How Covid-19 has impacted e-commerce firms in the MENA region
The retail industry in the wider Middle East and North Africa (MENA) region is currently on the verge of a monumental transformation. Although traditionally a hub of offline commerce, the preceding years have seen the online retail sector make steady inroads. The last decade has seen MENA’s online sales volume increase by 1500 per cent, reaching an estimated value of USD 8.3 billion by 2017. Traditionally, two key factors have driven this growth – a growing population that is amongst the youngest in the world, and one of the highest internet penetration levels per capita globally.
But since the beginning of 2020, both of these drivers have paled in comparison to the impact of the COVID-19 pandemic. With a strict lockdown imposed in nations across the region, consumers have been forced to make the switch to online retail channels en masse. In the face of this massive shift in consumer culture, it is imperative that e-commerce players in the region move quickly to utilise this opportunity to its fullest extent. Some of the key learnings and observations that have been made so far include:
Shifting consumer spending and purchasing patterns
Since the start of the lockdown, e-commerce portals across the world have witnessed unprecedented growth in most product categories. While the uptick in demand for hygiene products, electronic goods and accessories, and personal fitness items was anticipated, the surge in demand for certain items (such as personal grooming kits and baking equipment) took many by surprise.
Customers have also been observed to be more prudent with their household expenditures, with many choosing to economise during a period of financial uncertainty. This has manifested through a ‘trading down’ to lower-cost products, and a marked preference for store-brand items over other, more exclusive and pricey, options. With many home-grown brands capitalising on this shift, high-value companies may be forced to increase discounts in the short-to-medium term to retain their customer base.
Preference for digital payments
The COVID-19 pandemic has had a drastic impact on people’s attitudes towards handling and exchanging cash. A widespread acknowledgement of the dangers posed by the usage of hard currency has catalysed a shift towards contactless digital payment options. As a result, e-commerce platforms have witnessed a significant decline in the percentage of cash on delivery (COD) orders being placed, and a corresponding increase in prepaid orders. With no end to the pandemic insight, the wider industry expects this to signal the beginning of a long-term, fundamental shift in payment habits. This may pave the way for a startup ecosystem of online payment apps and mobile wallets – systems which up to this point have had a limited presence in the Middle East.
The importance of an optimised logistics system
The sudden surge in usage e-commerce platforms have experienced has also highlighted the importance of logistical networks that utilise cutting-edge technologies such as algorithmic routing, real-time visibility driven by IoT (internet of things), and data exchange over APIs (application programming interface).
A logistics system with these capabilities has a tremendous positive impact on two key performance indicators (KPIs): interactions per order and fulfilment percentage. For the former, an uptick in orders and an increase in real-time order updates being shared with customers demand a logistical structure that is flexible enough to meet these heightened demands without compromising its efficiency. The need to keep customers engaged and promote trust in the company is especially important given the inevitable increase in delays that have resulted due to the lockdown.
Although the fulfilment percentage of many online retailers has decreased due to a boom in first-time buyers making impulse purchases, platforms with an optimised logistical network have also been able to keep unfulfilled orders to a minimum. This element is critical to their future success, as an efficient and hassle-free shopping experience is likely to turn a one-off customer into a repeat buyer.
The shift from offline to online
Established offline retail players in the Middle East have been quick to adapt to these changing circumstances. Large corporations and conglomerates, such as hypermarket chain Carrefour, have rapidly begun the process of reskilling their employees and redeploying them to service online demand. Multiple examples of this process are evident, from store cashiers being trained to perform warehouse operations in the mould of Amazon’s fulfilment centres to operations staff in supermarkets being shifted to manage these warehouses. This reassignment of assets has even extended to physical locations, with stores now being transformed into fulfilment centres or serving as collection points for online orders.
Drive to use Artificial Intelligence in the supply chain
In an attempt to slow the spread of the coronavirus, nations across the world have imposed an array of restrictions on the movement of individuals and goods across borders. This, in turn, has led to a vast increase in supply chain exceptions, with the number of potential obstacles to the successful delivery of an item rising exponentially. As a result, the overall cost of operations for e-commerce firms has increased and unit economics has taken a hit. To counteract this issue, many businesses have opted to update supply chain management systems through the use of tools such as big data, artificial intelligence (AI), and machine learning (ML).
By working with third-party logistics providers that specialise in these systems, online platforms have the ability to automate multiple tasks and mitigate these issues before they ever arise. For example, these tools enable e-commerce operators to identify the ideal courier partner for each delivery. A decision that was once dependent on the experience of a logistics manager can now be made by an advanced algorithm, which provides a suggestion by analysing past data in real-time across numerous parameters.
The massive volumes of data being processed by an automated system every second allow e-commerce providers to identify potential delays in delivery before they ever occur. By nipping problems in the bud and keeping customers satisfied, an AI-driven logistics management system allows firms to always stay ahead of the curve.