An ecosystem of physical and virtual retail stores
Retail has always been a sunshine sector in the UAE, which is leading the growth in the GCC region.
The UAE is one of the leading countries in the world for Internet and mobile penetration with 8.1 million (91.96 per cent penetration) active internet users and 7.27 million (75.89 per cent penetration) mobile internet users.
It is only natural for the country to develop in e-commerce as validated by the number of online shops opening up within this small geography. The big question is, however, "will e-commerce replace the traditional brick and mortar retail?"
The simple answer is "no". For the longer answer, let us look at some facts.
Retail has always been a sunshine sector in the UAE, which is leading the growth in GCC. According to an Alpen Capital report, the GCC retail sales are expected to grow at a 7.3 per cent CAGR between 2013 and 2018 to reach $284.5 billion. The personal luxury goods segment in the Middle East is expected to grow at a 4.6 per cent CAGR between 2013 and 2018 to reach $9.4 billion in sales.
According to the report, the population base of the GCC region is one of the fastest growing, with 41 per cent of its population in the age group between 15 and 34 having a strong preference towards international brands. The region also has one of the most attractive corporate tax regimes, which is also attracting retailers. Increasing affinity towards big brands and changing habits of the population is pushing retail to adapt itself.
Reports suggest that e-commerce will reach over 2.5 trillion in sales by 2018, yet only add 10 per cent to the global retail market. E-commerce will complement the physical stores perfectly. However, it may not replace them. This is because, primarily, we buy with our senses and we buy with emotion.
Online retailers such as Amazon.com have now opened physical book stores and Chinese e-commerce giant Alibaba opened its first physical store in North China. While the online stores give the reach, physical stores cater to the primary human instincts, where we want to feel and experience the product first hand. We should see such moves being adopted by other e-commerce players as well. However, the players who already have a physical store and now ventured into e-commerce have a head-start advantage.
When Big Brands Factory Outlet decided to launch itself online with its e-commerce portal, we were skeptical about customers buying a perfume online as inherently the product thrives and sells on the sense of smell which cannot be replicated online. However, the online platform gave a very different experience to the customers. Here the customers got more detailed information about their favourite fragrances, its top notes and heart notes etc. Additionally, customers also get a price advantage by shopping online.
In the information age, retail has to adapt itself too. While customers experience the smell of rose petals and jasmine in the Jadore fragrance in our stores, they read more about it online. While they can feel the texture of a Bentley watch on their wrist at our stores, they learn about its intricacies online. No customer is shopping purely online or in physical stores anymore. Shopping experience is now ubiquitous and transcendent.
With so much going on in our lives, we find ourselves strapped with time. Yet, today we can find that elusive Christmas or birthday present easily, while shopping in a large mall, comparing prices online, and get the delivery done directly to your loved one. The dynamics of shopping are changing and we love the challenge.
The writer is head of retail at Big Brands Factory Outlet. Views expressed are his own and do not reflect the newspaper's policy.