While the shopping mall still reigns as the ultimate shopping destination in the Middle East, e-commerce is quickly gaining pace among consumers, and is expected to become one of the biggest growth areas for business in the region, according to research by global loyalty management firm Aimia (the company behind Air Miles in the Middle East).
The report, entitled 'Smart, Savvy and Set to Soar: Customer Loyalty in the Middle East', examined consumer behaviour in the region and its implications for business, based on in-depth research into consumer shopping habits and buying behaviours in the region.
"Businesses in the Middle East must now rethink how they're speaking with their customers, who are generally young, tech-savvy, and ready to engage with brands online through email and social media," warned Paul Lacey, managing director of coalition development for Aimia in the Middle East. "These are tomorrow's consumers and businesses need to understand that their expectations are higher than ever before."
Consumers in the Middle East are among the most technologically aware in the world, the study found, with 86% of them owning a laptop computer and 48% being in possession of a tablet device. Almost all (85%) have a smartphone.
They are also highly engaged with regular communications including email, SMS and social media technologies. Nearly 90% use email regularly, and over 60% are active on Facebook at least once a day. This behaviour has even been recognised by the region's shopping malls, which are increasingly making free Wi-Fi available to shoppers.
Smartphones are regularly used as shopping assistants, supplying reviews, price comparisons and opinions via social networks during the shopping process. Interestingly, a significantly higher proportion of males said they use their mobile phone to perform price comparisons before making a purchase in store (49% of males compared to only 39% of females).
"This constant connection is by no means unique to the Middle East, but what we do see here is the influence of the social world on people's relationships with brands and businesses. That's a trend that continues to grow because of the high rate of smartphone use," said Lacey.
But even though Middle Eastern consumers are leading the way in their almost ubiquitous usage of technology, this has not translated into online shopping... yet. But there are signs that this may be about to change. In 2012 some US$1.1 billion was spent online in the Middle East but by 2016 this is forecast to double to US$2.2 billion.
"We face an interesting situation here where everyone has a smartphone in their pocket and they're generally not afraid to use it in relation to new social connections or contacts, but the one area they are still wary about is shopping online," explained Lacey. "Retailers must significantly build trust before consumers will be willing to part with more information or trust online shopping to deliver a similar experience to the shopping mall."
Apart from 46% percent of Middle Eastern consumers using their mobile devices to check price comparisons in-store, 44% percent also seek out user reviews before making a purchase and 44% percent seek opinions from social networks before making purchases. Estimates suggest that at least 20% of in-store sales are influenced by pre-purchase digital research.
But why do consumers avoid shopping online? One of the main concerns expressed was the sharing of personal data, with 70% showing concern for websites using personal data to serve targeted ads (compared with only 41% in UK and 34% in the US). Nearly three out of four (73%) of Middle Eastern consumers cited "hackers accessing their private information online" as one of their top two concerns (compared with only 52% in the UK).
The problem is so marked that some internet retailers (such as Souk.com and Namshi.com) have even created 'pay on delivery' services to mitigate customers' concerns over the safety of online shopping. However, as with western markets, this reluctance to embrace online buying will gradually erode as consumers become more familiar with it.
The report also noted that customer loyalty marketing is still relatively new to the region, but with the rapid technology adoption shown by consumers there is potential for businesses to embrace and leapfrog other markets in loyalty programme development.