New MENA Online Retail Report 2023 reveals 63 per cent of retail leaders find managing ecommerce logistics challenging

Uplo has just released its latest annual MENA Online Retail report with insights from experts at Checkout.com and SAP, that reveals that 73 percent of the retail leaders interviewed said they would grow revenue and profits this year. Nearly half suggested that their online retail operations are growing at a staggering rate of 20 percent or more per year.

The report highlights some challenges that retailers are facing. 61 percent said competition from online rivals is fierce, while more than half found it challenging to manage profitability with the fine margins required for success.

Nicolas Bruylants, CVO and Co-Founder of Uplo said, “2023 looks set to be a record year for online retail across the region, with this survey indicating retailers are seeing rapid growth that is far outstripping many global markets. Ecommerce across MENA is bucking the global trends of inflation and supply chain disruptions, instead showing remarkable resilience. Countries like the United Arab Emirates and the Kingdom of Saudi Arabia are developing world-class ecommerce processes. Through investment in technology, infrastructure and talent, we are at the point where the region is starting to leapfrog other countries around the world in terms of the speed, convenience and efficiency of the ecommerce offering.”

Key findings from the report reveal that 63 percent of surveyed retail leaders find managing ecommerce logistics challenging while 51 percent of UAE retailers want to increase their global reach and sell cross-border.

Nagham Akileh, General Manager for Calibrate Commerce, says that ecommerce is growing 10 percent YoY in UAE and 19 percent YoY in KSA, on par and ahead of global benchmarks respectively. “One trend we are seeing is the need for young e-commerce businesses to build brand awareness to enhance performance marketing efforts and drive revenue growth. Creator partnerships continue to have a great impact on ecommerce growth, but we have seen strong demand from ecommerce-first brands for working with micro and nano creators on an outcome-based model as it's more cost-efficient and allows them to optimize and scale efforts based on performance.”

Uplo’s research also highlights MENA is the fastest growing ecommerce market in the world (double-digit year-on-year growth in all regional countries), with average household spending on ecommerce topping more than $2,500 per year in the UAE alone.

Akileh recommends that online-only retailers should consider using offline as an experiential brand touchpoint and stand out from their competitors. Many retailers operating both online and physical stores have adopted Click and Collect as a way to balance online traffic with footfall, but another opportunity could be incentivizing returns to happen in-store to reduce return costs associated with picking up returned items. “Online and offline channels shouldn't be pitted against each other, but rather work together to find efficiencies and drive the bottom line,” she added.

Nearly six in 10 business leaders also found managing online retail payments challenging. Cash usage in MENA has halved since 2018, with BNPL (buy-now, pay-later) taking its place. BNPL now accounts for more than 23 percent of ecommerce sales and is anticipated to overtake cash (35 percent). Credit/debit card use is still the most prevalent payment method across ecommerce accounting for 42 percent of transactions (Uplo Data). Despite demand for BNPL, nearly two-thirds of online retailers in the region do not offer the service.

Ashish Panjabi, COO at Jacky's Group, said that whilst BNPL as a nomenclature is more recent phenomenon, the concept of instalment payments has existed for many years. “As retailers of generally higher ticket value items, we’ve had association with over a dozen credit card companies where we’ve been underwriting together with some of the banking partners 0 percent Easy Payment Plans (EPP’s) that offer the same three month plans as most BNPL programs, but also offer six-month, twelve month and in the case of some banks, twenty four months instalment purchases.”

Jacky’s Retail has adopted much of the same on their e-commerce channels and customers there have also been able to take advantage of this. The retailer recently started offering Tabby as an additional payment channel. Panjabi shared that this has certainly helped to some degree. “Being a retailer, the most important aspect is to keep listening to what requirements the customer has. Our initial experiments with some BNPL platforms didn’t yield the sort of results we expected as it may have been too early for the consumers to be fully aware of them.  Now, we’ve come on-board when there is more consumer awareness, so there is a segment of our customers that is taking advantage of this,” he added.

Uplo report also found that retail is at a tipping point for using artificial intelligence (AI) and machine learning (ML), with a 50-50 split for those businesses that are using such tools and those who aren’t.

Jacky’s Retail’s Panjabi commented, “Data and trend analysis is something that we continue invest in. We are currently in the midst of refreshing most of our digital platforms whether customer-facing or those that work on backend processing in the hopes of improving not only customer experience but making it a more relevant experience.”

"AI can add a lot of value to customer experience, such as personalized shopping recommendations and loyalty experiences based on customer micro-segments,” pointed out Akileh. She added that “identifying the use cases for AI and having the right foundation and data points to implement AI-driven tools is essential to turning a good customer experience into a great one. Implemented poorly can have the opposite effect- they can be seen as intrusive, not useful or a bottleneck. The best retail customer experiences have a balance between AI-driven and human-led interactions."