Google predicts boom in regional e-commerce thanks to cheap cloud technology

In spite a rise in online shopping, the role of malls in the lives of people living in the UAE won't go away that soon. Silvia Razgova / The National

Google expects next year to be a watershed for e-commerce in the Middle East and North Africa as cloud technology helps to lower the investment required for retailers to boost their online presence.

"Next year will be big, different companies are at different stages but we will see a much more vibrant e-commerce landscape next year with more participation from all sides of the retail [sector]," said Wassim Kabbara, industry head for retail at Google Mena.

In the UAE only about 1 per cent of retailing revenues come from online sales compared to around 10 per cent in advanced markets with similar access and penetration, according to Mr Kabbara.

“So you can see the opportunity for us, it is 10x. Here in UAE and Mena most businesses are not e-commerce enabled, less than 25 per cent probably – they will probably have a website or a Facebook page but you cannot transact through that medium,” he said. “That is about to change.”

The costs of setting up enterprise solutions and building infrastructure have dropped dramatically with the advent of cloud computing.

“The cost and complexity of building a technology infrastructure and the lag between investment and ROI [return on investment] was a barrier to the industry,” said Patrick Bakey, executive vice president for global retail at SAP. “The cloud and cloud computing now allows a solution to be in place within weeks rather than within months or years and, obviously, the costs are significantly lower.”

However, marketing costs remain a significant investment, according to retailers.

Nespresso, the coffee machine and capsule manufacturer, set up its e-commerce site about 18 months ago and now covers eight countries in the Middle East. The investment into its e-commerce platforms, both in its building and the marketing of it, has cost “hundreds of thousands of dollars”, according to Pierre Debayle, regional manager for Nespresso in the Middle East, Africa and the Caribbean.

“Once we began the digital marketing and promotion to generate traffic, slowly but surely the business grew,” said Mr Debayle. “We have 30 boutiques in the Middle East and the online platform would be 20th in the league if we consider it a boutique itself. Our sales go flat without any digital marketing, performance has a price. We are now dedicating a significant investment into our digital space because without the investment you do not generate the traffic and growth.”

Local banks have also been slow to set up online payment channels for smaller businesses because of the lack of significant revenues, slowing the sector’s growth.

“It is not worth the bank’s time and energy,” said Abdel Kader Saadi, managing director of Glee Hospitality Solutions. “It is a big problem for us because although this region loves cash on delivery, a lot of people enjoy the hassle-free payment of credit card details that are already in our system.”

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