As new online sellers launch expansive retail operations, traditional traders fear for the future
Noon offers millions of products and doorstep delivery, but the Emirates love for the shopping mall looks unlikely to fade
As a new US$1 billion online shopping platform places the UAE on the threshold of an e-commerce revolution, retailers insist malls will remain at the heart of the nation’s shopping culture for the foreseeable future.
The long awaited launch of noon.com, a joint venture between Gulf investors and Saudi Arabia’s Public Investment Fund, threatens to carve new definition into the UAE’s retail landscape by selling fashion, gadgets, electronic goods and homeware to rival Amazon-owned Souq.com.
Online shopping’s meteoric rise may have sounded the death knell for traditional high street stores in Europe and other markets, but in the UAE – the consumer attraction for a trip to the mall remains as strong as ever.
“I’ve always maintained that retail trends are regional and can vary as to where the consumer is,” said Ashish Panjabi, chief operating officer at electronics chain Jacky's.
“If you have your own online marketplace, you have to attract visitors and that can be difficult with so much competition for traffic. It is very different to being in a mall, where you can rely on people walking by.
“If you want to go shopping in Europe, typically stores are shut in the evenings and on Sundays. Here in the UAE, many retailers open to suit consumer demand.
“There is an opportunity in the UAE for online retail growth, but there is still a long way to go.”
According to international analysts Euromonitor, global internet sales were worth almost US$640 billion in 2013, equating to about $90 a head. Whilst e-commerce accounted for just 5 per cent of global retail sales in 2013, the sector has enjoyed spectacular growth since then.
In the past five years, internet sales have rocketed by 127 per cent in current value terms according to market experts. The availability of e-commerce, buying electronically via the internet, and m-commerce for mobile phone transactions, is changing consumer habits
It has never been easier to search for value and choice at the swipe of finger or the push of a button. With faster download speeds and increasing internet access, new online markets are opening up all the time.
Improved reliable delivery services and secure methods of online payment has seen many turn to internet shopping as their preferred choice of buying. The shift towards mobile devices like smartphones and tablets has added further weight to the argument that shopping in person could become a dying trend.
Retailers have said economies of scale that have driven the success of other global online retailers like Amazon, could stand in the way of regional growth of the new breed of internet sellers in the UAE.
“In the US, it is an area that has taken time to evolve to become an efficient and cost effective delivery market,” said Mr Panjabi.
“Companies like Fedex and UPS had the drivers and vehicles, but were not used to delivering larger items. This is why Amazon has invested in its own logistics area.
“The size of the UAE e-commerce market is about 4 million people, with those who have access to a credit card, so the only way you can get volume in this region is if you go across borders.
“In Europe, if you are shipping form Germany or Italy, you are protected by EU law. If you were shipping from Arizona to New York, you are protected by US Federal Laws.
“You don’t have that protection when shipping from the UAE to Saudi Arabi, so there is more consumer risk.”
Opening hours are also less restrictive in the UAE, with big-name retailers opened for 24 hours or until the early hours of the morning during Eid and Ramadan to capture an engaged consumer market.
Samiha Mortan, a Canadian living in Abu Dhabi, said no online revolution would change her shopping habits.
“I don’t like to stay at home,” said the 60-year-old shopper at Abu Dhabi's Marina Mall.
“When you are not working, what can you do? You go here or Starbucks.
“Many people in the Emirates go to the mall when the weather’s not so good."
Despite loyalty towards malls, some Abu Dhabi store managers said they had already seen a significant dip in sales, blaming the rise of online shopping.
“Sales are 90 per cent of what we had five years before,” said Mohammed Shoaib, a sales manager at Sundarban Electronics Trading on the city's Hamdan Street.
“Before we could sell a minimum of Dh25,000 on the weekend. Now we can sell maybe Dh1,000 or 2,000 on weekends.”
Five years ago the shop’s daily sales averaged between Dh5,000 to Dh10,000. Now it is considered a good day when sales reach Dh500.
“Rich people are going online to shop,” said Mr Shoaib.