Is COVID-19-driven shift in MENA consumer behavior here to stay?

According to a Kearney Middle East report, MENA e-commerce is estimated to reach $50 billion by 2025.  AFP
1 / 4
According to a Kearney Middle East report, MENA e-commerce is estimated to reach $50 billion by 2025. AFP
The shift in consumer habits is not the only change the region is experiencing. E-commerce growth has also accelerated the use of digital payments. (AFP)
2 / 4
The shift in consumer habits is not the only change the region is experiencing. E-commerce growth has also accelerated the use of digital payments. (AFP)
According to a Kearney Middle East report, MENA e-commerce is estimated to reach $50 billion by 2025.  AFP
3 / 4
According to a Kearney Middle East report, MENA e-commerce is estimated to reach $50 billion by 2025. AFP
Women and children shop at a mall in the Saudi capital Riyadh. (AFP file photo)
4 / 4
Women and children shop at a mall in the Saudi capital Riyadh. (AFP file photo)
Short Url
Updated 24 July 2021

Is COVID-19-driven shift in MENA consumer behavior here to stay?

Is COVID-19-driven shift in MENA consumer behavior here to stay?
  • Online shopping platforms have witnessed unprecedented growth since the onset of the pandemic
  • In the GCC alone, e-commerce grew from $5 billion in 2015 to about $24 billion in 2020

CAIRO: Businesses of all sizes may have been hit by pandemic lockdowns, but online shopping platforms have witnessed unprecedented growth in the region, with e-commerce growing from $5 billion in 2015 to about $24 billion in 2020 in the GCC alone, according to a Middle East report by global management consultancy Kearney.

“People who used to go to stores and supermarkets moved to buying from apps. They now see the convenience and experience the ease of online shopping,” said Fahim Al-Zubaidi, CEO and co-founder of Akshaak, an e-commerce platform aimed at home-based businesses and individual projects.

While this shift in behavior may have been heightened during lockdowns, Al-Zubaidi believes it is here to stay.

“People will not stop going to shopping malls, but some of the products, particularly groceries and electronics, will move from shops to e-commerce platforms,” he said. 




While people may not stop going to shopping malls, many people who have good experience shopping online during the pandemic may prefer continue doing that. (AFP)

Another person who expects this shift in consumer behavior to persist long after the pandemic ends is Mahdi Al-Olabi, founder and CEO of R2S, a tech company that provides logistic solutions for e-commerce firms in Egypt.

“During the months of the lockdown, we experienced a huge spike in business, about 40 percent to 60 percent increase in deliveries,” he said.

“We’ve seen a shift in consumer culture, particularly when it comes to buying electronics, grooming products and workout equipment. While the buying calmed down a bit after lockdown, there has been a significant consumer culture change to the concept of shopping online. I don’t think that is ever going to go away.”

These predictions seem to be in line with projected e-commerce growth trends in the Middle East. According to the Kearney Middle East report, MENA e-commerce is estimated to reach $50 billion by 2025.

However, the shift in consumer habits is not the only change the region is experiencing. E-commerce growth has also accelerated the use of digital payments. The Middle East, traditionally dominated by cash transactions, now has more online shoppers preferring to use digital payments, according to a study from London-based Checkout.com.

INNUMBER

$50 billion - Projected MENA e-commerce volume in 2025

The report reveals that 53 percent of the region’s consumers now most often use digital payments for their online purchases. Al-Olabi anticipates an even brighter future for e-commerce if this trend continues.

“Once people become comfortable using digital payments, it will be reflected in the growth of e-commerce,” he said. “They’re directly correlated. The more a country moves toward becoming a digital society, the more people will be apt to use e-commerce.”

Lydia Schoonderbeek, founder of Egypt-based beauty products e-tailer Source Beauty, said that although cash on delivery is still the preferred payment method for her customers, she sees an uptick in credit card transactions.

“Cash on delivery makes up 80 percent of our payments, but credit cards are slowly coming into the spectrum,” she said. “In one particular month, it was up to about 30 percent. People are starting to feel more confident not dealing with cash.”

