Souq’s push into physical stores shows e-commerce still has work to do in the UAE
Souq.com’s move into bricks and mortar retail seemingly mirrors the strategy of its suitor Amazon but in fact highlights that the traditional shopping experience still carries weight with UAE consumers. The region’s largest e-commerce platform opened its first ‘customer experience centre’ on Dubai’s Sheikh Zayed Road, it said on Sunday. Customers will be able to view a selection of Souq’s products as well as pick up and return items.
A service centre will provide immediate repairs, such as mobile phone screen changes, and acts as a pick up and drop off point for bigger jobs.
“Trust was an issue for Souq.com in the past but its growth and acquisition of new customers was mitigation against that,” said Ronaldo Mouchawar, chief executive and co-founder of Souq.com. “That doesn’t mean that we or the other e-commerce players have totally overcome this barrier with our target audience.”
Amazon, which has reportedly been weighing an investment in Souq, has already opened physical book stores in the US and is reportedly planning to expand its network of Amazon Go, grocery stores, to as many as 2,000 outlets if its pilot proves successful.
Even China’s Alibaba, accounting for more than one tenth of the country’s total retail sales, spent US$2.6 billion to acquire a leading domestic department store at the beginning of the year.
“Physical retail continues to be our dominant force [in the UAE],” said Omar Kassim founder of e-commerce market platform JadoPado.com. “At some level it makes sense to figure out ways to get both the physical and virtual to work together rather than apart. I think Amazon’s physical bookstores and its upcoming grocery concepts are a great example of moulding the two together in exciting and efficient ways.”
Online retail is currently estimated to be between 1.5 and 2 per cent of the total retail spend in the Middle East but the store-based retail segment in the Middle East and Africa region only grew by 5.3 per cent in 2015, while online retail grew by nearly 26 per cent, according to Euromonitor International. However, the physical retail sector could be facing an oversupply this year.
“The amount of room for the online to market to grow across Mena, before it effects mall retailers, is massive,” said Matthew Green, head of research for property consultants CBRE. “There is, however, a risk of over supply of physical retail space with 270,000 sq m expected to be delivered this year in Dubai alone. Last year saw Dubai’s gross leasable area (GLA) grow by 160,000 sq m so 2017 is a significant increase. Certain demographics are turning to online shopping but the malls here are still important social environments.”
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