Middle East consumers’ preferred mode of payment remains cash on delivery, which is inefficient and problematic for online sellers. Debit and credit cards are widely in circulation, but many consumers worry about sharing their banking details online. There is also the problem of access to popular online payment gateways like Paypal, which is not available in all Arab countries. In some cases, credit cards issued by MENA banks are not accepted by all vendors for online payment because of sanctions or restrictions imposed by the U.S. or European Union.
On a related note, there is a significant trust deficit among MENA buyers when it comes to the authenticity of goods and sellers. Flourishing black markets and gray markets, along with weak consumer protection laws, have left consumers wary of buying online. Counterfeit goods still flood the market so people are wary of being duped. They like to see and touch goods before they pay, hence the preference for cash on delivery. In addition, the idea of a full refund is rare in MENA, where many sellers also take a hardline. As research and advisory firm Gartner notes, only 15 percent of the businesses in the region have an online presence.
E-commerce is appealing to consumers because it opens up a world of choice: products and services that they otherwise would not have access to. That doesn’t change the fact that the MENA region remains socially and culturally conservative, so fashion trends and tastes in movies, books and other content often play out differently. Marketers frequently find that what works in the U.S. or Europe needs a rethink in the Middle East. For example, the highly popular mascara by the company Two Faced had to change its name for the UAE market from Better than Sex to Better than Love.
The growth of e-commerce in the Middle East will, in part, be affected by the searing heat in the region. Many consumers still prefer shopping malls and bricks-and-mortar stores because they are cool, clean, pleasant places to be when the weather is intolerable outside – and because they typically stay open late (malls are open to midnight in the UAE, for example). Shopping centers aren’t just retail destinations but places offering a wide variety of services and food options that e-commerce can’t match. Family excursions to buy children new clothes and presents for major holidays such as Eid al-Adha are family affairs at major malls, where people socialize in a way they can’t if they are doing their shopping online.
E-commerce in the MENA region continues to enjoy double-digit growth despite the many obstacles. Amazon’s purchase of Souq.com in 2017 is further proof that the business world is keeping its eye on the potential of e-commerce in the Arab world. Like elsewhere, its success could ignite a cultural shift in the region.