While e-commerce may be growing in the region, the industry still has some catching up to do. According to Schoonderbeek, online payment systems need to be more user-friendly.

“Sometimes you’re asked to put an OTP code, and if you get preoccupied with something and don’t put the code in on time, you have to start the whole shopping experience again. The likelihood of you abandoning that whole experience is high. This needs to be fine-tuned.”

Providing the option to pay in instalments is another feature that should be made available to online shoppers, Schoonderbeek says. “People are price-sensitive; they should have the option of paying in instalments. This is not here yet, maybe because e-commerce in Egypt is still very much in its infancy.”

Meanwhile, Al-Zubaidi is concerned that the rapid growth of e-commerce in the region will affect service quality.

“With an increased number of e-commerce sites, we will have an issue with quality. Now everyone wants to open an e-commerce site. They think they will be successful, but they’re just copying other e-commerce startups. If they don’t have the right strategy, they will close down.”

However, he is optimistic about the future, adding: “It will take time, but the market will clean itself.”


Saudi Arabia insurance reforms will enhance sector — CAIS CEO

Saudi Arabia insurance reforms will enhance sector — CAIS CEO
Updated 8 sec ago

Saudi Arabia insurance reforms will enhance sector — CAIS CEO

Saudi Arabia insurance reforms will enhance sector — CAIS CEO
RIYADH: Saudi Arabia may be the first country in the world to witness a merger between three insurance companies following regulatory reforms, according to Sulaiman Binmayouf, CEO at United Co. for Actuarial Services CAIS.

Many of Saudi Arabia’s 29 insurance companies need capital infusions or mergers to meet the requirements of regulators, after they ordered to triple capital to SR300 million from SR100 million, Binmayouf said.

The Kingdom’s insurance companies are only profitable with high premiums, some of which they have to freeze as reserves, meaning they can’t invest the money, he said.

However, he expects the adoption of IFRS 17 standards by the insurance sector in the Kingdom will help solve the problem.

IFRS 17 is an International Financial Reporting Standard that was issued by the International Accounting Standards Board in May 2017.

The financial statements of insurance companies on the Capital Market Authority (CMA) website are not sufficient for taking an investment decision, said Binmayouf.

The standard will provide a more accurate supervision and disclosure process in the development of financial statements, giving investors a clearer idea of whether they want to invest in the company or not, he said.

“Investors should look at the status of insurance companies in terms of the board of directors and committees, and review the strategic plan and financial statements to make the investment decision,” he said.

That will lead to more capital flowing into the insurance sector, while supporting its stability, he said. IFRS 17 will be implemented in stages, as decided by the central bank.

Fed policy tightening not all bad for Gulf economies — Jefferies

Fed policy tightening not all bad for Gulf economies — Jefferies
Updated 3 min 52 sec ago

Fed policy tightening not all bad for Gulf economies — Jefferies

Fed policy tightening not all bad for Gulf economies — Jefferies
  • A likely strengthening of the dollar, to which Gulf currencies are pegged, may push down inflation, because it makes imports less expensive

RIYADH: The impending end of super-loose monetary policy from the Federal Reserve will have both positive and negative effects on the economies of the Arabian Gulf, according to Alia Moubayed, a managing director at investment bank Jefferies International.

A likely strengthening of the dollar, to which Gulf currencies are pegged, may push down inflation, because it makes imports less expensive, Moubayed said in an interview with Asharq.

Higher interest rates on dollar-denominated assets tend to lead to outflows from emerging markets, but Moubayed said that the Gulf markets have recently witnessed an influx of foreign capital, especially into stocks, and so should not be affected as badly as many of their EM peers.

Higher interest rates will increase the financing burden on governments with large budget and trade deficits, such as Bahrain, Moubayed said.

However, countries such as Qatar, Saudi Arabia and the UAE will “benefit from shrinking deficits due to the rise in oil prices and the increase in revenues in national currencies,” she said.

