Although e-commerce is becoming a key distribution platform for beauty players in both emerging and developed markets, the channel has yet to capture the imagination of beauty consumers in the Middle East. While overall online sales are growing – total business-to-consumer e-commerce sales in the Middle East are tipped to reach $20bn this year, according to UAE-based e-commerce player Souq.com – beauty sales make up just a small percentage of the total.
According to MasterCard’s 2015 Online Shopping Behaviour study, which polled 4,000 people across eight markets in the Middle East and North Africa, online shopping in the region has increased only gradually over the past two years. In absolute terms the airline industry recorded the highest online spend, followed by hotels, household appliances, electronic products and travel-related items, the study found.
In the UAE, 83% of respondents said that they had made an online purchase in the three months prior to the study, while in Kuwait the figure reached 95%. According to MasterCard, developments in internet infrastructure in Kuwait, which allowed a number of businesses to expand into e-commerce, had helped boost sales. In the UAE, facilitated payment methods have generated increased confidence in e-commerce transactions. Transactions made on mobile phones are also on the rise in key markets like the UAE and Saudi Arabia, which is said to be the biggest and fastest-growing market for e-commerce in the region.
Barriers to business
However, observers point to low credit card penetration and an over-reliance on cash as a key barrier to e-commerce development in the Middle East. A report by online payment facilitator PayPal predicted cash-on-delivery would account for 60% of online purchases in 2015. In Qatar, the country with the third highest per capita GDP in the world, just 20% of internet users made purchases online, despite a majority of residents having internet access, according to a 2015 report by Research and Markets. Another problem for beauty brands is that women make up just a third of internet consumers in the region, according to some reports,
In addition, shopping in brick-and-mortar stores is a key pastime for consumers in the Middle East. Going to malls is seen as a form of entertainment in many of the region’s markets and the convenience or even lower prices of shopping on the web is unlikely to replace this. Indeed, consumers’ penchant for brick-and-mortar stores is one reason that major international beauty brands have been slow to set up their own e-commerce sites in the region.
The number of local e-commerce players also remains limited compared to other markets. And this is despite the fact that consumers in the region generally prefer to turn to local sites like Souk.com, Aido.com, Lestango.com, or Awok.com. Analysts say that this is leaving the road wide open for increased cross-border shopping, especially for sites based in the US, Asia or Europe, which often offer a broader product choice and lower prices. International players like Amazon, Ebay and Aliexpress are among the most popular players in the region, according to Research and Markets.
There may be much potential for beauty e-commerce in the Middle East, but there are strong barriers to growth in the channel. Observers will be keenly watching local sites like Alshop.com and Basharacare.com, which have a focus on health-and-beauty categories, as an indicator of future development of the business.
