There’s more bad news for the country’s embattled bricks-and-mortar retailers. Most of Dubai’s shoppers are now shopping regularly online and spending more than ever as they do it.
According to data compiled for the UAE Card Security Week by the Department of Economic Development (DED) and Visa, 56 per cent of consumers shop frequently online, making a purchase at least once a week – up from 39 per cent last year.
Meanwhile, the numbers of infrequent online purchasers – that is, people buying online less than once a month – has dropped from 20 per cent to 10 per cent of shoppers.
The average basket price is rising from Dh1,375 to Dh1,479, while more than one fifth of respondents spend more than Dh2,000 regularly.
Ronaldo Mouchawar, the chief executive of Souq.com, which was recently acquired by Amazon, said online sales growth has been startling. “We are growing at 50 per cent year-on-year in the UAE alone,” he said.
The research found that security issues surrounding the use of electronic payment and, therefore, the problems of cash on delivery (COD), were the key deterrent to growth in the sector.
“With the country’s e-commerce sector growing rapidly, UAE Card Security Week is an important and timely opportunity to educate shoppers about staying safe online,” said Mohammad Ali Rashed Lootah, the chief executive of commercial compliance and consumer protection for the DED.
He said the study highlighted the opportunities and the challenges.
“The sector’s continued growth now depends on the quality of the customer experience and the security of their transactions being maintained despite ever-increasing volumes of activity.”
The global WannaCry cyber attack over the weekend, affecting people in at least 99 countries, highlights the problem of securing electronic data.
“Those that were attacked were guilty of basic security errors,” said Neil Fernandes, the head of risk for Visa Mena. He said weak passwords and nonexistent firewalls were the main cause for such a breach. “I think people who are happy transacting online electronically will still be happy to transact and those that weren’t will be more wary. However, our system of ‘tokenisation’, which we offer in the UAE, makes hacked data useless because it only holds data that we create rather than account numbers or sensitive information.”
The research found that the region’s preference for COD has dropped to 22 per cent from 29 per cent of respondents. Many of the UAE’s e-commerce retailers see a rate of COD far higher than that. The luxury retailer Chalhoub Group believes the region’s reliance on COD with online sales is making the sector inefficient and costly, and limiting investment into it.
“Seventy-five per cent of our sales online are COD,” said Patrick Chalhoub, the co-chief executive of the Chalhoub Group, speaking recently at the launch of its Age of Digitalisation White Paper. “This has to change because it makes business very hard to transact. If people pay digitally they have made a commitment to purchase, if they wait till they pay they have made no commitment at all. Also the security of the delivery is compromised as cash is an insecure payment method.”
About a third of respondents said the barrier to online card payment was wanting to see the product first hand before making payment, while 42 per cent choose COD because it assures product delivery. Security concerns and a lack of trust towards product quality are cited as the biggest barriers. But sites that have been trading for several years are experiencing a conversion to electronic payment.
“Card transactions in the Mena region are growing tremendously,” said Ulugbek Yuldashev, the founder of Awok.com, an online electronics retailer founded in 2013.
“Our revenue through card transactions has increased almost three times and 30 per cent of our revenues are through card transactions. While card transactions are on the rise, COD is still one of the biggest payment methods and 65 to 70 per cent of our revenues are driven through COD. Awok is making a great effort to encourage customers to move towards card transactions. We have tied up with leading banks in UAE promotions, discounts on their credit cards and 0 per cent interest rate … upon purchase of high-value products.”
Follow The National's Business section on Twitter