3D (Demand, Data, Delivery) to drive e-commerce growth in the Middle East in 2023

The Middle East history will forever remember 2022 as the year of many firsts. From the World Expo to the FIFA World Cup and so much in between the year was characterised by sustained levels of activity.

Among the foremost beneficiaries of heightened economic activities was the retail industry, which continued its digital transformation as brands ramped up their omnichannel pursuits. The International Trade Administration expects the number of Saudi e-commerce users to reach 33.6 million by 2024, a 42% increase from 2019.

So, what are the drivers behind the e-commerce industry’s promising outlook?

In an exclusive Q&A with RetailME, Imteyaz Khan, General Manager – KSA, REDTAG touched upon trends and how they could play out in 2023.

Let’s start with your thoughts on the pulse of the e-commerce industry, globally and regionally.

The e-commerce industry is primed for significant growth in 2023. However, the driving factors are different from those in the last couple of years, when COVID-19 and the ‘pandemic habits’ underpinned e-commerce growth. In 2023 growth will be fuelled by structural trends such as increasing digitalisation, conscious consumerism, access to previously inaccessible markets and growing convenience-driven value propositions from retailers.

In the region, especially in KSA, where the demand economics are strong, smartphone penetration is one of the highest in the world and sociocultural reforms are defining consumer choices, the e-commerce industry is set for about 20% growth in 2023. The traction of e-commerce in the region exceeds the corresponding rate in global markets because of the good demographic dividend (young population) and a sense of ‘newness’ associated with online shopping.

REDTAG has expanded its omnichannel capabilities in recent years, especially by scaling its ecommerce models. Where does e-commerce stand in the company’s plans in 2023 and beyond?

Having kept pace with the retail market evolution in the region, we felt the need to expand our e-commerce models. However, we wanted to bide our time, set up strong digital foundations and ensure the new models are consistent with the value we stand for. So, we scaled the e-commerce models methodically – from WhatsApp shopping to dedicated websites – in the UAE and KSA. Supported by analytical platforms we have integrated those models with our brick-and-mortar stores creating a database of 16 million.

While the overall growth of the e-commerce industry is set for about 20%, an accelerated growth rate of 25-30% is being forecasted for certain categories such as fashion, handbags, beauty and cosmetics which also happen to be the dominating categories for our brand. So, REDTAG is primed for a promising 2023 with a well-defined roadmap for increasing the revenue contribution of its e-commerce segment to 10%. E-commerce will be central to our operations in 2023.

You spoke about strong digital foundations. What constitutes this foundation?

E-commerce is a highly complex playing field with distinctive customer profiles, preferences, expectations and price sensitivities. Unlike in stores, where you can talk to shoppers in-person, factor in their preferences and offer customised products, e-commerce models only allow virtual interactions. So, personalisation hinges on data-driven insights and audience segmentation based on location, demographics, age and interests. That necessitates the adoption of solutions such as CRM, CDP and automation software. If implemented effectively, retailers can drive meaningful loyalty programmes, enhance internal operational efficiency and personalise brand messaging, all adding to good customer acquisition and retention rates. Insight-led operations also translate to better response time and forecasting of future demand, thereby providing retailers with ROI clarity, enhancing their readiness and competitiveness.

Do you think market conditions in KSA are mature enough to support omnichannel operations?

The impact of pandemic-related supply chain disruptions continue to strain retail margins across the globe, and the Kingdom is no exception. However, being a customer-centric brand, we cannot distribute the impact of increased operating costs to our shoppers. Instead, we are relying on technology to enhance operational efficiency and unlock savings, which can offset the burden.

Fortunately, the post-pandemic reopening and the resulting uptick in economic activities have buoyed the industry. Heading into 2023, there are multiple promising tell-tale signs, especially the fast-evolving sociocultural dynamics in Saudi. Women, in particular, have attained significant spending power and are increasingly defining e-commerce trends. The heightened awareness and distinct preferences, including channels and styles, call for omnichannel operations. As we cater to about 80% of the Saudi population, we witness first-hand shoppers’ growing affinity towards omnichannel trends.

Finally, what are some trends that will redefine the regional e-commerce industry in 2023?

Retailers will make conscious efforts to cater to the entire spectrum of customer preferences in 2023. In other words, brands will emphasise modest fashion just as much as fast fashion. That development is owed to the uptake of modest fashion across geographical and cultural lines. So, modest fashion is expected to cross the $300-billion valuation mark globally in the next couple of years. Broadly, the e-commerce industry will become more agile and customer-centric by virtue of technology adoption. Artificial intelligence and machine learning will emerge as the hallmarks of future-ready e-commerce operations. Concurrently, unlike its preceding years, 2023 will also see brands collectively embracing data protection laws through demonstrable efforts.