UAE. According to PwC Middle East’s latest “Total Retail Middle East 2016: They say they want a revolution”, Middle Eastern retail is in revolution and online shoppers in the Middle East are fundamentally disrupting retail.
Technology is changing not just how consumers shop, but how retailers operate across the spectrum: from supply chain management, all the way through to customer engagement and brand management.
In PwC’s most comprehensive Total Retail survey, nearly 23,000 online shoppers in 25 countries, including over 1,000 consumers in the Middle East, revealed the changing behaviors that will drive the coming retail revolution. The survey looked at what drives shopping decisions, what makes different channels attractive and explored how new trends like social media are changing the face of the sector.
Middle East key findings
Despite taking time to develop, the online retail sector is growing and is gradually catching up with more developed markets across the world. The survey found that the PC is still the main channel for online retail, however the use of mobile is growing and taking a larger role in the online shopping process. Further, the advancement of online retail varies across product categories.
One of the important factors that has an impact on shopping behaviour, and as a result on the retailers themselves, is the payment method as consumers are still wary of online security and have a preference for cash payment. Finally, social media and personalisation influence consumer shopping behaviour and should therefore be a consideration for retailers with the change and evolution of the sector.
The survey found that price is still king and plays a key role in determining shopping behaviour. Middle Eastern consumers value monetary benefits obtained through loyalty / reward programs and social media.
PwC’s survey also found that social media influences shopping behaviour and contributes towards building brand value across the region. The PC remains the most commonly used device for online shopping followed by mobile / smart phones.
Online retail is growing
- Middle Eastern consumers are shopping online more frequently than they did a year ago (2014 vs. 2015)
- The percentage of daily online shoppers doubled from 6% in 2014 to 12% in 2015
- The shopping experience remains divided between online and in-store; consumers still revert to in-store shopping after researching their products online
- As many as 44% of respondents in the region made their first ever online purchase less than one year ago, compared to 19% globally
- 63% of those in the UAE would pay more for sameday delivery, and 54% in Saudi Arabia
PC is the main channel, mobile is catching up
- The use of mobile / smart phones for online shopping increased from 61% in 2014 to 70% in 2015,
- While the use of PCs decreased from 92% in 2014 to 89% in 2015, indicating a shift in consumer behaviour and choice of shopping channel
Preference for cash; concerns over online payment
- 80% of consumers prefer the cash payment method over others, higher than the global average of 75%
- Shoppers still have security concerns over making payments via their mobile / smart phones
Preference for online shopping varies significantly amongst products
- Clothing and footwear was the most frequently purchased product category online (68%) followed by consumer electronics and computers (66%)
- Groceries was the least purchased product category online (43%)
Shoppers value service, flexibility and personalisation
- Preference for buying from a neighbourhood retailer increases with better service
- Customers are willing to pay a premium for speedy delivery of online purchases
- Shoppers find that real time personalised offers improve their in-store shopping experience
Norma Taki, Retail and Consumer Partner at PwC Middle East, commenting on the survey and findings said: “The Middle East has one of the fastest-growing populations in the world, and one of the youngest: the number of people in the Arab world is set to almost double to 500 million by 2100, and half of these people will be under 24. Because of these demographic shifts, compounded with the other seismic changes provoked by the global megatrends, the Middle Eastern retail sector, is no doubt undergoing a change, a revolution, albeit at a different pace compared to the more developed countries.
"Most notably, here in the Middle East, the disruption is happening at the millennials’ level: our younger populations with more of them living in cities, and more of them using digital technology. There are opportunities here for retailers, as well as challenges. Online shopping is the most obvious example, with even relatively small operators now able to cross borders and reach global buyers, if they do digital well. But increasing urbanisation also offers new and different possibilities for physical stores, and the growing numbers of middle-class consumers in emerging economies have more to spend, and an appetite for brands. It truly is an exciting time for the Middle East.”
In this year’s survey, the UAE stood out as having more experienced online shoppers than is typical in the region:
10% have been shopping online for more than ten years, compared to a Middle Eastern average of 5%. Likewise everyone surveyed in the UAE said they owned a mobile phone, but in the region overall 7% did not have one. Aftersales service is more important to UAE respondents (37% versus a Middle Eastern average of 31%), as is Click & Collect (27% versus 22%), and they value loyalty points more in loyalty schemes (64% see it as a key benefit, compared with a Middle Eastern average of 55%).
UAE consumers are more likely to choose a retailer for their stock availability (24% compared with a regional average of 18%), and because they trust the brand (32% versus 29%). UAE respondents are more concerned about security risks online (22% versus 14%), and – perhaps for similar reasons – are much more likely to use a debit card than another form of payment (46% compared to a regional average of 25%).
Saudi respondents tended to conform to the overall regional trends in their answers. Some of the variances that did stand out are aftersales service and Click & Collect, which are both less important in Saudi than the regional average (24% versus 31%, and 18% versus 22%, respectively).
Saudi respondents also put a lower value on reward points as part of loyalty schemes (47% see it as a key benefit of a loyalty scheme compared to a regional average of 55%). The other interesting finding was that 16% of Saudi respondents say the slow speed of their data connection is an impediment to mobile shopping, compared to a Middle Eastern average of 10%
One of the most striking findings is the polarisation of the online shopping landscape in Egypt. Egypt has more people shopping online daily (12% versus a regional average of 11%), but also more people who have never shopped that way (18% versus 13%). It also has the smallest number of people who have been shopping online for a long time – only 0.9% of respondents have been doing this for more than ten years, compared to a regional average of 5%, and 16% of Egyptian respondents said they don’t own a mobile phone, compared to a regional average of 7%.
But Egyptians are catching up fast: more of them are likely to research products on their mobile while instore (39%, versus 29% in Saudi Arabia and 31% in the UAE), and they are more likely to compare prices on their mobile while instore (46%, versus 39% for Saudi and 40% for the UAE). Social media is very influential too: 75% of Egyptian respondents value a brand more after interacting with it on social media, compared to a Middle Eastern average of 63%.
Price and personalisation emerge as other key factors: Egyptians are more likely to choose a retailer because of price (52% versus an average of 49%), and the availability of personalised offers is a major reason why retailers gain ‘favourite’ status (31% versus 24%). 43% would have a better instore shopping experience if there were more personalised real-time offers, compared to a Middle Eastern average of 34%.
Security concerns are much less of an issue for Egyptians: only 2% say that’s preventing them from shopping online, compared to a regional average of 14%. But mobile security is still an issue: 74% are worried about their phones being hacked, compared to an average of 65%, which may partly explain why more of them prefer to pay in cash – 85% versus an average of 80%.
Other challenges for the online operators include long delivery times: 51% of Egyptian respondents cite this as a problem, compared to an average of 45%.
Photo Caption: From PwC's report: “Total Retail Middle East 2016: They say they want a revolution” (Credit : PwC)
At PwC, our purpose is to build trust in society and solve important problems. We’re a network of firms in 157 countries with more than 223,000 people who are committed to delivering quality in assurance, advisory and tax services. Find out more and tell us what matters to you by visiting us at www.pwc.com.
Established in the Middle East for 40 years, PwC has firms in Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Oman, the Palestinian territories, Qatar, Saudi Arabia and the United Arab Emirates, with around 4,000 people.
For more information, please visit www.pwc.com/me.