Exploring markets: The UAE

Exploring markets: The UAE

Karim Khalifa, CEO and co-founder of Digital Republic - Linked by IsobarWith only 1.4% of retail sales coming through the online channel, you might think the UAE, and the MENA region as a whole, is an easy market to rule out when planning your internationalisation strategy. However, with a population dominated by a tech-savvy youth, widespread Internet access and a fondness for western brands, the UAE is a market worthy of a second look.

To find out more about the potential in the region, we spoke to Karim Khalifa, CEO and co-founder of Digital RepublicLinked by Isobar, a full-service digital marketing agency, part of the Dentsu Aegis Network, that’s working with brands and retailers in the MENA region.

 

With a year-on-year growth rate in online sales of 11.7% (2014-15), what do you think is driving consumers to the online channel?

There is a very large youth segment in the UAE and MENA – where the median age is 30 versus the UK’s 40 - and they are tech-savvy and well connected, with 77% having access to broadband in the UAE, 49% of traffic coming from mobile devices, north of 70% smartphone penetration, and upwards of 40% of the population using mobiles to transact. Online shopping isn’t only about cost savings. It’s about a propensity for digital. Couple that with the increase in product choice available online, and the continued growth of eCommerce is a no-brainer. Recent acquisition activity by Mohamed Al Abbar (Founder and Chairman of Emaar, the group behind the development of the iconic Burj Khalifa, the tallest skyscraper in the world, located in Dubai) is further evidence of the confidence and growth in eCommerce in the UAE and the region.  

 

However, the market is still very much dominated by in-store shopping. Tell us about the culture of shopping in the UAE, known for its malls with ice rinks, cinemas and arcades, and how that may impact the growth of the online channel?

Going to malls is a social activity in the UAE. It’s not dissimilar to socialising at bars or cafes in Europe. And it’s not restricted to any age bracket. This shouldn’t, however, be seen as a blocker to the growth of online sales, but is in fact an enabler. While people are in the malls, they are also connected; they are there browsing on their mobiles. This connectivity is the big opportunity in the UAE and MENA region. Thinking about eCommerce versus the store is as much of a mistake for the UAE as it would be for the UK – despite the maturity of the market. There is a big opportunity here for Brand Commerce. Retail in the UAE may cut short or even leapfrog the multi-channel phase and skip ahead to immersive commerce. The malls here are very high-end, fitted out with the latest tech and we have connected, tech-savvy consumers of all demographics, so the opportunity is to figure out how to design an experience for them, that allows them to transact throughout the journey – not exclusively at the till and not exclusively through an online checkout.

 

With great potential in the market, what do brands and retailers need to know about consumer expectations and preferences?

At the moment the online consumer in the UAE and MENA has more patience than a UK consumer. But that will not last long. Expectations are growing fast. Already Souq.com, an Amazon-style pure play, is offering 24-hour delivery options. This is setting a new standard. When it comes to delivery costs, consumers in the UAE don’t expect to pay. And in terms of payments, the market is going through a shift. With traditionally low credit card penetration (particularly in developing MENA countries), cash-on-delivery options are still a requirement for any retailer looking at the region. However, the market is starting to see alternative payment platforms and options take hold, for both merchants and consumers. Payfort, a Paypal equivalent, is slowing gaining share. This growth, however, is nascent but accelerating as consumers gain confidence in transacting online.

 

And finally, what advice would you give to any retailer considering expanding into the UAE?

Be careful not to copy and paste. Every touchpoint needs to be reconsidered and tailored for the culture and the region. That requires hiring locals who understand the region. Cultural sensitivity is paramount. A strong focus on UX is also essential - good UX is an international language, but the consumer in the UAE and MENA is different, both culturally and in terms of digital maturity. Their tastes reflect that maturity. You might be surprised to find that some prefer a ‘noisier’ website design, particularly in the more developing MENA nations. Another key consideration is designing for the Arabic language, which is read from right to left. Designing for it is not straightforward, you can’t just mirror it. Plan for an extra 30%-50% of design and development time and make sure you offer both an Arabic and an English version. And don’t forget that in addition to a population of 9+ million (a majority of whom are expats), the UAE also has over 12 million tourists per year – many of whom come exclusively to shop. So offering your site in additional languages like Russian may also be worthwhile – depending on the segment and brand.

 

 

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