Feature Once shunned because of security concerns, Internet commerce has become an accepted way to do business in the UAE.
Internet shopping wins over UAE consumers
Once shunned because of security concerns, Internet commerce has become an accepted way to do business as entrepreneurs jump into an increasingly busy market with desirable products at the ready, Armina Ligaya reports It started as an entry in a university business plan competition. It has come to life as a player in the UAE's rapidly expanding online retail sphere. The saga began when Saeid Hijazi was studying engineering at the University of Toronto two years ago. His plan defeated those of more than 400 competitors in an eight-month contest. Encouraged, he returned to his hometown of Dubai and launched Nahel.com in August of last year.
Two months later, roughly 25,000 people had visited the site to browse through the 10,000 items the online retailer had on offer, from Dolce and Gabbana shoes to Hewlett-Packard printers to Clarins make-up. Mr Hijazi is understandably optimistic. "We haven't scratched the surface yet, it's definitely picking up," he said in his capacity as the company's managing director. "You can see how the UAE's internet penetration is very high. People are already accustomed to using social networking and getting their information, or doing research, online. We haven't even captured a fraction of the potential market when it comes to e-commerce."
Demand for online shopping is growing in the UAE, retailers say, with new players entering the fray and existing entrepreneurs expanding their reach. The UAE's internet penetration is the highest in the region at 50 per cent of the population, according to data from the research and consultancy company Arab Advisors Group. On average, UAE residents spent US$1,193 (Dh4,381) on online shopping in the fourth quarter of last year, according to the Mastercard survey released in June of this year, the first time the credit-card company measured such spending in the region. The UAE topped Hong Kong ($543), Singapore ($841) and Australia ($644). According to Andrawes Snobar of the Arab Advisors Group, the UAE spent Dh1.2 billion, or an average $251 per person, online in 2007. A quarter of the country's population shops online, the group said.
While there are still cultural sensitivities to using credit cards over the web, online retailers are moving quickly to cash in. The team behind the online gift store Quickdubai.com launched Quickabudhabi.com yesterday and has plans for Quickoman.com by the end of the year, said Kajsa Dokakis, the managing director of the group. "We want to grow. We feel that there is a demand for gift delivery in Abu Dhabi," she said. "We are already making some deliveries to Abu Dhabi. We have that as an option on Quickdubai and we just felt that Abu Dhabi should have their own site and their own products."
Orders and traffic on QuickDubai.com have risen 20 per cent in the third quarter compared with the same period last year despite the economic downturn, Mrs Dokakis said. As many as 12,000 people visit the site in an average month, she said. "If we compare the monthly orders this year compared to last year, we have grown," she said. "We had just a little bit of a downturn during the recession, where the order amounts weren't that great, and it fell to 80 or 90 dirhams per order. But we picked up again and people are spending again."
Brownbag.ae, one of the first online retailers in the UAE, is adding more storage centres across Dubai to reach their customers faster, said the company co-founder Ahmed bin Shabib. The number of visitors to the site rose 25 per cent between the first and third quarters of this year, he said. The group is in the midst of signing agreements for 11 new locations across the emirate, including in Deira, Mirdif, Dubai Media City and Jumeirah to ensure deliveries reach customers within the one-hour company deadline, he said.
"In the beginning, we were doing very well with centralised deliveries. But now, the demand has increased," Mr Shabib said. "So what we're starting to work on is to figure out a way to distribute ourselves throughout the city, and get to people wherever they are quicker." Citruss TV, an Arabic-language shopping channel based in Dubai which broadcasts to 14 countries in the Middle East, launched its online retail portal in English in May of last year, said Nicolas Bruylants, a co-founder of the channel.
"We do sales normally on the TV and a small portion online, but we can see since May when we started (online), the response was good in terms of growth," he said. "Until now, we have had four times the visitors and purchases online." As of last month, the Citruss online portal had about 4,000 visitors. Those figures may increase as customers grow more familiar with secure internet commerce sites, Mr Snobar said.
"We've seen a trend of growth in the e-commerce," he said. "People are getting more comfortable using it, their trust in the online transactions is increasing. The retailers are providing more content and more goods over the websites for people to purchase." Still, consumers in the UAE are still wary of using their credit cards online, Mrs Dokakis said. The bulk of orders placed on their website are paid for by cash on delivery and the proportion has not changed, she said.
That's true for her rivals as well. About 80 per cent of all purchases made at Citruss TV are cash on delivery, Mr Bruylants said. Still, that's better than a year ago, roughly 90 per cent of all the channel's shoppers wanted to pay for their goods in cash, he added. Things are turning around for some companies. Brownbag.ae customers still prefer paying by cash on delivery, but they are slowly turning to credit. "It's gotten a little better," Mr Snobar said. "People are getting a better understanding of the system."
While the number of online transactions in the region is growing, it still has a long way to go to catch up with the volume of e-commerce in North America and Europe, he said. While it will change in time, personal interactions are still ingrained in the mentality of regional residents. "If they see the person face to face, they trust them, they bond together," Mr Snobar said. "They think they are developing some sort of business communication, a relationship of some sort."
He said people in the UAE will become more comfortable with online shopping through word of mouth. "If it starts with a few people who do a lot of online transactions, if they start talking about it, saying that it is simple and convenient, it will spread and people will try it," Mr Snobar said. @Email:firstname.lastname@example.org