The GCC E-Commerce Royal Rumble

E-commerce in GCC has now matured from merely an allied business vertical to core business channel. COVID 19 catapulted it and small to large retailers moved nimbly towards taking their business online. While some retailers focused on being technology first, others nimbly moved towards being ‘technology -enabled’.

E-commerce was always going to be a promising channel with a bright future ahead of it. However, the pace with which it has grown is astounding. From a USD 5 Bil market in 2015 to USD 24 Bil in 2024 and onwards to become a USD 50 Bil market in the next 5 years, GCC could very well be world’s fastest growing e-commerce market in the next few years.

The GCC market is certainly evolving and embracing technology. The average number of households shopping online has increased 4x from a meagre 2% to 8%. This is still 50% less than most of the e-commerce evolved nations like Germany & China where approx. 25% households buy goods online. There is still significant room to improve and grow.

While the customers have demanded, businesses have delivered. Number of websites offering e-commerce has more than tripled in the last 3 years. Things like 48 hour delivery, easy returns and refunds, multi-category view, ratings and reviews, 24 hour query resolution and 24x7 customer service are now entry level requirements.

Marketplaces have started reaching out to more and more specialty sellers to offer a wider spread of products and to have increased share of voice. Amazon, Namshi & Noon take the largest share of the pie with respect to customer visits and over 50% cumulative revenue share. They are also seeing up to 5x conversions during sale periods like Yellow Friday Sale & Prime Day Sale.

But the multi-category retailers are not far behind. Customers’ demand of convenience bundled with data driven decision making, overall improvement in logistics and customer journey is making it easier for retailers to offer seamless omni-channel experience to the customers. With better control on private labelled products, retailers are also in better control of customer data and promotional pricing. Marketplaces currently have an opt-in model for sellers to opt for their big sales, however, retailers have been nimble in launching various campaigns during flat growth periods. Some retailers have even embraced the ‘365-day sale’ model.

E-commerce companies slogged to overcome major hurdles like operational inefficiencies, lack of digital payments infrastructure and changing traditional touch-and-feel consumer behavior in the 1st leg, the race to win is getting even ‘royal rumblier’.

Spends to acquire customers are increasing by the day and a tons of dollars are spent on optimizing acquisition channels. While marketing automation tools are being deployed to automate the right communication to the right customer at the right time, CDPs are making in-roads to provide 360 degree customer view to omni-channel retailers. Some brands are also striving for customer convenience by increase POS assets some other are relying on technological advancements like personalized merchandising, augmented reality, 360 degree product view and voice based order placement. Data scientists are working day and night to extract key information basis customer footprints, browsing behavior and purchase pattern & marketers are working day in day out to retain more customers. This is a battle for relevance. Larger players with a free flow of funding are thumping the smaller players by making it more competitive to acquire & retain customers online. As the acquisition costs have increased, private brands are also finding their EBITDA reduced by half and in some cases even going in red.

In the long run, it is imperative that smaller players and private label brands have a clear value & service proposition to retain loyal customers and acquire relevant customers. Currently highly dependent on promotions and discounts to acquire more customers, they will have to quickly create a brand and service proposition to survive, stabilize and scale.

In this royal rumble of growing e-commerce business, the customer, as always, is winning on all fronts.