Digitisation in the GCC: attracting the next generation through e-commerce
A wealth of research exists in the public domain in regards to the importance that the millennial generation has on global society. The characteristics of this group have a profound impact on the way that businesses attract and retain the attention of new buyers.
According to a study commissioned by the 1Bank of America Merrill Lynch, there are over 2 billion millennials around the world, of which around 86% live in emerging markets. When we look closer to home, this group accounts for over one-third of the entire GCC population.
Given the access to high disposable income across the region, alongside the rapid diversification of the economy, this group of new consumers will play an increasingly important role in the shifting landscape of buying behaviours.
GCC millennials tend to be higher spenders than their global peers, with access in most cases to more than one handheld device from which they scan the global market for the latest insights, trends and deals. This further validates the statistics in regards to internet user numbers, which currently stand at a square-average-per-country penetration figure of 83% for the GCC - significantly higher than the global average of 49.2%. Within the GCC, two countries particularly stand out – the UAE and Saudi Arabia. Aside from their economic depth they are home to a rapidly growing e-commerce market.
So with access to high disposable incomes, a wealth of technological innovation on the horizon, increased access to the internet and handheld devices, we ask what the future of e-commerce is within the GCC market. We ask Khurram Bhatti, Audit Partner of Grant Thornton and an adviser to e-commerce businesses, what his thoughts were in this respect.
Globally, 3worldwide retail e-commerce is estimated to increase to $4.058 trillion in 2020, making up 14.6% of total retail spending. Likewise, in the UAE, which accounts for five in 10 people shopping online in the region, the e-commerce market is estimated to exceed $10 billion in value by 20183 – supported by a growing, young and tech-savvy population that favours the ability to obtain competitive pricing, convenience and ease of access to various goods and services.
The growth potential that this sector represents for local business is immense compared with the numbers in 2012, when $3.2 billion was spent online across the entire GCC4. It is therefore no understatement to say that there is a plethora of opportunities within this sector in the GCC.
The government and private sector have collectively supported this lucrative industry through educating users and maintaining just enough oversight to help the sector develop, without being weighed down by cumbersome regulation or overly bureaucratic red-tape.
The e-Government initiatives integrated with online payment platforms have helped users build confidence and trust in transacting online and have aided in nurturing consumer awareness, maturity and acceptance. In the UAE, in addition to moving services online, the government has taken bold steps in setting up the world’s first purpose-built duty free e-commerce hub, Matajircom, making very clear its ambition to work with both local and regional players in order to continue fostering e-commerce.
That said, regional businesses have historically been slow to adapt to the change and thus currently the trade between online shoppers in the region and locally based businesses accounts for a mere 10% of the total estimated spend5. Recent research by PayPal suggests that local businesses need to embrace e-commerce more seriously and invest further time in planning their digital strategies in order to tap into the market opportunity in the region. The removal of previously existing trade barriers has simplified the process and provided multiple routes for businesses to exploit the burgeoning online shopping trend.
According to Google, the UAE and Saudi Arabia rank in the top five countries globally in smartphone penetration rates and 40% of smartphone owners in the UAE alone reported making their first ever online purchase in the previous 12 months with a positive experience. This provides us with an outlook on the demand for effective e-commerce channels and potential for businesses to make significant inroads towards accessing this valuable market.
One of the key highlights of the current online data analysis is that most B2C transactions are centred on travel (air-fare) and consumer electronics, but the range of goods and services being acquired is growing, with shoppers increasingly keen to tap into the internet’s ability to help facilitate quick price and service comparisons. It has been witnessed that approximately 40% of current consumers typically undertake some sort of price evaluation activity before executing an online transaction and this figure is likely to increase, as user maturity and awareness begins to develop further. This presents a considerable opportunity for both end-retailers and the “brokers” - sites that enable online price comparisons and facilitate transactions between the goods/service provider and the end consumer.
