Neelesh Bhatnagar, CEO of Emax Electronics, wrote a rather mediocre article for GulfNews last week on the future development of m-commerce in the Gulf region. His views on m-commerce are hardly ground breaking, and in actual fact somewhat tunnel visioned.

The idea that mobile is the future of e-commerce isn’t new, in fact reported in 2013 that shoppers in the Gulf already prefer smartphones to computers or tablets when shopping outside their homes. Bhatnagar’s opinion on the current state of m-commerce is ‘retail mobile commerce hasn’t yet gained similar traction despite the fact that the Gulf registers one of the world’s highest smartphone penetration rates’ and suggests ‘one reason could be that retailers themselves are late in embracing m-commerce.’ However, taking a look at 2013 PayPal Insights e-commerce report, mobile transactions already represent 10% of e-commerce in the Middle East (a level similar to the rest of the world), and are set to reach close to 20% of transactions in the region by 2015. The rate of growth is expected to  accelerate from a current 1.3 billion transactions to 5 billion within the next two years.

Given the level of smart phone penetration in the Middle East, it’s already hard to even define m-commerce in the region, let alone measure it. Can a customer shopping in one store, who uses their smartphone to find a lower price at another, and then orders it electronically for in-store pickup, be considered an m-commerce transaction? Is it m-commerce if a customer orders from a smartphone or tablet but exchanges the item at a local store? In a recent report titled ‘The New Digital Divide’ from Deloitte Digital in the US, 69% of survey respondents say they already check the web before they head to stores; 36% say they use digital devices like smartphones while shopping in stores.

Bhatnagar’s puts forward his other theory that ‘has to do with consumers and retailers’ suspicion of the security and safety of m-commerce transactions. ’It would seem however, Middle East shoppers are already relatively comfortable with online shopping and what’s interesting is trade between online shoppers in the Middle East and businesses based in the region makes up only 10% of total spend. Most of these shoppers are not spending at companies based in the Arab world; the majority of online shopping is done in the US (35%); Asia (30%) and Europe (25%), with the Middle East accounting for 10% of e-trade. This would indicate shoppers in this region have long been comfortable with mobile shopping  and now it’s up to retailers need to play catch-up with their already tech savvy customers.

The rise of m-commerce and the rapid adoption of e-commerce in general goes far beyond the creation of new purchasing channels, and instead represents a change in overall buying habits. For companies to really embrace this new era of retail digitization, they need to realize that a whole new shopping experience is being created – omni-channel retailing. Omni_Channel_Retailing_Middle_EastThe name signifies a trend in retailing towards the use of multi-channel approaches to engage customers – mobile, tablet, television, direct mailing, physical stores, pop-shops and websites to name a few.

Although I agree with Bhatnagar that M-era consumers are connected around the clock, just a click away from browsing stores all over the world and it takes them only a few clicks to make purchases,’ and his opinion that retailers need ‘to adapt to the evolving requirements of consumers if they are keen to seize the huge opportunity provided by m-commerce and sustain the business in the future’, rapid growth in e-commerce is not the only issue affecting traditional retailing in the region. There are a number of other factors that present challenges for foreign retailers operating in the local marketplace.

With a growing population and record numbers of tourists flocking to the UAE, retailers seem to be under the impression customers will always be there. However, in a region where out of stock scenarios are frequent, checkout lines are long, return policies differ to European and US standards and stores are staffed by sales associates from South East Asia whose English or Arabic is most likely to be their second language, customers are growing more comfortable with onmi-channel and less tolerant of the experience they encounter in store. This is already evident in 2013 Paypal Insight report claiming that most of those polled said that they prefer online to offline shopping thanks to convenience (26%), lower prices (18%), and product variety (15%).

As foreign companies and brands require a local partnership to trade outside of a free zone, partnerships are usually formed with major local Emirati groups such as Landmark Group, Al Chalhoub, or Al Tayer. By law, the partnership is at least 51% owned by the local company, hence not under full control of the parent company, which causes a disruption in the alignment of the business functions. Certain key systems such as the overall supply chain can become inconsistent, due to non-integrated IT systems. Take for instance a European customer, used to an onmi-channel shopping experience in Western retailing, who orders online from a brand’s global website, but then takes it to be exchanged or refunded at a local UAE store. Due to the brand’s local independence from the parent company, he will be told by the store assistant that the process cannot be completed, and instead must return to the item through the postal service to the global head office. How can global brands operating in the local market place expect to offer a seamless, uninterrupted shopping experience when experiences differ from country to country in what is supposed to be an increasingly connected world.

Furthermore, Tina Oberoi, Chief Operating Officer of franchise retail at Lals, recently stated that  ‘UAE retailers tend to add a certain percentage over the price in the country of origin of the brand,’ highlighting that ‘margins in fashion are definitely good, even in the mid-market space’. With 18% of shoppers already preferring online shopping due to lower prices, is this really a sustainable trend in the industry? It would appear the omni-channel experience for retailers in the Middle East will be difficult to achieve unless an alignment of all operating policies and standards is implemented at a global level.

The mere adoption of m-commerce technology by Middle East retailers is not enough, nor is Bhatnagar’s other obvious solution of creating ‘the fastest ways to deliver the purchased goods to mobile buyers’. The real challenge for the retailer will be to create innovations that sync the online and offline experience, exceeding customers’ expectations to generate profitable growth.

There is no doubt that Burberry is one of the most successful examples of a brand that has harnessed digital channels as a way of delivering unique experiences. Probably the most well documented integration of the online and offline experience, Burberry underwent a seven year transformation from a floundering, disregarded, over-licensed, decentralised brand, to becoming one of the most innovative and desirable luxury brands. From live-streamed catwalk shows, viral social media campaigns and online communities, all have been instrumental in engaging fans and spreading awareness.

Digital experiences such as the interactive ‘Burberry Kisses’ campaign allows mobile users to share ‘kisses’ via a desktop camera or touchscreen device, to ‘Burberry Bespoke’, a service which allows customers to create their own customized trench coats online, all serve as a purpose to humanise technology in order to interact with the consumer in a more personal way. Burberry has become as much a media content company as a design house, and this content driven strategy appears to have paid off, with Bloomberg reporting Burberry sales to have risen 14% to $866 million for the three months to the end of 2013 compared to 2012.

What today’s Middle East consumer expects is the advantage of digital platforms to provide broad product selections, reviews, product information and opportunities to compare pricing and product specifications online. But with the ‘shopping mall experience’ so ingrained into the Middle East shopping experience, the traditional advantages of handling a product and personal service at physical stores will always exist. Retailers that can learn to harmonize both the online and offline experience will be the companies that dominate their category in the future.