Ecommerce in MENA – Challenges and Opportunities Await
Let’s assume you want to count to one million. Apparently, that would take you about one month. If you wanted to count to one billion, however, that could take you as much as 100 years depending on how fast you can count. One trillion? Don’t bother trying – we’re talking thousands of years to count that far.
Within three years or so, the value of ecommerce transactions could reach $6 trillion per year, globally. That’s assuming current rates of growth continue; they’re running at 20% a year. We can all agree, that’s a lot of money and you really wouldn’t want the job of counting it all. But that $6 trillion won’t be spread evenly across all regions. Similarly, growth rates will differ significantly – it’s not going to be 20% a year everywhere.
While the US and Europe are already mature ecommerce markets, others are not. In China, things have been hotting up considerably in the very recent past, and it has become the ecommerce engine room of the APAC region. Firms like Alibaba and Tencent dominate the market and growth has been exponential.
The next big growth area is likely to be the MENA region (Middle East and North Africa) and there are a number of reasons why. In the UAE and the Gulf States, there is a large and prosperous middle class with high levels of disposable income and with aspirations to improve their standard of living through well thought out purchases. By 2022 the value of ecommerce in MENA is expected to hit $48 billion, with the UAE highlighted in recent research as one of the key hotspots.
There is also a very high rate of smartphone and internet usage – higher than in many other parts of the world – and a young population (40% of people in the Middle East are aged between 20 and 39). So, while ecommerce may have come relatively late to the region, there are ideal growing conditions for it here.
However, that doesn’t mean that shoppers and retailers should assume that everything is going to be easy, stressfree and rewarding. Well, maybe shoppers can. But not retailers. Just like in every other part of the world, there are challenges as well as opportunities, and retailers will have to be at their best to succeed.
The last must come first
The last mile gets talked about almost incessantly. So much so, it starts to be regarded as a single entity, whereas it’s actually a complex, interwoven ecosystem. Or at the very least, it should be. There is no one-size-fits-all for the last mile of ecommerce. Just as in any other region, there will be people who want the fastest possible delivery and others who want the most flexible. There will be those for whom home delivery is the only choice they want to make, and those for whom that won’t work so well because they are out at work.
There are already huge problems with congestion in parts of the region. This is partly because cities like Dubai continue to grow in status as destinations for businesses, conference organisers and holidaymakers. If you then add into the mix a substantial increase in delivery-related traffic too, it will only get worse. There is already a long-standing dialogue taking place in London, for example, about what should be done to cut the number of delivery vans in the UK’s capital.
There are no reasons, sadly, to think a market like the MENA region, which is poised to grow its ecommerce transactions rapidly, will escape those problems. It’s a scenario that throws up questions about the viability of vital logistics and fulfilment measures, such as shifting stock around and offering shoppers timed delivery slots.
Learning from the experience of others
Despite a set of challenging background issues, the region could do well to learn from the experiences of others, Europe in particular. Across Europe, you will experience different delivery preferences – lockers are popular in Germany, but not in the UK, for example. So being able to cope with different requirements will matter. As will the development of tech solutions, such as tailored delivery and apps to send notifications. But one of the biggest innovations in the delivery sector, and this is something that has been seen in the UK over the last few years, is the tendency to build new solutions that use existing infrastructure.
High street click and collect or PUDO options, for example, based out of existing businesses. Such as the convenience store acting as a neighbourhood delivery hub. The next step on that logical continuum is to consider using existing spaces and locations in urban areas to hold stock, making it possible to overcome some of the challenges caused by traffic congestion and remote distribution facilities.
There’s no doubt the Middle East is entering an exciting period of ecommerce growth. But the most important thing for all involved is to ensure customer expectations can be met sustainably by everyone involved in that all-important last mile.
This article first appeared in my regular thought leadership column for the London-based startup Parcelly.