The 4 focus areas of MENA’s rising fashion e-commerce scene

Angela Hundal, Acile Sleiman, Josette Ghorra, Sara Hamdan June 2019

Clicked ‘buy’ recently? You’re not alone. The global online fashion market is now a $500 billion industry, with fashion e-commerce making up a third of all online sales worldwide. Fashion e-commerce grew four times faster than traditional retail between 2013-2017, according to a recent McKinsey report. In MENA, the figures show that the fashion e-commerce landscape is ripe with opportunity.

Fashion e-commerce in MENA is the second biggest category after electronics and is worth $1.6 billion in 2018, according to a recent research report by Google and Bain. The industry has grown 28% over the past 4 years, almost 3.5x faster than overall fashion in MENA (which has been growing at 8% annually). It’s still a large and under penetrated market in MENA, but the opportunity is plentiful. Breaking it down further into the three largest markets in MENA, our research shows:

  • Saudi Arabia is the largest market for online fashion in the region, worth $715 million in 2018and is expected to reach $3 billion by 2022.
  • The UAE is the most advanced market for online fashion, valued at $650 million and projected to reach $1.9 billion by 2022.
  • Egypt comes in at $125 million and the rest of the GCC at $140m, projected to reach $300 million and $500 million by 2022, respectively.

A Google and Bain study suggests that fashion e-commerce as a whole will grow by 39% in the region annually, reaching $5.7 billion in the GCC and Egypt by 2022. To that end, we have compiled these 4 key focus areas for retailers looking to make an impact in MENA’s ever-growing fashion e-commerce market:

1. Understand shoppers

We already know that the MENA consumer is digitally savvy, with the region boasting one of the highest internet and smartphone penetration in the world. E-commerce may still be a young industry, but shopping online is already a natural extension of MENA consumers’ habits. The role of search engines has played an instrumental part in the shopping research process.

As part of a Google and Bain study, we conducted consumer research with over 6,000 people in KSA, UAE and Egypt and found that 56% of online shoppers start their shopping journey using search engines.

According to Consumer Barometer, 69% of fashion shoppers in KSA and 61% in the UAE were inspired and made initial discoveries online, versus 36% and 26% in the UK and US, respectively. The driver of this behavior is the MENA consumer’s high reliance on smartphones throughout their discovery, research and purchase journey. So, regardless of whether the final purchase happens, a large part of the customers’ shopping journey is already online and on mobile.

2. Leverage data

Our research shows that the most successful fashion e-commerce companies use existing data and technology to better understand their consumers and make smarter business decisions. However, according to market research company Forrester, even with more companies talking about big data, using technology to capture it, and acknowledging the value of this information, an astonishing 60–73% of all data within an enterprise goes unused for analytics. This is a lost opportunity. Take a look at what happens when data is leveraged successfully in this case study from regional home furnishing retail chain, Home Centre. The company found that 63% of its sales were touched by digital and customers who conducted online research before visiting an offline store. The brand connected its online activity with offline purchase data through the group's loyalty program, using Google Analytics to merge Customer Relationship Management (CRM) data with online behavior data, and machine learning to make sense of it all. This was an essential step towards enhancing predictive decision making, from marketing to pricing to merchandising, and more. The results showed that Home Centre customers who conducted online research before visiting an offline store had a 39% higher Average Order Value (AOV) compared to customers who didn’t do online research.

3. Connect with consumers

Consumers have changed on a fundamental level, with today’s online shoppers being much more open to choice. When it comes to fashion in MENA, 66% of Google search queries are generic (indicating ‘open to choice’), compared to 32% in the UK. When it comes to non-brand and brand-specific queries by category in the UAE and KSA, in the fashion category, 66% of queries were non-branded and 34% branded and this means that consumers are open to choice. Aside from being more open to choice, MENA consumers’ engagement with new technologies and digital services is also driving expectations.

In fashion, technologies such as visual search are aiding in product identification and purchase. For example, L’Oreal launched Makeup Genius, a mobile app that allows consumers to virtually try on makeup 24/7, select a look they like, and directly order the right products with the tap of a finger. A Google product that offers users a highly visual experience, for example, is Google Shopping. This platform – launched in the UAE in 2017 and in KSA in 2018 – allows consumers to quickly compare offerings, from specs to prices and more, for a quick and easy shopping experience. Looking ahead, Google Lens, announced in 2018, allows you to take a picture of an outfit that catches your eye or a chair for your living room, by simply scanning it with your phone. Powered by machine learning, Google Lens and Google search will find the item for you, available soon on all devices through the Photos app.

4. Delight customers

Traditionally, marketing has been focused on identifying and outdoing direct competitors or companies that offer competing products or services. But with the acceleration of technology, experiential competitors have grown in importance. These businesses offer products or services that, while not physically similar to yours, offer an experience that effectively replaces yours. For example, customers are comparing your checkout experience to Uber’s or Careem’s, and your customer service to Deliveroo’s. So, how do you meet customers’ fluid expectations? One way is through personalization. Nescafe’s Dolce Gusto did this beautifully by tailoring ads to fashionistas, foodies and travellers in an ad campaign featured in this case study. A great example is the online fashion e-retailer very.co.uk, which now delivers an estimated 3.5 million versions of its website to shoppers by using 1st and 3rd party data. Shoppers see different versions of the site based on signals, such as the weather. If a customer has just moved into a new house and is more interested in shopping for electrical appliances, that’s what they’ll see. The personalized home page, meanwhile, adds to customized website navigation, using browsing behavior and purchase history to order department store categories based on their relevance.

 

Snapshot: molding a successful fashion e-commerce business in MENA

Shopping has evolved and marketing tactics must stay ahead of the game to stand out. Online habits tell us that consumers are hungry for choice, so meeting consumers when they research products before purchase on Google Search and YouTube is key. Continually engaging with new technologies and digital services is essential because today’s consumer shares valuable information and data more regularly, too. This is an opportunity for savvy fashion e-commerce retailers in the region to not only understand customers better, but also tap into a growing online market using deep insights leveraged through Google platforms. The end goal? Connecting with consumers through personalized, best-in-class shopping journeys that not only rival experiential competition, but also drive active conversion.