Middle East retailers should offer online and offline shopping options to stay competitive

March 28, 2016

Middle East Ranks 9th Overall of 19 in Global Omnichannel Retail Index

Middle East Ranks 5th of 19 in Grocery, Apparel and Footwear Segments

Middle East has high growth potential in omnichannel market

Some retailers worldwide are well on their way to offering an ‘omnichannel’ shopping experience for customers, the option to make a purchase either online or offline, to sustainably grow their businesses and avoid risk of extinction. The Middle East ranks 9 of 19 countries and regions considered in terms of omnichannel market penetration and potential, according to the 2015 Global Omnichannel Retail Index by management consultancy Strategy& (formerly Booz & Co.).

An omnichannel shopping experience allows customers to ‘channel-hop’ between online and physical stores and use smartphones, tablets and social media to make purchases. Shoppers can buy products through the channel that is most convenient and affordable for them, as they can read product reviews, compare prices, and either make a purchase in store or have it delivered directly to them.

Middle East consumers however still seem to favor single-channel shopping, according to Strategy&’s 2015 Global Omnichannel Retail Index. The region has adopted robust omnichannel models in the Grocery, Apparel and Footwear segments, achieving a rank of 5 from 19 in these categories. Even though the region still lags behind in terms of infrastructure, as mobile internet and tablet penetration are still comparatively low, growth potential is significant.

Commenting on this trend, Karim Abdallah, Principal at Strategy&, said: “Today consumers want to shop when they want for what they want by instantly comparing product information across multiple shopping channels. This allows them to make the purchase that best suits their individual preferences. Before the emergence of e-commerce, consumers rarely got the full package in one shopping experience. Today retailing is morphing from a single-channel, exclusively being either online or offline, into a more multifaceted omnichannel landscape that gives consumers many more options for shopping. Although omnichannel delivery is making strong inroads in many retailing segments, the strategies for effectively implementing them are still in their infancy.”

According to Strategy&, three conditions are critical to the success of omnichannel strategies for retailers: 1) enhanced technological infrastructure, 2) high customer expectations of offline and online channels, and 3) retailer readiness to adopt an omnichannel business model.

First, retailers should consider offering sophisticated mobile apps, online promotions and customer reviews to encourage more to shop online. Second, consumers must continue to demand online and offline shopping options to keep the retail market competitive. When consumers demand ‘the best of both worlds in both worlds,’ retailers anticipate and respond to their needs to ensure instant product availability, which in turn enhances the retail market. Third, retailers should embrace a corporate culture that treats online and offline business and sales strategies as a single entity. By developing innovative and compelling concepts, tools and apps for adopting additional shopping channels, retailers can successfully and sustainably grow their businesses.

Most markets already have the necessary technological infrastructure to adopt an omnichannel shopping model and the majority of consumers are excited about the benefits of a mixed online and offline retailing environment. However, after the necessary infrastructure is in place, the biggest roadblock for omnichannel adoption lies in retailers focus on customer experience and their willingness to invest in the technology needed to drive the strategy. According to Strategy&, consumer preferences for a blended online and offline shopping experience however will push omnichannel retailing to become the way people shop - it will be ubiquitous and no longer a differentiator and what retailers must do to be profitable.

“Retailers achieve significant benefits from adopting an omnichannel shopping model as well. They gain a comprehensive picture of individual customers and their shopping preferences by merging data and insights obtained through consumer activities across channels. This analysis helps retailers better understand customer behavior and wishes, which allows them to produce and deliver sales, promotional content and product recommendations tailored to consumers’ immediate needs. In turn, these omnichannel programs can generate significant gains in conversion rates and purchases,” concluded Karim Abdallah.

The Strategy& 2015 Global Omnichannel Retail Index shows that the United States, the United Kingdom, and Australia are the top three from the 19 countries and regions considered. This reflects the prevalence and maturity of e-commerce in English-language countries. The index also highlights that consumer electronics, appliances and media products are the segments with the highest omnichannel penetration, due in large part to online powerhouses like Amazon and eBay who are dominating the market and keeping competition stiff.

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