Wednesday, 18 July 2012

E-Commerce in the UAE: Part 2

This is a multi-part blog post on my views on E-Commerce in the UAE.  To read the first post, click on E-Commerce in the UAE: Part 1.

Whatever thoughts I have on this topic are my own.  They aren’t to be linked to my company or anyone else so if quoting me, please don’t quote me in my professional capacity as this has been written in my personal capacity.

Installment 2: The Retail Experience
The death of retail.  
A lot has been said about this with stories circulating every few years of a certain retailer shutting down because they failed to react in time to changing trends.  That may be true, but the changing trend isn’t only the role that the online sphere plays today.  If a retailer has over-expanded, over-committed or over-expected, they’ll fall, if not fail.  This is true in any business and the fundamentals have to be in place for any business to succeed.  A lot of these fundamentals have been there for decades if not centuries but they make take another guise or shape over the period.
Retailing in the UAE is unique.  A lot of the reasons given for e-commerce to succeed in the US or Europe simply don’t exist in this part of the world because retailing here is quite different which I’ll highlight in a few examples below:
Example 1: Proximity
The vast majority of the population of the United Arab Emirates lives in a city.  Most cities in United Arab Emirates are flooded with malls.  I don’t have the exact figures but the UAE probably has one of the highest retail ratios in the world if you compare the amount of retail floorspace versus the size of the population.  Even in some of the most remote parts of the country, you have a shopping centre, if not a mall located not too far away from you.  This isn’t the case necessarily in a lot of the places where e-commerce has thrived.  
Not quite Rome, but to a mall in Dubai: YES.
Example 2: Availability of Goods
If you want to find a product in the Middle East, chances are you’ll find it in Dubai.  No matter how new it is, what brand it is or how short the supply is, you’re best bet is Dubai within the region.  Someone or other will find a way of bringing it here, even if it’s at a price that could make them a small fortune, but it will be available at a shop near you if you live in the UAE.  I know a couple of years ago when I worked with a brand to sell their products over the Internet in the region, one of the most successful markets for them was Bahrain and Saudi Arabia because they could ship goods there that weren’t necessarily available in the local market there but were available in stock with retailers in Dubai.  These were not because there was a shortage in supply, it was just that the variety retailers kept in Dubai was something that a retailer in Bahrain would struggle to manage with.  I’m guessing that a lot of the products that sell best over the Internet in the UAE are those products that aren’t freely available in the UAE because they aren’t as easily available here (point in case, the Amazon Kindle).
Example 3: Retail Hours
You get spoiled in the UAE.  On weekends, our malls are typically open till midnight.  On festive periods, we’re open till midnight.  During retail events such as the Dubai Shopping Festival and Dubai Summer Surprises we’re again open till midnight.  During Ramadan, we may find stores open well past midnight.  In short, if you’ve got free time, you’ll probably find that there is a retail outlet open somewhere not too far from you.  Now compare this with Europe.  In many countries, retail stores are shut entirely on Sunday’s or open only for limited hours.  During the week, where our retail outlets are typically open till 10pm in the UAE, you find retail outlets in Europe are open up till 7pm, 8pm or at times 9pm.  The fact that retail hours in Europe don’t match the times when people are typically free has given rise to e-commerce on the continent.  This isn’t the case in the UAE and this is probably another reason why e-commerce hasn’t quite taken off as it has in much of the West.
Example 4: Retail Mix in the UAE
Much has been said and is debated about retail standards in the UAE.  If you’re looking purely at the quality of service you get on the shop floor, then the United States has been the best experience for me.  There is no doubting that.  However, if you look at the Retail Mix in the UAE wherein you consider the quality of shopping malls, F&B offerings, entertainment offerings, brands available, retail hours, cleanliness, upkeep, retailer furnishings, etc., then the UAE is one of the most advanced.  Whether this is the advantage of being a younger country or whether it is that we’ve got better people managing retail in the UAE, you can’t argue with the fact a lot of the reasons that people move away from retail stores in the West and migrate towards online avenues simply don’t apply here in many cases.  Consider an old and tired mall in any country and compare that with what we consider an old or tired mall in the UAE and chances are, you’ll find the mall in the UAE to be so much better off.  This is why when you look across the broader region (that is not only the Middle East and Africa but also the Indian subcontinent), any retail developments that are happening here are being benchmarked against what we have in the UAE.
Example 5: Customer Service
I know I’m walking on egg shells here but we are spoiled in the UAE.  We don’t like self service petrol stations which is why whenever the petrol companies have tried to make us fill our own tanks, they’ve ended up back peddling very quickly.  We’re used to have a bottle of milk delivered to our house by the neighborhood grocery at 11pm.  Come to think of it, what isn’t delivered to our house today without any extra charge: our newspaper, laundry, appliances, fast food.  The list could go on.  How many of us actually get up and climb up a ladder when the lightbulbs in our house have to be changed?  In a lot of cases, there’s an electrician, a handyman or a maid who does that for us.  While we take a lot of this for granted here, these are luxuries for most people in most countries and as much as we can complain about the level of service, we are served in more ways here than we are in many other parts of the world.  The self service or DIY culture has always been a slow burner in this part of the world.  Even Ikea understands that and will recommend people to deliver and install your furniture for you.  When you get a level of service like this from a retailer or service provider, then it becomes even more challenging for an e-commerce player to compete.

Concluding Thoughts on The Retail Experience

An aerial view of Dubai Mall.
Retailing is thriving in the UAE and will continue to do so for the foreseeable future.  As long as we have tourists in our malls and residents who are financially stable, we’ll continue to see retail prosper.  A day in the mall isn’t a chore in the UAE.  There is so much to do for everyone in the family that the mall revolves around how we plan our free time.  We may not go to the same mall every weekend but chances are that if you’ve got a two day weekend, there is a portion of one day per week that you spend in a mall.  It may not be the same mall every week but chances are, somewhere down the line, you’re plans revolve around a mall. 

This isn’t necessarily the case in many other countries whether they be in the region or outside of the region.  Think about it.  When you travel overseas, do you necessarily think of where sightseeing destinations that include malls or are there other attractions that come to mind first?  Now compare that with any visitors you welcome in the UAE and can you recommend them five places to visit, one of which isn’t a mall?  It’s difficult and this is another reason why e-commerce hasn’t taken off in the UAE like it has in so many other parts of the world.

In the next installment, I move onto another topic: Government Regulations.