'Shoppertainment' behind low online retail figures

The culture of malls as entertainment hubs may have slowed the adoption of buying on the internet, but UAE consumers are beginning to trust online transactions, and business is picking up.

When it comes to e-commerce, UAE residents who use the internet outspend their regional counterparts. Yet one-third of web users in the Emirates - twice the global average - say they have never bought anything online. And UAE consumers are not buying lots of luxury goods or electronics but mainly airline tickets, books and hotel reservations from established websites, according to the latest global online shopping report from the research firm Nielsen.

Sevil Ermin, Nielsen's UAE director of retailer services, said online shopping here may have been slow in catching on because going to a brick-and-mortar mall was part of the "shoppertainment culture" in the Emirates. The arid climate pushes many residents to go to the mall not just to shop but also to socialise. "The change in the GCC might come later than in other parts of the world in terms of switching to online shopping," she said. In March, about 33 per cent of UAE consumers who responded to an online survey said they had never shopped online, far more than the 16 per cent global average. The Emirates is still ahead of the rest of the Middle East and Pakistan, where 47 per cent of internet users said they had never made an online purchase. When web users were asked what they planned to buy online in the next six months, 51 per cent of respondents said they intended to buy airline tickets. This was followed by books at 29 per cent and tours and hotel reservations at 27 per cent. Globally, most web users intended to buy books, clothing and accessories. The pattern is surprising for the UAE, where shopping is a pastime, and where internet connectivity is relatively high. There were about 1.47 million internet subscribers in the Emirates at the end of May, which is about 68.5 internet users per 100 inhabitants, according to the Telecommunications Regulatory Authority. About 63 million Middle East residents, just 29 per cent of the total population, are internet users, figures from the International Telecommunication Union show. Nielsen says 31 per cent of UAE web users who have shopped online bought items that they could not find in traditional brick-and-mortar stores. Two long-standing barriers to e-commerce in the region have been a lack of online payment options and the reluctance of consumers to use their credit cards on the internet. Most of the online shopping sites based in the UAE allow their customers to pay cash on delivery, and retailers say most of their customers choose that option. But Amazon.com, one of the largest online retailers in the world, does not give customers a cash-on-delivery option. Another hurdle e-tailers are attempting to overcome is the lack of a coherent address system to assist the efficient delivery of goods. Delivery drivers often receive confusing directions and deliveries are consequently delayed. Online shopping in the UAE still represents just a fraction of the total retail market. Last year, UAE consumers spent an estimated US$19.6 million (Dh71.9m) on online purchases compared with an estimated total of $10.9 billion of non-grocery retail spending, data from the research firm Euromonitor shows. E-commerce in the UAE should grow by 72 per cent to about $33.7m by 2014, Euromonitor forecasts. UAE residents who shopped online spent an average of $1,048 in the quarter ending on December 31 last year, according to a MasterCard survey in Asia-Pacific, the Middle East and Africa. The UAE's online spending was far ahead of that of the second-biggest spender, Singapore, where the average online shopper spent $779 over the same three months. Anticipating a boom in the sector, more local entrepreneurs are rushing to set up virtual shops. At least eight shopping websites have been launched in the Emirates in the past year. They include EmiratesAvenue.com, 3abaya.com, the group-buying website GoNabit.com and the luxury shopping clubs Sukar.com and Fashionation.me. Existing websites are also expanding their ranges, with Nahel.comintending to branch out into fashion and books this year. Saeid Hejazi, the managing director of Nahel.com, said the move was prompted by customer requests and a growing customer base since the site's launch last year. Although it is starting from a low base, revenue was up more than 2,000 per cent in the second quarter of this year compared with the first quarter. "We're reaching a stage where we starting to get some awareness," he said. "Word of mouth is starting to pick up." Sanjay Amarnani, who launched Aido.com about eight months ago, said its revenue was up more than 500 per cent. His site has processed between 7,000 and 8,000 transactions in the past six months, he said. "It's the future of shopping. It has worked in Europe, it has worked in the US. It's only a matter of time until it works here." @Email:[e-mail]