Challenges Hampering Retail eCommerce growth in uae
Evolution Of eCommerce Retail in UAE Filled With ChallengesUAE, particularly Dubai is a place where malls and air conditioned markets are main source of purchasing ration, electronic goods, home/office products and any box that can be either used or traded further. This is due to the fact that trade like other places has been done in the same fashion for many years.
However, for people residing and working in UAE be it a simple consumer or a purchasing manager including the expatriate workforce which constitute for almost 85% of the total population, value bargains, ease of shopping and time constraint push them towards shopping for products online although we are still far away from a full-fledged online e-tailing model and customer clutter like its followed in UK and USA primarily.
Some of the online retailing players in UAE market that have built their credibility around the masses of UAE are:
1. Dubaimachines.com – A Leading Electronics and Office Automation Store in UAE with Integration Services mainly dealing in products for office use.
Business Model: B2B, B2C and D2D Model (a term coined by Dubaimachines.com gurus for dealer to dealer based transactions where one dealer shares his stock list with other dealer and vice versa for swift depletion of inventory from the market),
2. Souq.com - A Leading Electronics Store mainly for consumers.
Business Model: B2B, B2C and C2C model. One of the early birds of eCommerce in UAE market and based on self claimed amazon model for GCC.
3. Jadopado.com - In the writer's opinion, it is still trying to find its niche in this market but well known.
Business Model: Started as a B2C business few years back and has gradually moved towards the same model as Souq.com,
There are many more stores and deal offering portals such as techsouq.com, awok.com, cobone.com, nailadeal.com to name a few that are core evolution partners and core foundations of eCommerce retail success in UAE.
But the old saying goes, all that glitters is not gold. Unlike US market, where the distributors and manufacturers ensure fair pricing and have an understanding and methodology of enforcement of terminologies such as MSRP and MAP Policies, the online retailer pricing is not regulated.
To dig a little further, distributors for famous brands have opened up their own online stores where they start marketing their products in prices that are lesser than the pricing given by the same distributors to their offline and online channel partners in the country.
This challenge has caused lot of online retailers and offline retailers to start importing their own products to maintain their market presence which ultimately hurts the interests of the principle manufacturers. To quote an example, Dubaimachines.com's CEO Muhammad Zeeshan Hussain said "We deal in interactive whiteboards and projectors alongside many other electronics and office products. We have noticed many times in the past that we quoted a pricing to a customer on a certain product and came to know that our own distributor has hired a sales team for these segments and quoted a price cheaper than us. This practice de motivates the interest of retailers who want to be loyal to their distributors but are periodically ditched."
To deal with this issue the retailer has started importing their own interactive whiteboards by the name of DMBoards.
"This will ensure that we are less in prices in comparison to Distributor pricing. It is sad but that's the only way out with the kind of old mindset that prevails in the distribution industry in UAE", said Zeeshan Hussain.
Another challenge is due to the fact that there are no online payment gateway providers that are willing to work with on line retailers as they feel that the risk of on line retailers is higher than having to work with a retailer that has a physical presence such as a showroom or a big office. The online retailers can digest the conservative nature of the online payment processors but then they will also like to understand why PayPal is not being conservative sitting 10000 miles away from here. Why does it take just few clicks to sign up, integrate and start accepting payments more seamlessly using PayPal? The only reason why the retailers are skeptical about using PayPal is the interchange fee that is charged due to the fact that base currency remains US$. Secondly, the access to payments received in PayPal account can only be withdrawn to visa cards and not to the bank accounts.
For businessmen having experience in USA market, they feel that dropship model of ecommerce in UAE has a long way to go until the challenge of distributor to retailer supply chain and pricing + eCommerce Payment Processor is addressed. Also on the Government front, there should be a dedicated business type inducted as “eCommerce” within the economic departments in UAE so as to bring about a regulation that will enable genuine retailers to enter the market and easier coordination between consumer rights, business and the customer.
To sum up, eCommerce industry specialists have two important tasks at hand. One is to get the manufacturers acquainted with dropshipping model within eCommerce and get them to push distributor to empower their retailers rather than reaching out to end customers directly and living up to the example "I will eat the cake and then have it too" or just be a stockist. If they do not agree to it, try to open up channels with manufacturers to open up their stock houses in this region and directly bill channel retailers and power retailers through tier pricing models.
And secondly, explain and convince payment processor to come up to the change by being more liberal in their terms, if they want to reap benefits and profitability out of this market.
Solving these challenges will just be the tip of an iceberg towards transition to mCommerce for retail businesses. But until that happens there is another old saying and it goes like this: "We'll live"