Challenges Faced by E-commerce Businesses in Middle East and Ways to Overcome Those

The MENA region consists of almost 6 percent of the global population. Some of the countries have as much as 50 percent of the population under the age of 15. The Middle East possesses almost 28% of its population is between the ages of 15-29; this makes it among the youngest populations around the world. Few of the countries in this region have the highest per capita income in the world. This makes it one of the best target markets for businesses, more noticeably, the e-commerce retailers. But, the reality is quite different than numbers. The countries of this region account for the lowest percentage of online sales in the whole e-commerce industry, a mere 2% of total retail transactions. The question that arises is this; why a market with huge purchasing power and a young population that can be targeted brilliantly by e-commerce retailers isn’t going the same way as every other region?

Looking at it from an e-commerce business’s point of view; it is one of the toughest markets to crack. Why? It is because of the challenges that are unique to the region, which will take innovative approaches and patience to push through. Here are the major challenges and tips to tackle each:

1. Preference for COD Orders as opposed to Digital Payments

Even after being friendly towards technological use, Middle East hasn’t witnessed a shift tow必利勁
ards preferring digital payments. Reports suggest that almost 85% of the deals in the Middle East are still done in cash, starkly different from than the rest of the world. Digital payments make e-commerce dealings a lot easier; so why is it that people don’t want to pay online? There is a major trust deficit amongst both merchants and consumers when it comes to using regional online payment processes and banking systems. Even though financial markets and banking infrastructure has evolved in recent years, it is still plagued by issues such as inadequate clearing and settlement processes and electronic channels for payment transfers that are still at the embryonic stage. Owing to these hiccups, merchants themselves don’t encourage online payment and show a pronounced bias towards cash acceptance.

Thirdly, a study showed that 2 out of 5 mobile shoppers have been victims of cybercrime. Fourthly, consumers don’t trust companies so much to pay for the product first and then receive it later; they would rather have the product in-hand and check its condition before making the payment.

There are more factors at play here than we can imagine, pertaining to every part of the process; right from the mindset of people to the technological tools available even if one gains the trust of customers.

What can we do about it?

• Consumers cannot be motivated to pay online unless they can trust that payment gateway is secure and the transaction would not eat up their time. To this end, e-commerce companies need to vigorously invest resources in implementing fraud prevention and monitoring processes to inspire confidence in customers to shop online without any inhibitions.

• Mobile wallets can be enormously instrumental in addressing the COD challenge in MENA. Given that majority of the e-commerce, the transaction takes place on smartphones, mobile wallets have emerged as a secure and convenient alternative payment method in comparison to credit cards that require you to input credit card number on phone. While banking and independent financial institutions are focusing on launching mobile wallets in the region, e-commerce companies can also launch their own digital wallet as Amazon did with Amazon Pay. This will make sure that customers can quickly order a product and spend money on buying from one e-commerce company as they have money stored on their website, earning long term loyalty.
• Another model to emulate is what Alibaba did in China with Alipay that works like an escrow payment service and doesn’t release the money to the seller unless the buyer verifies that they are happy with the purchased goods. This significantly alleviates transaction risk for online shoppers and helps in precipitating cashless e-commerce.

2. Consumer Behavior 

The Middle East has a unique culture and way of life; that affects how business is conducted and consumers act in the setting. For example, the mall culture is heavily predominant and people still prefer to purchase from brick-&-mortar stores rather than online retailers. More women are wont to place an order online than men. 40% of people surveyed said that the biggest motivation to buy online was the lower prices as opposed to convenience, which has pushed e-commerce worldwide. E-commerce businesses undeniably incur lesser overhead costs and are able to pass on those savings to their customers, making them more price competitive. However, this boon has turned into a bane for the e-commerce industry, pulling it in the wrong direction. E-commerce stores seem to be scrambling to become the cheapest online while other virtues such as service and user experience that should have been the decisive factors for customers are relegated to the backburner by the business owners. In a bid to save on costs and lauch fast in the market, e-commerce retailers picked readily available platforms available in the market and simply customized the colors and branding without sparing much thought to their target audience. Consequently, customers also priortise retailers who offer the cheapest prices.

What you can do about it?

• E-commerce retailers need to differentiate themselves by way of crafting unique and innovative user experiences to draw consumers. Spend time on understanding what makes your niche target market different, what is their behavioral pattern and aim to address their specific needs via user experience on your platform.
• You need to orient consumers’ attention to the ease and convenience of purchase online. This can be facilitated by providing your consumers with seamless fast, intuitive, responsive websites and mobile apps to shop on. Offer them the option of various checkout options such as click-and-collect and doorstep delivery and allowing them the flexibility to pay via their preferred mode of payment.
• 31% of people in the Middle Eastern region say that a wide range of products available online is what makes them choose an e-commerce retailer over brick and mortar stores. Make that your competitive edge. Online stores can afford to offer a much more wide array of products as they do not have the physical space constraints that limit offline stores. E-commerce retailers need to analyze which products are in the most demand and which products are hard-to-get. You can put these products online and market it accordingly to the target audience and earn their loyalty.

3. Personalization

Even with the level of potential, the Middle Eastern market possesses; companies focused on how to personalize customer experiences. There is minimal personalization when it comes to user experiences and product discovery. E-commerce businesses can be blamed for not using the data and metrics at hand to create unique experiences for users.

