e-Commerce becomes a boon for small businesses and consumers in the UAE
As e-commerce is picking up in the Middle East at 20 per cent yearly growth rate, many of these distributors and small shops are moving online
The UAE has long been a trading hub for consumer electronics since the 1970s, when industrious entrepreneurs, notably from India, came to establish distribution and retail businesses and grew them into empires. Over the decades the number of distributors and small retailers in the UAE grew into the hundreds. Spend some time walking around Deira and you will see dozens of stores side by side along the street, selling electronics and all sorts of merchandise.
Today, as e-commerce is picking up in the Middle East at 20 per cent yearly growth rate, many of these distributors and small shops are moving online. Many consumers think that Souq is the only e-commerce store in the UAE, when there are in fact at least one hundred smaller online stores that sell from any category that you might find at the major supermarkets at the malls. Because these distributors are bypassing the traditional retail channel, they can offer prices that are much lower than those of established big box stores. The commerce that the Internet is enabling is a boon for both small businesses and consumers alike. Gone are the days where “location, location, location” were the only drivers for retail. Today, any store can claim real estate on the internet — essentially a domain name — for as little as $10 a year. Competition shifts from being able to afford the perfect physical location (such as malls) to offering competitive prices and superior customer service. In effect the internet is making it possible for small, less known business owners to compete against the Goliaths anchored in high-trafficked malls.
For consumers this means that e-commerce is creating a more price competitive market.
Our research on pricena.com shows that 84 per cent of consumers are price-sensitive, and there is good reason for it as there are significant price differences among stores. Online shops are in fact on average 20-30 per cent cheaper in consumer electronics such as smartphones, tablets and cameras. The differences can be sizable for high ticket items where for example one could save Dh5,000 on a professional-grade camera or a high-end large screen TV.
But one could argue that small stores won’t survive competition from the big retailers once these go online, and Amazon might be given as a prime example. In fact, it’s the opposite. In the past few years Amazon has opened up its platform to third-party merchants, effectively turning into a marketplace where the store offering the most competitive price has a high chance to win shoppers. In addition, with its high traffic base Amazon enables small businesses with limited marketing budget to be discovered. For example, you could be a niche store specialised in fine handcrafted Japanese art and list your products on Amazon in return for a fee to get exposure to millions of online shoppers.
In the UAE the ecosystem needs a similar marketplace to connect buyers and sellers, be it in the form of a platform such as Souq or a price comparison site such as Pricena. We’re bigger believers in price comparison platforms because of the strong value proposition that it offers to consumers. Merchants will always subscribe to platforms where shoppers go, and by design price comparison sites empower consumers through complete information transparency on price, speed of delivery, shipping fees and payment methods.
Price comparison models have been successful in the West and have been a driving force for the development of e-commerce. Shopzilla.com pioneered the concept in the late 90s in the United States, and was sold in 2005 for $525 million. Shopping.com was sold to eBay also in 2005 for $620 million. Kelkoo.fr, the French price comparison site, was sold to Yahoo in 2004 for €475 million and the Brazilian Buscape.com.br was sold to Naspers for $342 million in 2009. The model seems to be successful among consumers but also investors and we think it’s only a matter of time until most consumers become online shoppers. We’re already seeing it in the younger generation.
Despite the hurdles that e-commerce is facing in the region, international investors are betting on the industry, with big names like JP Morgan, Tiger Global and Naspers having made sizable investments in internet companies based in the UAE.
The writer is a founder of price comparison website pricena.com. Views expressed by her are her own and do not reflect the newspaper policy.
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