The Federal Reserve announced yesterday that it will likely start reducing its asset purchase program soon, and said policy makers are increasingly minded to start raising interest rates in 2022 instead of 2023 as previously envisioned.

If progress toward employment and inflation targets continues, the slowdown in asset purchases may start in November and end in mid-2022, the Fed said.


APICORP sukuk program given expected AA rating by Fitch

APICORP sukuk program given expected AA rating by Fitch
Updated 47 min ago

APICORP sukuk program given expected AA rating by Fitch

APICORP sukuk program given expected AA rating by Fitch
  • A default in APICORP's sukuk program would be considered a default in the parent, Fitch said

RIYADH: APICORP, the multilateral development bank set up by Arab oil producers, has received a rating of AA(EXP) by Fitch for its sukuk program.

APICORP Sukuk Ltd. (ASL) is incorporated in the Cayman Islands with the sole purpose of issuing Islamic debt. The final rating is contingent on Fitch receiving documents that support information already provided.

ASL is expected to receive the same AA rating as APICORP as a default in the sukuk program would be considered a default in the parent, Fitch said. APICORP’s rating is based on Fitch’s solvency and liquidity assessment and a “medium risk” business environment.

APICORP was established in 1975 by the 10 members of the Organization of Arab Petroleum Exporting Countries (OAPEC) with the aim of developing the Arab world’s energy sector through equity investment, debt financing, financial advisory and energy research services.


UAE allocates $17.6bn to Emirati housing program in Dubai

UAE allocates $17.6bn to Emirati housing program in Dubai
Updated 54 min 23 sec ago

UAE allocates $17.6bn to Emirati housing program in Dubai

UAE allocates $17.6bn to Emirati housing program in Dubai
  • Land plots allocated to Emirati housing projects in Dubai increased to 1.7 billion square feet.

RIYADH: Dubai Ruler Sheikh Mohammed bin Rashid Al Maktoum has approved the allocation of 65 billion dirhams ($17.6 billion) to a housing program for Emirati citizens in Dubai, to be spent over the next two decades, according to a statement from the Dubai Media Office.

Sheikh Mohammed, who is also prime minister of the UAE, issued directives to quadruple the number of Emiratis benefiting from the housing program from next year, and to increase the land plots allocated to Emirati housing projects in Dubai to 1.7 billion square feet.

“We are working to develop a comprehensive plan for ensuring our citizens have access to high quality housing over the next 20 years,” said Sheikh Maktoum bin Mohammed bin Rashid Al Maktoum, deputy ruler of Dubai. “Dubai’s urban development plans are subject to constant review and our housing policy will continue to evolve according to the requirements of our citizens.”

The Dubai 2040 Urban Master Plan sets out a comprehensive future map for sustainable urban development in the city, and focuses on enhancing people’s happiness and quality of life in line with the UAE’s vision for the next 50 years.


Saudi Capital Market Authority seeks to double $213bn funds under management

Saudi Capital Market Authority seeks to double $213bn funds under management
Updated 24 September 2021

Saudi Capital Market Authority seeks to double $213bn funds under management

Saudi Capital Market Authority seeks to double $213bn funds under management
  • The CMA wants to create more jobs in the financial sector by increasing the assets under management

RIYADH: The Saudi Capital Market Authority (CMA) aspires to double the funds invested through managed channels from SR800 billion ($213 billion), SPA reported, citing the CMA’s Assistant Undersecretary for Strategic and International Affairs Ahmed Al-Enezi.

The CMA wants to create more jobs in the financial sector by increasing the assets under management in funds, portfolios or other innovative financial tools, including private equity funds, venture capital, and financial technology, he said.

To that end, Saudi Arabia has invested in infrastructure, including the Saudi Fintech initiative, launched by the Saudi Central Bank in partnership with the CMA in April 2018, as a catalyst for the development of the financial technology sector in the Kingdom, said Al-Enezi.

The Fintech accelerator is helping to build the capabilities and talent required by financial technology companies, and is supporting entrepreneurs at every stage of their development, Al-Enezi said.