Physical retail stores showing resilience despite e-commerce boom

Brick-and-mortar stores in the Mena region continue to account for sizeable retail volumes, new research finds

With two out of three consumers in the MENA doing their shopping online now, annual e-commerce sales growth is in the double digits in the UAE, Saudi Arabia and Pakistan, according to Visa data. istockphoto.comShow less

The Covid-19 pandemic has driven a surge in online shopping in the Middle East and North Africa region, however, brick-and-mortar outlets still account for the biggest retail market share, according to spending data analysed by Visa.

“The future for brick-and-mortar retail is not the apocalypse it is being painted to be," said Akshay Chopra, Visa's vice president of innovation and development for the CEMEA region.

"Our data shows that although e-commerce is now drawing a larger share of the pie [compared to the past few years], physical stores have [also] continued to see their sales grow.”

With two out of three consumers in the Mena region now shopping online, e-commerce sales have achieved double digit annual growth in the UAE, Saudi Arabia and Pakistan between January and June, while in Egypt, online sales have doubled annually during the six-month period, Visa said in a webinar on Monday.

The future for brick-and-mortar retail is not the apocalypse it is being painted to be

However, brick-and-mortar retail outlets continue to account for the majority of retail market share in Saudi Arabia, the UAE, Pakistan, Egypt and Morocco, the payments giant added.

Results of a Standard Chartered survey released on Monday found that 73 per cent of the UAE's respondents believe Covid-19 has made them more positive about online shopping. Almost half, or 47 per cent, of UAE respondents said they prefer making online payments now rather than using in-person cards or cash payments, according to the poll.

According to Visa's research, almost 80 per cent of Mena consumers have changed what they shop for, where they shop and how they pay for it due to the pandemic, while 75 per cent said they will continue these shopping patterns when the pandemic ends.

In the non-food retail category, the UAE, Saudi Arabia and Pakistan saw the highest growth in sales in discount stores, home improvement outlets and pharmacies. Meanwhile, there has been a double-digit decline in sales of apparel, accessories and electronics in these markets, according to Visa data.

People increasingly prefer contactless and low-touch payment options in the wake of Covid-19. Contactless payments in the UAE and Saudi Arabia grew by about 10 per cent in the second quarter of this year compared with the first quarter.

In the UAE, contactless payments accounted for 48 per cent of overall transactions in the non-food physical retail category between January and June, Mr Chopra said.

Almost 80 per cent of UAE consumers are concerned about the hygiene of where they shop and avoid rush hour and long queues at shopping malls, while 90 per cent are willing to switch stores if they don't offer contactless payments.

Cash-only retailers were affected most negatively, while merchants that moved online and adopted contactless payment systems have been able to better cope with the market conditions.

“Providing customers with an omni-channel experience is now more critical than ever. Retailers can innovate in future retail experiences with technologies like artificial intelligence, robotics, augmented and virtual reality and the Internet of Things, as well as a range of contactless payment options,” Mr Chopra said.

However, this can be a tall order for smaller merchants who only accept cash. Visa committed more than $200 million in April to support small and micro businesses with the tools and resources to adapt to new digital ways of working.