limited capacity.
  • Cash on delivery. COD remains the primary mode of payment in this region with an embedded cash culture. This entails several risks for eCommerce players, including higher costs of operations and higher return and failed-delivery rates.
  • Digital payments. Compared to developed markets, digital payment adoption remains relatively low in MENA region. While UAE banks are leading the way in the adoption of digital solutions, other countries in the region are lagging behind. For example, only about a third of Egyptians and a mere 42% of Jordanians have a bank account.

Five technologies driving transformative change in online retail in 2020

Technology has had a decisive impact on eCommerce, fuelling the growth and sustainability of the most successful online stores. As customer expectations are evolving, future-driven online retail brands are jumping on board with the latest tech trends and solutions. They are rolling out cloud deployments, incorporating AI and ML engines, and pulling data insights to create immersive customer experiences in their digital stores.

Artificial intelligence for enhanced customer experience

Artificial intelligence presents immense opportunities for online retailers in MENA countries to unleash the hidden potential of eCommerce. Visual search is used to gather valuable customer insights and enrich the digital shopping experience with personalized product recommendations. AI-based voice assistants interact with online users, transforming the purchasing process, and making eCommerce stores accessible to a wider group of buyers.

In a region where buying is considered a social activity, chatbots are taking online retail by storm. International retail giants and local startup eCommerce platforms alike use intelligent bot technology to generate customer engagement, shorten sales cycles, and generate more upsell and cross-sell opportunities. Artificial intelligence solutions are also shaping eCommerce marketing, helping retailers simplify marketing campaigns, and optimize returns on ad spending.

For example, Mumzworld, the leading mother-and-baby-product online store, is integrating machine learning capabilities into its marketing platforms to tailor its product catalog to the individual taste of each buyer.

The UAE, and the MENA region, have a smart youth population who are in-tune with the latest mobile technologies and applications, and hence are always on the lookout for apps that not only save time but also provide the ease of payment.

John Tsioris, CEO at InstaShop

Blockchain for verified, secure transactions

Blockchain offers ample potential to eCommerce sellers to strike a balance between seamless customer experience and high-grade security.

Considering a strong bias for cash payments in the region, in the near future cryptocurrencies stand a small chance of gaining a strong foothold among the local buyers. Nevertheless, blockchain supports numerous uses beyond crypto payments where it’s particularly useful in the MENA context.

Blockchain’s tamper-proof distributed ledgers can be used to protect online retailers from charge-back fraud on card payments, secure cross-border transactions, and accelerate payment processing. By contributing transparency and traceability, blockchain-based platforms can also help eCommerce vendors simplify supply chain transactions and facilitate contract enforcement.

Retail, whether digital or traditional, is fraught with security challenges. Find out how to recognize and overcome these with modern technology solutions

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Payment gateways, platform, and mobile wallets for the buyer’s convenience

In cash-based economies, eCommerce trendsetters are finding multifold ways to make digital purchases fast, secure, and convenient. Digital stores and marketplaces in the region benefit from payment innovations, enabling varied payment services to encourage buyers.

There is a distinct eCommerce trend for integrations with online payment gateways such as PayPal, CyberSource, and MasterCard Internet Gateway Service that retailers add to their eCommerce stores to boost sales volumes and improve buyer experience. Mobile wallets are gaining traction among the younger generation of consumers, who appreciate the speed and convenience of this payment method.

Interestingly, industry front-runners such as Souq (now don’t turn their back on cash-based transactions. To enable the handling of cash on delivery payments – still the preferred method for most of their buyers – the company’s software engineers integrated cash-purchase history into the platform. This allows users to track their past transactions, and see if they’d paid by card or cash.
Five Dominant Technology Trends Shaping the Future of Online Retail in MENA Region

Beacons for bridging physical and digital shopping experiences

Beacons are by no means a novelty, as brick-and-mortars have been using indoor positioning tech for quite some time to engage with customers in unique ways. Those tiny sensors can be found all around physical stores, connecting to shoppers’ phones and tracking their movements to understand what products make them tick. But can they be used in eCommerce?

For retailers with both an online and offline presence, beacons are proving to be a significant asset in bridging the gaps between these two channels. Data gathered from beacons in store can be utilized in digital storefronts to push digital upsell/cross-sell offers, update buyers on product availability in different outlets, and encourage shoppers to complete their purchases online.

Big data for an in-depth understanding of your online retail business

Data has permeated virtually every industry, and it won’t be an overstatement to say that successful eCommerce doesn’t exist without big data analytics. Advanced eCommerce software platforms leverage in-built predictive data analytics features to scrutinize every aspect of online business, from customer behavior, through product pricing, to website visitor flows.

One of the most popular applications of the technology in digital sales are trend forecasting algorithms, which help sellers keep up with trends and predict what’s coming to optimize inventory and stock products that sell. Demand forecasting, on the other hand, allows eCommerce vendors to evaluate the current and future demand for their products to avoid expensive overstocking. By collecting and analyzing customer feedback, online sellers can build a comprehensive, 360-degree view of each customer to enhance customer service and boost sales.

Are you an online fashionretailer? Discover how applying big data methods can help you improve demand forecasting and avoid common mistakes when predicting fashion trends

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Closing thoughts

eCommerce in MENA region is standing on the verge of a new era. Historically, the rates of online shopping adoption have been rather low in the region, but tables are turning. Given the increasing internet penetration and a growing young population, MENA region is poised to become the next big market for eCommerce.

The region’s digital-savvy consumers are craving new, personalized shopping experiences that go beyond a traditional shop visit. Local and international brands in the region should actively look for retail technology trends that address these evolving consumer expectations and enable effective operations.

Are you looking for bespoke eCommerce software? Our team will help you discover scenarios that frame online retail in the region and build technology solutions to create a differentiated buyer experience in your online store. Get in touch with Intellias, a trusted retail software company.

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