This post originally appeared on the JadoPado Blog and has been re-produced here to preserve the JadoPado historical record.
It’s no secret that there’s a distinct lack of quality content when it comes to the nitty gritty issues around e-commerce locally in the UAE as well as the greater GCC and Middle East region. I’ve done a quick round up of some of the more interesting resources that I’ve come across recently.
Back when JadoPado was a little twinkle in our eye and Quora was the next hot thing out of the Valley, I decided to very naively ask “Why don’t more people shop online in the UAE?” and then found a bunch of interesting people to answer it. It’s definitely worth reading some of the responses from local entrepreneurs such as Narain Jashanmal and PK Gulati. The opinions expressed provide a bit of insight into retail in the UAE and by extension the GCC.
Earlier this summer, Ashish Panjabi the CEO of Jackys Electronics, a prominent local electronics retailer put up an interesting set of posts on his personal blog. I’ve linked to them below with some notes on some of the issues that he highlights:
Part 1 — What Sells Online?
Ashish starts by identify what sells online at the moment in the UAE. He correctly concludes that e-commerce locally (and perhaps regionally) is currently driven by services rather than physical products. The drawback of physical product is the need to process and handle the physical product itself. As you scale your costs do grow, but your unit costs are driven down at scale. It’s far more challenging versus handling services — but then again, if it were easy — everyone would be doing it. It’s a challenge and market opportunity worth undertaking in my view.
Part 2 — The Retail Experience
Ashish raises some interesting points including the proximity and high availability of offline retail, and the general high availability of product in the UAE as well as retail hours. We built JadoPado’s business model to address some of these issues but one that we’ve not really considered is retail opening hours. We currently deliver from 9am to 9am, 6 days a week across the UAE, but that’s still far short of mall opening hours especially during key events such as the Dubai Shopping Festival, Ramadan and Eid. Perhaps running 24/7 in the near future may make sense.
On Ashish’s point on customer service, I would argue that we’re used to being served or obtaining service — but I don’t think we get “real” customer service from retail at the moment. Staff turnover tends to be fairly high, training is not as good as it should be, and our un-integrated multicultural society ends up being a problem rather than an advantage. I’m generalising of course, but from the time I’ve spent growing up here — I can count the great customer service experiences that we have available locally on one hand. As the economy continues to grow and competition intensifies I am hopeful that firms across the board will be forced to re-think customer service and end up building it as a core part of their businesses.
Part 3 — Government Regulations
I personally found this part to be very insightful as Ashish discusses some of the core issues around the difficulties of sourcing product efficiently regardless of whether you’re an e-commerce business or a physical retailer. One primary issue that remains is “The Agency Law” which in a nutshell generally supports a single agent or distributor for a given brand of product. While the law hasn’t changed, the way in which a number of technology brands such as Apple & HP are going about dealing with it are — the larger brands are moving towards having multiple distributors, on occasion with distinct differentiated product lines or in some cases carrying the same product lines.
The point that Ashish makes on Grey Goods is very valid. While I detest the term as the immediate connotation is that grey market or grey product is inferior in some way. The primary difference between an “authorised” product and one that is considered grey is where and how it has been source. Grey, parallel or the word that I like is “alternatively sourced” product essentially leaks into the local market due to price disparities on authorised product as well as the nature of Dubai being a trade, storage and logistics hub.
The primary issue that we tend to face as an e-commerce retailer is customer expectation that pricing online should and will always be lower than retail. I find this to be an unfortunate mindset as it forces us to either try to convince distributors that they need to consider e-commerce to be a separate channel and price accordingly or be forced to source product through alternative means in order to remain competitive. The way in which we handle the lack of direct after sales support is by handling it ourselves via the 365 Day JadoPado Warranty. It isn’t an ideal situation as we’d prefer to pass the burden of support back into our supply chain — but at the moment it’s a Catch 22 between trying to convince existing distributors that e-commerce is the next wave versus remaining competitive to build out our business.
It’s been interesting of late as we’re gradually experiencing a shift from alternatively sourced product to working more closely with distributors. We expect this trend to continue as e-commerce grows as a channel.
Part 4 — Sustainability of an E-Commerce Business
Ashish’s timing on this one couldn’t have been better. In the wake of Living Social’s Middle East exit, followed by the news that Rocket Internet’s Mizado.com has also decided to close, the question that continues to come up in conversation is whether e-commerce can turn into a sustainable business in the region. It’s relatively easy to start an e-commerce business, but the jury’s out on whether you can turn it into a sustainable and profitable business. In my view it’s like any other business — it’s a game of patience and pacing yourself.