The bricks versus clicks debate has been made redundant today with traditional brick-and-mortar players realizing that it is almost impossible to survive as a business today without an active digital presence. Needless to say, the pandemic accelerated the technology push for all retailers and the ones that managed to get through without irrevocable damage were the ones that adapted to the online shift smartly and efficiently.
Now, there were various verticals of business that made pandemic profits from pharmacies to cybersecurity firms, technology solution providers, video conferencing apps and e-commerce businesses. During the lockdown, e-commerce became the only source of growth for retail. While traditional retailers started urgently pursuing e-commerce capabilities, the pure-play online players saw an incredible surge in their sales and revenues.
Amazon’s sales in the Middle East grew by 26 percent to $76 billion in Q1 2020. Mumzworld saw staggering growth of 800 percent during the same period, while Namshi’s sales grew by 40 percent in 2019. By Q1 2020, 45 companies offered e-grocery across the GCC. UAE-based Instashop has recorded a 70 percent spike in app downloads, an increase in orders of 53 percent, and an average basket value increase of 70 percent.
Agreed, that the sharp spike seen in 2020 was reactionary and is bound to drop but it would still be way higher than it was pre-pandemic. According to Kearney, the e-commerce market in the region amounts to $24 billion today, compared to $5 billion in 2015, and is expected to reach $50 billion by 2025. And those staggering figures have motivated many pure-play retailers to enter the market.
However, with the sheer number of online retailers in the market today and the traditional ones working towards having a strong online presence, along with a dominant foothold of marketplaces in a region that is relatively small, it would be paramount to get it right in order to survive and thrive.
But how to get it right? Leena Khalil, co-founder of Mumzworld, the Middle East’s first and largest mother-baby-child online shopping site explains how to set up a long and sustainable e-commerce business.
“The biggest question you have to ask is ‘how do I get the right traffic and do I have the funding to get the right traffic?’ Acquiring traffic is becoming more and more expensive. So you need to figure out if you want to collaborate or do that on your own. It’s not necessarily about having a product or delivering a beautiful solution. It is about attracting the right kind of traffic at the right price and that’s the challenge,” she explained.
The total number of websites offering e-commerce has tripled since 2015. Due to the increasing competition and the need for continuous investments, the path to profitability can be a treacherous one. It is also very easy to get lost in the crowd, so differentiation in products, services, experience and the ultimate goal of providing a solution must not be forgotten.
When Mumzworld launched in 2011, the goal wasn’t to just sell products to mothers. The mission was to create a community while providing curated content that mothers were in dire need of, and selling products at the back of it. There were big gaps in the market that Mumzworld resorted to filling and not just blindly add more goods that customers can buy.
“I think it’s important to ask yourself ‘what are we delivering?’ We are very clear on what we are known for. We are here to solve a problem. We are not here to sell more apparel or diapers. Our solution is content, product, and community. Mothercare isn’t relevant anymore as they churning out more apparel and not asking if this is solving anything for the consumer. Competition comes and goes. As long as you are one with your consumers, you are okay,” she said.
Now there are a number of challenges that a new business needs to be mindful of. The first one is funding. Although the appetite for startups and investors willing to put in money behind smart tech-based e-commerce operators is growing, it is an ardent task.
“50% of what founders do is try and find the funding. However, things are much better now than it was when we started. Even traditional funds today are saying that we need a high-growth technology segment and they are creating that. More and more money is coming to this space now. People are taking more risks and doing bigger tickets,” she said noting that Mumzworld has a record fundraising month in March this year.
Second is inefficiencies in the supply chain, which lead to problems such as sourcing issues, late deliveries, higher return volumes, and a low level of integration between suppliers, fulfillment centers, and delivery companies. So inventory management and reverse logistics cannot be taken for granted irrespective of how successful or crisis-proof the business proposition is. “From a supply chain point of view, we are not crisis-proof. We all produce from the same country and if there is a supply chain issue, we will be impacted. This is why we are working to diversify,” she said, indicating that the business itself needs to be open to flexibility and diversification.
Collaboration between pure-play e-commerce operators and big retailers will result in the success of both parties. Traditional retailers have been on edge with the surge in e-commerce adaptation and changing consumer habits that are inclined towards convenience and technology. Adding to that, the direct access to data that e-commerce enjoys has put them in an advantageous situation. On the other hand, e-commerce operators that are entering the market are intimidated by the mega-retailers who’ve got a foothold on the customers, have build trust over time, and have massive control over the market.
“Many big retailers have collaborated with us. And they see results that they don’t see anywhere else. After Covid, retailers are in a panic mode where they are saying that they need to be on every outlet and platform. But they have seen that the results, revenue and reach they get are more valuable than any other platform so they hold on to it,” she said.
An e-commerce platform is a simple, attractive, and reliable online store built on consumer-centricity. In order to be successful, online retailers need to keep the following in mind:
Find your niche and ask yourself ‘what problem are you solving, what gap are you filling, and what makes you stand out from the crowd?’
Validate your target market and focus on getting the right traffic at the right price
Create a fully optimized website that provides a hassle-free, convenient and seamless experience to the customers with a simple checkout process, compatibility across multiple devices and fast loading times
Make the economics work. While e-commerce businesses give you deep consumer insights, make sure that is being used to drive sales as if the margins don’t meet the target, then it’s probably not worth it.
Be mindful of the challenges such as supply chain inefficiencies, which lead to problems such as sourcing issues, late deliveries, higher return volumes, and a low level of integration between suppliers, fulfillment centers, and delivery companies
Words by Katie Streten Experiential Strategy Director, VMLY&R COMMERCE Throughout the last year,June 13, 2021 | By Shruthi Nair
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