Online shopping is forecast to grow from $1 billion last year to $2bn by 2016 in Saudi Arabia, the UAE and Egypt, according to Euromonitor, a research and information company. Sean Gallup / Getty Images
Online shopping is forecast to grow from $1 billion last year to $2bn by 2016 in Saudi Arabia, the UAE and Egypt, according to Euromonitor, a research and information company. Sean Gallup / Getty Imag

Mixed reaction to e-commerce study



The latest survey on e-commerce habits in the region says fraud is still consumers' biggest concern, but online retailers argue otherwise.

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Fraud and theft of personal information are often cited as the biggest stumbling block to the growth of e-commerce in the Middle East.

High-profile cases of information breaches, such as that on the Sony PlayStation Network last year, do nothing to dispel shoppers' concerns that their bank details could be used to fund a cyber thief's takeaway habit or even organised crime.

About 56 per cent of respondents in the Middle East and North Africa in the latest survey said theft was the biggest deterrent to shopping online, according to Onecard, an online payment provider that questioned 1,000 internet users.

But executives at online retailers argue that such concerns are now unwarranted in the Middle East because of the advent of better technology that enables more secure payment systems.

"I really don't think [fraud is consumers' biggest concern]," said Omar Kassim, the founder of JadoPado.com, an online retailer that was launched in Dubai last year.

He said 60 per cent of payments on his website involved credit cards, with the remainder being cash on delivery.

To help in combating fraud, JadoPado uses a third party called Cybersource, which can save and protect a customer's credit card details for repeat use without the retailer having access to the details.

"We feel that as customers have started to use more … services online, their general comfort level with transacting online has increased," said Mr Kassim.

Other industry experts say costly payment processes and inconsistent or nonexistent address systems are the factors now impeding online shopping in the region.

Ahmed Fahmy, the general manager of Onecard, said the primary barrier to greater use of e-commerce was the payments process.

But he added that the lack of accurate address systems in countries, including Saudi Arabia, was still a problem. "They don't have addresses in Saudi Arabia. It's not familiar. You have to write down the nearest [landmark]," he said. "It's a very big problem to the customers."

Julien Pascual, the chief executive of EmiratesAvenue.com, an online shopping portal based in Dubai, said high bank commissions stunt the growth of online retail.

"Banks, I cannot describe the commissions they charge," he said.

EmiratesAvenue.com offers only cash-on-delivery payment because bank fees eat too heavily into margins.

Mr Pascual said the average transaction on EmiratesAvenue.com was Dh2,700 (US$735.07) and credit card fees payable by the retailer on that amount would be almost Dh200. EmiratesAvenue.com charges customers on delivery. The courier who makes the delivery returns the cash to the retailer. The courier charges the website Dh8 per transaction.

Mr Pascual said credit card fees for online transactions in the UAE were 5 to 6 per cent, compared with about 1.5 per cent in his native France.

"The banks say 'make more sales and we will give you better rates', but I say 'give me better rates and I will make more sales [by offering online payment]'," he said.

Ashish Panjabi, the chief operating officer for Jacky's Electronics, agreed that bank fees for online transactions were holding back the e-commerce industry. "The online fees are expensive. There is no doubt about it."

Jacky's, which launched its online payment service more than 10 years ago, has recorded little growth in Web sales since then.

But despite representing only a very small part of the overall retail pie, online shopping is expanding rapidly. It is forecast to grow from $1 billion last year to $2bn by 2016 in Saudi Arabia, the UAE and Egypt, according to Euromonitor, a research and information company.

And although there are still barriers to growth, the advantages to e-commerce are compelling. Shoppers often benefit from discounts, save time and have a wealth of information and product reviews at their fingertips.

"The most important factor for online shoppers is information and the ability to compare the prices with multiple vendors, and all of this is happening when they are sat in their living room," said Sheriff Rizwan, the founder and chief executive of Alshop.com, an online electronics store founded in 2008 in Dubai. "It's the ease of getting the information. "

Mr Rizwan says Alshop.com offers products at a minimum discount of 15 per cent cheaper compared with brick-and-mortar stores. This is primarily because Web-based outlets are cheaper to run.

"Cost structures tend to be lower due to lower overheads such as retail rents and retail staff [wages]," said Mr Kassim.

Having experienced sales growth of up to 100 per cent last year, online retailers are investing this year in better marketing, advertising and social media strategies, improving their websites and online payment systems.

"E-commerce moves the onus of getting the product to customers rather than expecting customers to come out to the retailer," said Mr Kassim. "It saves your fuel for more pleasurable journeys."

bflanagan@thenational.ae

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