E-commerce portals in the region are burdened by expectations… of the low kind. While they may still be tempted to make the odd purchase or two, and primarily for low- to mid-value transactions, large swathes of the region's shoppers are still unwilling to repose full faith in the medium.

      And more often than not, they cite security as a top concern for their reluctance for engaging in such a transaction. Another stems from persistent doubts over a portal's long-term viability, especially those operating in the region. Even if such concerns are misplaced, they remain a steep hurdle that regional portals have to surmount. Or fail, if they don't.

     This is in spite of repeated — and concerted — efforts by the many portals vying for shopper attention that the transactional integrity will be maintained and that the security features can be rated along with the best elsewhere. But, as the portals' promoters will tell you, this continues to be a hard sell.

     Despite the seeming lack of traction, there is no dearth of portals coming through to try their hand at making a go of it. They remain united in the conviction that 2011 may yet be the breakthrough year for them. Rather than try and covert the doubters, the portals are aiming for those potential shoppers who do not carry any such baggage.

     Catch them young, is the buzzword among portal operators. "We see a pick up because of the acceptability among the younger generation to the e-commerce space," said a spokesperson for," said a spokesperson at SpendWisor.com, a portal for electronics and tech gadgets.

Extra distance

     If it means going the extra distance on creating added value for the portal to draw in more eyeballs, then so be it. "We are not just a marketplace — we are building a community where people can discuss products, ask questions and receive expert advice," the spokesperson added. "There is a live chat which is being manned at all times during office hours to answer questions that our consumers might have.

     "We believe we will be profitable in the year 2011-12, which is within 18/24 months of [launching] operations. Compared to other markets this is a much faster rate."

      Going by track record, that may not necessarily be the case. In the UAE, 52 per cent of those polled by The Nielsen Company said they spend less than 5 per cent of their monthly expenditure online. Another 30 per cent placed the same at between 6 to 10 per cent a month.

      In other words, so far, there is not much transactional activity taking place for all the portals out there to make sustained returns.

"For UAE consumers, if they can't find something locally, then they are more likely to go online," said Sevil Ermin, managing director for the UAE, The Nielsen Company.

     "This has been a bigger driver to shop on-line in the UAE than lower on-line prices as there have been insignificant price differences by on-line counterparts at present. This aspect mirrors global figures, where one-third of global online consumers say they primarily do their internet shopping at retailers that have only an online presence, such as Amazon.com.

     "But the UAE still has a fair way to go when compared to other markets where online sales account for a larger percentage of total retail sales. At this stage a lot of people are researching on-line, but very few people are actually buying."

Distribution strategy

      To get more shoppers to do their purchasing online, what the region might require is a complete redrawing of a retailer's strategy.

"Retailers going online will need to have a multi-channel distribution strategy, which means they need to have a physical presence, an on-line presence and embrace social media to enable customers to be in touch with them through any number of points," Ermin added.

     "This would mirror trends in the US and other countries where the market is really changing from broadcast to "narrow-cast", focusing more on personalisation."

     This would inevitably lead to a spike in operating expenses, which may not be something that pure-play e-commerce portals can afford to do, or even want to. In fact, for many of them their whole business plan is built on eschewing a physical location and making savings from doing so.

     For established retail names — those in the consumer goods space for instance — looking to create another sales medium by having an online presence, the transition is much easier. The brand awareness is already there, which would also mean that future shoppers would have invested sufficient trust in what the portal would offer. In the coming months, many of them would be doing just that in the local market.

     None of this means that the pure-play portals are going to vacate the space.

    "It is very important that you match your customers expectation at every level of your business, whether it's the ease of use of the website, customer support and payment options," said Paul Kenny, CEO of Cobone.com, which through its partners offers discounts of 50 per cent and more on a range of daily promotions. It could be on a movie ticket or a meal at a happening restaurant. "The business model of Cobone is very sustainable as it is a proven model globally as we have already opened in nine other countries, including Australia, Brazil and India," said Kenny.

Marginal commission

    "Every day we feature a deal that guarantees a business a minimum number of customers before the deal goes live. When the number is reached, Cobone applies a marginal commission to the total revenue on the day, which for the business means there is no set up cost and it works on a performance basis.

    "What that means for the business is a no risk, technically free way of generating a great cashflow and people through your door."

    The portal already has made a go of it in Dubai, Abu Dhabi and Sharjah, and plans to repeat the same in the GCC and a total of 30 cities. Kenny, for one, is nothing if not bullish about what the future holds for the region's e-commerce.

He places GCC-wide growth to run in the 20 per cent range annually in the coming years. It also helps Cobone.com that it is from the Jabbar Group stable, which also operates Souq.com, Sukar and Cashu portals. And it recently sold Maktoob to Yahoo in a deal valued at $170 million (Dh625.26 million).

    In a marketplace where brick-and-mortar retail is so entrenched and mall trawl a favoured pastime, for e-commerce portals to draw eyeballs and get the regular deals can be a big ask. Ermin is emphatic on what needs to be done to get them — "The levels of service will also need to improve as they are not providing enough incentive for shoppers to go on-line. They have not succeeded in fully convincing customers that buying on-line is a viable (and beneficial) option.

    "Businesses in the UAE have not really embraced the opportunities offered by online shopping and have not taken advantage of the global trend where we see the common thread of online shopping offering bargains to provide more value over brick-and-mortar offerings."

    "Globally, online shopping sites are getting consumers the best price possible, and if you go to any of these sites you'll probably get a better deal than a physical store."

    Maybe, 2011 will mark the moment when the same starts happening in the region as well.

Low players density

    For Middle East portals, there are no easy answers to resolving shopper concerns about security. It's a fact of doing business that the portals themselves have come to accept.

    "Payment security is one of the biggest concerns, especially when the buyer is new to the medium," said the spokesperson at Spendwisor.com. "Even though the services offered by the payment gateways in this region are good, what lacks is an adequate number of players to be able to achieve the right level of competition which would benefit merchants.

    "PayPal has limited support for this region as well. Getting a payment gateway integrated on their website is probably the biggest - and the most daunting task - for any e-commerce portal in this region.

    "In the more developed markets, one can be ready to sell on their website in a matter of days."

Interestingly, airline ticket purchases leads on-line buying activity in the UAE.

    "It may largely be attributed to the fact that the airlines have had to develop a competitive on-line shopping environment and retail experience to enable them to compete with their global counterparts," said Sevil Ermin at The Nielsen Company.

    "Especially, given the fact that many of their customers are based in markets where the expectation and demand for this level of differentiated on-line service is very high.

    "On-line customers also save on up to 5 per cent in agency fees that would be incurred if they make their purchase offline. These reasons have combined to result in a more developed offering that provides convenience than going to a travel counter. Airlines websites have also made more investments in making on-line purchasing secure than retailers have made in their on-line sales operations."

                                                                                                                                                                                                      Source :Gulfnews

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