Platforms such as comparison sites support end-retailers to explore digital channels with minimal disruption or cost to their business, given it is a relatively safe and phased approach to e-commerce. Similarly, broker sites such as compareit4me.com – an online comparison site promoting financial/insurance based products - can target specific consumer segments by offering comparable goods and services, simultaneously exploiting a particular niche and market demand. The business model is by no means unique, but it is proving fertile ground for new online businesses seeking to exploit a relatively new and fast-developing channel.
Having made reference to compareit4me.com, it is worth noting that the company launched in 2011 within the UAE has now spanned to nine countries across the wider Middle East region. The firm has a growing service portfolio, which has earned it multiple awards, which have positioned it well to make the most of the developing local market. The business was one of the vanguard entities in the online comparison space and helped to drive e-commerce take-up in the region.
compareit4me.com is one of the few businesses that has maintained the development of its proposition in harmony with market maturity and is now proving to be a hallmark for those who may be looking to follow in its footsteps. With an increase in awareness and realisation of online trading benefits by goods and service providers, comparison sites such as compareit4me.com are poised to become a healthy catalyst for a revolution in local retailing trends.
The GCC region is well positioned to exploit the lucrative opportunities that e-commerce offers, given the generational demographic shift that we are witnessing and which will inevitably have a seismic impact on businesses for the future.
GfK and VMware: Innovating together on hybrid cloud
GfK has been the global leader in data and analytics for more than 85 years, supplying its clients with optimised decision inputs.
In its capacity as a strategic and technical partner, VMware has been walking GfK along its digital transformation path for over a decade.
“We are a demanding and singularly dynamic customer, which is why a close partnership with VMware is integral to the success of everyone involved,” said Joerg Hesselink, Global Head of Infrastructure, GfK IT Services.
Four years ago, the Nuremberg-based researcher expanded its on-premises infrastructure by introducing VMware vRealize Automation. In doing so, it laid a solid foundation, resulting in a self-service hybrid-cloud environment.
By expanding on the basis of VMware Cloud on AWS and VMware Cloud Foundation with vRealize Cloud Management, GfK has given itself a secure infrastructure and reliable operations by efficiently operating processes, policies, people and tools in both private and public cloud environments.
One important step for GfK involved migrating from multiple cloud providers to just a single one. The team chose VMware.
“VMware is the market leader for on-premises virtualisation and hybrid-cloud solutions, so it was only logical to tackle the next project for the future together,” says Hesselink.
Migration to the VMware-based environment was integrated into existing hardware simply and smoothly in April 2020. Going forward, GfK’s new hybrid cloud model will establish a harmonised core system complete with VMware Cloud on AWS, VMware Cloud Foundation with vRealize Cloud Management and a volume rising from an initial 500 VMs to a total of 4,000 VMs.
“We are modernising, protecting and scaling our applications with the world’s leading hybrid cloud solution: VMware Cloud on AWS, following VMware on Google Cloud Platform,” adds Hesselink.
The hybrid cloud-based infrastructure also empowers GfK to respond to new and future projects with astonishing agility: Resources can now be shifted quickly and easily from the private to the public cloud – without modifying the nature of interaction with the environment.
The gfknewron project is a good example – the company’s latest AI-powered product is based exclusively on public cloud technology. The consistency guaranteed by VMware Cloud on AWS eases the burden on both regular staff and the IT team. Better still, since the teams are already familiar with the VMware environment, the learning curve for upskilling is short.
One very important factor for the GfK was that VMware Cloud on AWS constituted an investment in future-proof technology that will stay relevant.
“The new cloud-based infrastructure comprising VMware Cloud on AWS and VMware Cloud Foundation forges a successful link between on-premises and cloud-based solutions,” says Hesselink. “That in turn enables GfK to efficiently develop its own modern applications and solutions.
“In market research, everything is data-driven. So, we need the best technological basis to efficiently process large volumes of data and consistently distill them into logical insights that genuinely benefit the client.
“We transform data and information into actionable knowledge that serves as a sustainable driver of business growth. VMware Cloud on AWS is an investment in a platform that helps us be well prepared for whatever the future may hold.”