x Abu Dhabi, UAETuesday 25 July 2017

Jacky's online presence does little for bottom line

As e-commerce again becomes a hot topic in the UAE, Jacky's says the online model is not about making money.

Jacky's launched its first online payment service more than 10 years ago. Ana Bianca Marin for The National
Jacky's launched its first online payment service more than 10 years ago. Ana Bianca Marin for The National

A decade after introducing the first online payment system in the Emirates, Jacky's Electronics is still waiting for the world of the web to have a big impact on its bottom line.

E-commerce is again a hot topic for retailers in the country, with Ikea and LuLu planning to roll out online payment and delivery services in the coming months. But one of the pioneers of e-commerce in the country says the model is not a major money spinner in the UAE.

Jacky's, which launched its first online payment service more than 10 years ago, has recorded little growth in web sales over that period.

Ashish Panjabi, the chief operating officer at Jacky's, said online sales contributed just 1 to 2 per cent to total sales and he thought the real value in having an online presence was the interaction with the consumer.

"Online is not a huge market here to be honest, it's not been something we have pushed strongly in the past couple of years," Mr Panjabi said.

Unlike successful online retailers globally, many in the UAE have physical stores as well as online payment and delivery services, so they often do not benefit from the lower overhead costs that are traditionally a competitive advantage for online retailers.

"For the consumer, the products are not going to cost more whether you buy in-store or online, because the margins that we work on in this region tend to be much lower than other parts of the world," Mr Panjabi said. "If you look at the US, Europe or Singapore, most retailers work on a healthy margin of double digits, we work on single digits, so there's not that much room for online."

Because most brands are sold through exclusive dealers in the Emirates, there is also little scope for competition among suppliers.

Mr Panjabi said the cost to retailers of a credit card transaction was greater online, which eats into already slim margins.

Despite these shortcomings, Carrefour, the French superstore chain, launched a non-food online store, www.ic4uae.com, in September that offers electronics goods and prompted many other retailers to begin considering e-commerce.

Euromonitor, an independent data provider, predicts consumer electronics will account for the biggest increase in internet spending over the next four years, with total internet retail spending in the UAE estimated to almost double, rising from Dh701 million (US$190.8m) last year to Dh1.3 billion in 2015.

Zeid Kaddoura, the director of Webology, an online marketing and e-commerce solutions company, said the value of e-commerce for retailers depended on the products being sold.

"If someone wants a fridge from Carrefour, they might buy it online because it is difficult to get it home if they are in-store," he said. "Many retailers are making a lot of money online."

Mr Panjabi believes the "power" of an online offering is research and communication, rather than convenience.

"Dubai being Dubai there is a mall everywhere and we are in most of the locations where you get a lot of traffic," he said. "As a consumer you have to pay for a courier charge to get delivery, whereas I can go to the mall, pick it up and come back within 10 minutes."

Experts say many consumers use online websites to narrow down a number of products to a shortlist and then go in to a store to make a purchase, particularly when spending a large amount of money.

"We have been on Facebook and Twitter for a while and have a blog that's been running for a couple of months," said Mr Panjabi. "It's a quick, easy, two way dialogue about our products."