The GCC has the potential to become the world’s fastest growing e-commerce playground, global management consulting firm A.T. Kearney said and noted the region’s e-commerce market is still very small.
Despite strong economic fundamentals, the GCC is one of the most underpenetrated e-commerce markets in the world, A.T. Kearney said in a report titled ‘Getting in on the GCC E-commerce Game.’
However, with high levels of disposal income, world-leading Internet and smartphone penetration, and changing consumer preferences, there is robust potential in the region, and some companies are beginning to seize the opportunities.
Average mobile penetration stands at more than 170% and smartphone penetration is at more than 65%.
In addition, more than two-thirds of the population uses the Internet, with penetration in the United Arab Emirates (UAE) and Qatar exceeding 90% (including fixed and mobile).
And yet, the e-commerce market is very small. With an estimated market size of $5.3bn in 2015, e-commerce contributes only about 0.4% to the region’s GDP – a miniscule amount compared with more mature markets that have similar levels of GDP per capita and Internet penetration.
According to the report, there are several obstacles preventing e-commerce in the GCC region from reaching its potential, including consumer trust and awareness, gaps in payment systems, distribution and logistical infrastructure, government policies, data security and fraud.
Furthermore, e-commerce offerings from the retailer side are also lacking. The A.T. Kearney study reveals 34% of major GCC retailers have an e-commerce channel, compared to 58% in the United States. However, there are significant opportunities to overcome these challenges and facilitate growth in the sector, with the study expecting the market to quadruple its value to $20bn by 2020 if the right set of enablers are put in place.
On the report, Laurent Viviez, partner, A.T. Kearney said, “We expect the growth of e-commerce in the GCC to transform the future of businesses, economics and lives across the region – but only with the right set of enablers in place. And it doesn’t rule out traditional retailers who can be on the winning side of e-commerce by adopting an omni-channel approach. We see the future for the sector as not digital-only but ‘physical with digital’ – traditional retailers can really to tap into this.”
The report states that online payments and wary shoppers are among the biggest factors holding back e-commerce growth in GCC. As a result of these factors, 60% of online orders are still paid-in cash at the point of delivery.
Cash on delivery is not only expensive for retailers as they bear transaction and cash transportation risks, but also affects negatively impacts cash flow, it said.
“This should be a focus area for retailers as they select best payment options to ensure transaction security as well as enjoyable customer experience. They need to form payment ecosystems to ensure interoperability, and forge strategic partnerships with the best-of-breed providers that are already active in this space and also enable mobile-based payments collaborating with telecom players and taking advantage of the region’s high mobile penetration,” said Adel Belcaid, Principal, A.T. Kearney.
With opportunities galore, it is prime time for the GCC to take the plunge and drive growth in its e-commerce sector. As consumers become more tech-savvy and embrace e-commerce, e-tailers will have the first-mover advantage. Traditional retailers that took a wait-and-see-approach will need to act now to reserve a share of this fast-growing market,  A.T. Kearney noted.