With the high level of Internet penetration and strong economic fundamentals, the GCC region has the potential to become the world’s fastest growing e-commerce playground, finds a latest report by A T Kearney, a prominent global consultancy.
However, the report titled ‘Getting in on the GCC E-commerce Game’, suggests that despite strong economic fundamentals, the GCC is one of the most under penetrated e-commerce markets in the world. However, with high levels of disposal income, world-leading Internet and smart phone penetration, and changing consumer preferences, there is robust potential in the region, and some companies are beginning to seize the opportunities.
Currently, the e-commerce market in the region is much smaller compared to mature markets with similar economic fundamentals. With an estimated market size of $5.3bn (QR19.29bn) in 2015, e-commerce contributes only about 0.4 percent to the region’s GDP– a miniscule amount which is 4-8 times lower than other comparable markets. According to the report, there are several obstacles preventing e-commerce in the GCC region from reaching its potential, including consumer trust and awareness, gaps in payment systems, distribution and logistical infrastructure, government policies, data security and fraud. Furthermore, e-commerce offerings from the retailer side are also lacking. The A T Kearney study reveals 34 percent of major GCC retailers have an e-commerce channel, compared to 58 percent in the United States.
However, there are significant opportunities to overcome these challenges and facilitate growth in the sector, with the study expecting, the market to quadruple its value to $20bn by 2020 if the right set of enablers are put in place.
Commenting on the report, Laurent Viviez (pictured), Partner, A T Kearney said: “We expect the growth of e-commerce in the GCC to transform the future of businesses, economics and lives across the region – but only with the right set of enablers in place. And it doesn’t rule out traditional retailers, who can be on the winning side of e-commerce by adopting an omni-channel approach. We see the future for the sector as not digital-only but ‘physical with digital’ –traditional retailers can really tap into this.”
The report states that online payments and wary shoppers are among the biggest factors holding back e-commerce growth in GCC. As a result of these factors, 60 percent of online orders are still paid in cash at the time of delivery. Cash on delivery is not only expensive for retailers as they bear transaction and cash transportation risks, but also affects negatively impacts cash flow.
“This should be a focus area for retailers as they select best payment options to ensure transaction security as well as enjoyable customer experience. They need to form payment ecosystems to ensure inter operability, and forge strategic partnerships with the best-of-breed providers that are already active in this space and also enable mobile-based payments collaborating with telecom players and taking advantage of the region’s high mobile penetration,” commented Adel Belcaid, Principal, A T Kearney.
With opportunities galore, it is prime time for the GCC to take the plunge and drive growth in its e-commerce sector. As consumers become more tech-savvy and embrace e-commerce, e-tailers will have the first-mover advantage. Traditional retailers that took a wait-and-see-approach will need to act now to reserve a share of this fast-growing market.
