We all remember how our grandmothers used to yell to "Abou Ahmad," the grocery shop owner at the bottom of the building, to fill the baskets they would lower to him from their balconies. This beautiful memory proves that we have always looked for ways, albeit very simple at times, to bring the market to us instead of going to it.
Looking for the easiest and fastest way to do things isn’t new. And while granny’s basket is no longer made of straw, it still exists in the form of online baskets roaming ecommerce websites.
Online shopping is more prevalent in the region than it was a decade ago and it’s still expanding. However, it’s obvious that its growth is greater in some countries than others. The sector seems to be most popular in Gulf countries, especially in the UAE, and more specifically in Dubai. The reason is due to various factors:
- The influence of western culture, which has embraced online shopping.
- Longer working hours, after which people prefer to rest instead of going shopping.
- Lifestyles that allow customers to afford slightly higher bills in exchange for a comfortable shopping experience (that is if it’s higher indeed).
- Traffic jams and hot weather, which discourage people from going out.
All these factors correlate and complement one-another, which means that one factor alone is not enough to make the sector viable. In Egypt, for instance, where traffic is the worst in the region, the ecommerce sector is not as strong as the UAE’s. Though traffic congestion discourages shoppers from going out much, there are other factors in the equation, such as the living standard and lifestyle.
There are three online shopping models: 1) Brick-and-mortar supermarkets with online platforms, 2) warehouse platforms, and 3) platforms that play an intermediary role between shoppers and supermarkets.
Brick-and-mortar supermarkets with online platforms
Companies that fall into this category include a traditional store that shoppers can visit as well as an online platform that allows shoppers to order online wherever they are. These companies include Al-Osra in Bahrain, Geant in the UAE, Dukkan in Jordan, Gourmet in Egypt, and Spinneys in Lebanon.
While some might think that posting prices online could hurt sales, Dukkan’s Chief Operations Officer Kareem Tabbaa doesn’t see it that way. “A supermarket looking to go online must pay a price for declaring its prices,” he said. “However, this is not a threat for a supermarket with an organized rate policy. We constantly monitor our prices to stay competitive and regularly launch offers to maintain our customers,” he added, saying that price isn’t the only way to satisfy customers. Good customer service is equally important.
Companies in this category deal directly with suppliers and keep products in warehouses to deliver on demand. These companies include EarlyBird, Trolley, and Easy Living in the UAE, Khodarji in Jordan, Beqala and el5odary in Egypt, Fresh Qatar in Qatar, and Dukaany in KSA.
Cornelius Durm, managing partner of UAE online supermarket Early Bird, which is the oldest of the sector in the UAE, believes that this business model has advantages over traditional supermarkets in terms of quantity of products that it can deliver. If you order 200 water bottles, it is easier for warehouse stores to deliver them because they stock large quantities. Supermarkets, on the other hand, have to showcase their products in the store.
Similarly, Nasr Shammout, founder of Khodarji in Jordan, believes that his business model is better than that of traditional supermarkets, because it’s not in the favor of the latter to advertise their prices, as they might lose customers who comparison-shop. Nasr also believes that products in this model should be cheaper that those in regular stores because delivery costs are cheaper than the operational costs of keeping an offline store running.
Shammout doesn’t believe that the Jordanian market is mature enough to drive this sector yet, because customers still prefer to physically check the products before they buy, and because Jordan doesn’t suffer from gridlock the way the UAE does. This is why Shammout intends to open a branch in Dubai soon.
However, even in the UAE, Durm faces the same problem. Many prefer to go to the store to ensure the quality of the products that they are getting. However, instead of fighting this way of thinking, Durm has decided to adapt. His company now offers grocery on the move, where a truck loaded with products parks in a certain region to allow passersby to pick their products. Furthermore, Durm will launch an offer in about two weeks that enables buyers to receive their products directly from the warehouse after they order them online for a 7% discount so that they check for quality themselves.
Companies that fall under this category offer a service rather than the products offered in the two other models. The online platform is more like an online mall that displays different stores from which shoppers take their pick, after which the selected store provides the products ordered. These companies include Next Mart, which will soon launch in Dubai, and Awfar Market in Egypt.
Next Mart has come up with a process that helps it avoid the delays that occur as a result of traffic jams, by displaying the stores on the website by proximity to the shopper, to allow customers to order products from the nearest store and receive them as fast as possible.
Delivery service details differ from one company to another. For instance, some can have their own delivery team as with Awfar Market, or can have each store send its own delivery staff, similar to Next Mart. In the second case, the company is only responsible for the online aspect and mediation between the two parties.
The Sector’s Future in the Region
Despite the pros of online shopping over ordering products by phone, such as seeing the products and ordering them accurately (by not mishearing the order), phone orders still have a grip on the sector. Nasr says he receives many orders over the phone. Similarly, Durm says that he receives most of the orders through conventional channels, with online ordering only accounting for 30%. The reason shoppers still use conventional channels rather than going online may be due to a lack of marketing, electronic illiteracy, and cultural traditions.
“We don’t only work online,” says Durm, “because if we limit our orders to that, there’s a big chance we might fail. Despite the growth of the sector, the online market is still not very mature. However, online orders are constantly increasing; they rose over the last year by 40 to 50%.” As for the future of traditional grocery stores, Durm believes that “they will not vanish as the sector develops, because they cannot be replaced. Of course there will be many more online grocery stores than there are today; but traditional grocery stores will not disappear.”