E-Commerce luring Mideast shoppers

Sales start climbing as Arab Spring spurs Internet, social media usage.

By DAVID ROSENBERG/THE MEDIA LINE
January 11, 2012 13:35
Mideast e-commerce rising

Arab woman credit card shopping_311. (photo credit: Thinkstock/Imagebank)

 
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It is not just Facebook and Twitter that have enjoyed surging on-line activity in the Middle East and North Africa (MENA) in the past year. E-commerce is growing, too, analysts say as more and more people in the Arab world use the Internet and take out credit cards.

A report by Euromonitor International, the market research company, estimates that for three key economies in the Arab world – Saudi Arabia, the United Arab Emirates (UAE) and Egypt – Internet retail sites pushed past the $1 billion for the first time last year.

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In a forthcoming study, Euromonitor sees in-line retail sales doubling over the next five years to just over $2 billion. Saudi Arabia will account for more than half of all on-line sales, but the proportion will drop as Egypt and the UAE pace the growth, figures showed.

“Euromonitor International forecasts very healthy growth for Internet retailing in the UAE and the region as a whole,” Research Manager Sana Toukan said in e-mailed remarks to The Media Line. “This will be pushed by a rise in the number of credit cards in circulation [and] an improving economy, which will translate into a higher employment rate, meaning that people will have less time on their hands to visit shops.”

The rise in on-line sales came as much of the Middle East contends with slowing growth due to Arab Spring turmoil and more recently a slowing global economy. But Business Monitor International (BMI) says retail sales, whether it’s in all brick-and-mortar malls or over the Internet, are being spurred by rising disposable incomes; population growth especially in cities, the improving status of women, a growing middle class, expatriate wealth and the development of a modern retail infrastructure.

BMI expects retail sales in five MENA markets – Saudi Arabia, the United Arab Emirates (UAE), Kuwait, Bahrain and Egypt – will grow 11% this year to $139.8 billion. Between now and 2015, they will climb by nearly 50%. Egyptian store sales growing about 60% from 2011 through 2015, it estimates.

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The 15% increase in e-commerce sales charted by Euromonitor over 2010 was not phenomenal by global e-commerce standards, where Christmas sales in the sluggish US economy alone rose by about the same percentage. But last year’s growth in the MENA was paced by Egypt, which saw retail e-commerce sales jump by two thirds even as its economy was paralyzed by political unrest, according to Euromonitor figures.

Euromonitor predicts that Egypt’s on-line sales will jump by 3.5 times over the next five years to $447.3 million in 2016.

Analysts say Egypt’s virtual shopping spree does not come as much as a surprise. While Internet penetration and credit card use remain low, the Arab Spring generated an efflorescence of social media use among the country’s middle class as a way to tune in to events at Tahrir Square and around the country. The Arab Social Media Report by the Dubai School of Government that Egypt estimates that of 15 million new users to join Facebook across the MENA region in the first 10 months of the year, more than four million were Egyptian.

Social media has served as a pathway into other Internet applications, with government and business both taking advantage in Egypt and elsewhere of growing Internet usage, Fadi Salem, director of the Governance and Innovation Program at the Dubai School of Government, told The Media Line.

Euromonitor’s Toukan said the rise of social media even made its impact in places like the UAE, which didn’t experience any of the political gyrations of the Arab Spring and is home to some of the world’s biggest and most lavish shopping malls. Albeit from a low base of $227 million, on-line sales in the Emirates grew 14.5% last year, hastening from  9% in 2010, Euromonitor said.

“A rise in the number of on-line stores coupled with a rise in the number of credit cards in circulation, higher number of people using social networking sites and thus seeing advertisements for online stores, have all pushed sales in 2011 in the UAE,” Toukan said.

Right now, more than half of all on-line transactions in Egypt are done through the more complicated and less flexible system of pre-paid cards, according to a survey of 1,000 Internet users from around MENA conducted for Onecard, a Saudi company that offers on-line payment accounts.  The survey says the next most popular method is credit cards and cash on delivery.

But credit card usage in Egypt is growing, easing the way for on-line shopping. Synovate, a market research firm, found that increasingly number of middle and upper middle class. Egyptians are using commercial banks, as against the government postal bank. More importantly they are more likely than before to take out a credit card – 72% had one in 2010, compared with 66% the year before, according to its latest figures.

Nevertheless, e-commerce has a long way to go in the region before it catches up to the level of web shopping in the West. The chief barriers remain low usage of credit cards, which are the main way people buy on-line, and deep concerns about credit card fraud. Indeed, the Onecard survey found that fears of credit card theft and fraud were by far the highest concerns among Internet users it polled.

A tit-for-tat war between Israeli and allegedly Saudi hackers over the past week may exacerbate those concerns.

Allegedly Saudi hackers, identifying themselves as Group XP, claimed more than a week ago to have gained access to 400,000 Israeli credit card accounts, although the Bank of Israel said the number of compromised accounts was far less than that. The attack prompted a group of Israeli to claim they had obtained the records of thousands of credit cards used in Saudi shopping web sites and threatened they would disclose the material if “the [Saudi] leaks continue.” Talaat Hafez, secretary-general of the media office for the Saudi banking authority, on Tuesday denied any accounts had been compromised.

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