What you can do about it

• Use qualitative and quantitative research methodologies to recognize customer usage patterns or preferences and effectively incorporate these insights into your strategies to adapt your offering, target customers, influence user decisions, or to up-sell.

• Create relevant and personalized experiences for your customers. Personalization spans all the aspects that visitor experiences while shopping online. Right from the look and feel of your website, to the products that displayed to them could have a significant impact on conversions. Personalized engagements and promotions combined with marketing efforts such as SEO, digital and social media should be vigorously utilized to reach and convert customers. The end goal is to make every user feel unique by personalizing their journey.

• A deep understanding of language, culture, customs, and appropriate etiquette is imperative to succeed in the Middle East. Religion penetrates every sphere of the Arab people. The boundary between professional and personal worlds is somewhat blurred and hence, you need to be vigilant about the daily routines of Muslims. Arab people prefer talking in Arabic so Arabic call center support is a must if you wish to do business in the Middle East and what complicates it further is that every region has its own dialect. Gender roles are sensitive and proper customs should be followed to avoid disrespect and offense. This is why you need to have only native Arabic customer support staff deal with your Arabic customers. If you do not have in-house staff, it is advisable to outsource it to a Multilingual call center that provides Arabic Call Center Support. Native Arabic customer support people inherently understand the right communication practices and understand techniques and protocols followed in business culture.

4. Logistical Issues

This is the biggest problem e-commerce retailers face and is the real challenge, which has stagnated e-commerce growth in the region. It is difficult to provide ‘in-a-day’ delivery system due to poor logistical infrastructure. Like a chain effect, it gets harder to manage returns or providing quick replacements. Delivering small quantities of products poses another challenge. This brings us to the big question- what can e-commerce retailers do to resolve these problems?

• Warehousing Challenges: E-commerce retailers in the Middle-East are ridden with numerous challenges related to warehouse operations such as maintaining real-time inventory, fast replenishment, a dearth of right technological tools, etc. To resolve these, it is necessary that warehouses are revamped and redesigned as per the modern standards to bring about improvement in supply chains. Warehouse related processes also need to be analyzed to eliminate bottlenecks and bring inefficiencies. Complex supply chains in the Middle East also pose a huge impediment to E-commerce growth in the region. Merchandise is usually stocked at large outsourced fulfillment centers, which are supplied by various vendors from different countries. From fulfillment centers products are then sent to the outsourced distribution centers. This causes an inevitable delay in e-commerce deliveries because their order systems and back end logistics are not integrated with that of the businesses. One way to overcome this obstacle is what Noon has done by setting up their own in-house fulfillment and distribution centers, run by their own employees, fully integrated with their backend, and completely customizable. Speed- fast delivery, fast returns- plays a pivotal role in the success of e-commerce, and without in-house control is one of the most efficient ways to achieve it.
• First Mile Pick-up Issues –Most e-commerce retailers face hurdles in picking up products from small and medium businesses as they are more inclined to sell products neighborhood physical retail stores instead of going online. To circumvent this hurdle, it is recommended to map your pickup center locations in the vicinity of SMBs and other suppliers. This curtail time is taken for pick-ups and will enable faster processing times. Taking a cue from noon.com again, another alternative is to store inventory for the region in the self-owned warehouses so that the products are already available on the site, ready for pick up when an order comes in. Such a centralized system allows better control over what is in stock and how quickly it can be delivered to the customer and helps you set the right expectations for the customer, earning you their loyalty and trust.

• Last-Mile Delivery Hiccups – The address system in the Middle East is notorious for its unpredictability due to the absence of any universal addressing system that directly impacts delivery speed and failure rates. Let’s take Dubai for example. There are no street addresses for residential or business locations in Dubai but only P.O boxes exist to serve the purpose. That poses a big challenge for any e-commerce retailer trying to deliver products; more so, for international retailers who want to make a mark. This makes the use of GPS to deliver products redundant and that’s why only a few courier services are successful in the region. Aramex remains the leading player and overdependence on that is a major handicap for e-commerce retailers. Recruiting your own local delivery agents who are familiar with the city’s layout and understand how to get around the city is one of the best options as locals usually provide buildings and landmarks as a means of navigation. To overcome this challenge, noon.com invented a geotagging system. As soon as the product is ordered, the system captures the geo-location of the customer and paves the way to deliver a product at the correct location. This can work very well in favor of other e-commerce retailers. noon.com has also developed a cloud-sourced platform that allows locals to act as delivery agents and gives them the freedom to choose their working hours. It’s a win-win as while this creates youth employment in the region, it gives noon.com flexibility and access to a ready team on the ground when they need additional staff to manage deliveries during rush periods like Ramadan.
• Returns’ Management – Research reveals that up to 30% of the orders placed online with e-commerce retailers are returned. Customers do expect to be able to return and get a refund for their orders, a challenge e-commerce companies have to confront. Hence, there is an urgent to focus on making reverse logistics channels robust, managing returned to inventory at the fulfillment center(s)/warehouses, sending fast replacements, and so on as these are the fundamentals that e-commerce players can’t survive without.

At LiveSalesman, a call center outsourcing company with over 18 years of experience, we have been working with some of the most renowned business groups across UAE, Saudi Arabia, Kuwait, and Qatar. We have an in-depth understanding of the distinctive challenges that the Middle East market throws up. Over the years, we have helped our clients overcome the challenges in the area of call center, customer support, and backend operations through a unique combination of automation and human support to bring in maximum cost, quality, and productivity efficiencies. Contact us to learn how we can help you.