Purchasing and Logistics in E-Commerce
In the MENA region, e-commerce continues to dominate the digital landscape, with 2/3 of tech investment dollars going into transactional businesses, and marketplaces for services growing exponentially. Beyond pure e-commerce platforms, e-commerce is gaining importance as a channel for all types of traditional businesses, and corporations across industries are investing in and experimenting with new ways of providing on-demand fulfillment of their customer needs.
The E-Commerce Insights and Best Practices report, conducted by ArabNet in partnership with OMD, was launched in October to provide brands and decision makers with the insights and best practices for developing their e-commerce strategies and plans. Based on a survey of 13 executives from some of the top e-commerce companies in the MENA region, the research investigates the main social media channels, mobile strategies, and logistics and payments’ practices adopted by these major players.
The report is composed of three main sections: Social Media – Marketing and Advertising, Mobile, and Purchasing and Logistics. In this article, we will focus on the Purchasing and Logistics section, which takes a close look at the e-commerce purchase cycle and the fundamental consumer behavioral differences seen in the e-commerce space across markets.
With regards to awareness, the majority of the surveyed e-commerce players create targeted ads for each stage of the purchase cycle, based on consumer navigation, as well as to stimulate use in the case of long absence, during holidays and for activation. Age does not seem to be a key conversion factor when engaging with ads: most survey respondents mentioned that younger people do not convert more easily, and many of the companies do not track the age of their customers. One caveat to this is that millennials are more open to considering and making purchases online.
Consideration & Purchase
A number of respondents highlighted that millennials are highly informed, more likely to read reviews, and look for deals during this stage of the cycle. Most users tend to make a purchase on their first 2 visits to the site, roughly within the first 3 days to 1 week of their visit. The average order value for fashion and general retailers tends to be around $100-$150, whereas the average order value for services and consumable e-commerce players is $15 to $30. To increase the average order value, the majority of retailers focus on pushing additional purchases by promoting related products or via bundling. Many retailers also endeavor to increase the average order value by focusing on shipping: either by placing minimum orders for shipping or by having a free shipping threshold.
Repeat purchase rates are rather high; with respect to quick consumable goods and services, consumers often repurchase within 2 weeks. All retailers say that at least 40% of e-commerce consumers are repeat buyers, with the majority stating that the number exceeds 65%.
All surveyed e-commerce players have loyalty initiatives; the majority use email as their primary channel and social media as a secondary one, to communicate their initiatives, as well as for customer relationship management. The loyalty programs provide incentives based on the purchase amount, exclusive deals for subscribers, free credits, and referral schemes.
One of the most surprising findings of the research is that many of the e-commerce companies surveyed do not gather data about the age of their customers, and do not have age-specific strategies or strategies that specifically target millennials. From a sub-sample of three survey respondents that provided this data, it seems that the largest proportion of customers are millennials, 20-35 years of age, representing almost 2/3 of the customer base. The slightly older age group of 36-45 years represents about a quarter of the customer base, and forms an important segment.
Moreover, based on a sub-sample of four survey respondents, the gender of e-commerce buyers seems to be split equally, and may differ marginally according to product offering – for example, a fashion retailer shared that 60% of their customers are female, whereas an electronics retailer claimed to have 45% female customers only
While survey respondents did not share quantitative differences between customers across markets, they did share qualitative descriptions based on their experience. For example, one retailer emphasized the importance of the Arabic language in Saudi Arabia, and more specifically the use of colloquial dialect. Another respondent commented on the high-fashion and high-price purchasing behaviors in Kuwait; yet another highlighted that UAE customers are the most demanding in terms of product offering
With regards to payments, survey respondents emphasized, "cash in MENA is king". For the majority of e-commerce companies surveyed, more than 2/3 of their payments are made in cash. It is however interesting to note that there is a significant minority of companies that do minimal cash transactions, some of whom choose to discourage or refuse payment by cash.
Many survey respondents highlighted that cash on delivery is a challenge since customers tend to change their minds at delivery point, and that controlling cash payments tends to be an issue, due to leakage. A number of respondents said they currently do not accept cash on delivery but are launching it as they realize the importance / size of the channel and the opportunities missed. Some of the surveyed e-commerce players also stated that sending a POS machine to the delivery point gives consumers the opportunity to pay via debit or credit card, considering that many consumers are concerned with online payment security.
None of the e-commerce players highlighted returns as an issue, with most stating that return rates are very minimal. However, respondents did report that the return rate starts to increase significantly after 5-7 days; the highest reason for returns being damage. All those surveyed have clearly and consistently applied return policies that are similar for both offline and online, in the case where they do have an offline presence.
Delivery & Shipment
In terms of delivery and shipment, survey respondents are split. The e-commerce players who have in-house shipping and delivery stated that it is no key concern to them, as they are able to ensure high quality of delivery, with the advantage of getting immediate feedback. On the other hand, e-commerce companies who deal with external couriers reported facing several issues, ranging from incorrect addresses, to the absence of a recipient at the delivery address. This is especially challenging when dealing with couriers, since they only try making contact once, and move on when the customer is unresponsive.
Survey respondents highlighted that consumers, especially millennials, value having more control over when their deliveries are made; presenting them with a delivery time slot is hence a key recommendation. It is also essential to keep in constant communication with buyers regarding shipment status and inform them of any delays, which can be done via live order status and map monitoring. A number of respondents highlighted that a majority of the calls to their customer service centers were inquiries about the status of their order / shipment. With regards to shipping products across borders, most respondents reported that customs could be a lengthy process across markets, creating a challenge.
The Use of Social Media in E-Commerce