As the 5th edition of the Future Investment Initiative forum draws to a close, we at Mukatafa wanted to highlight the experiences shared by some of our partners and their contribution to the ongoing discussions shaping the future of the Saudi economy.
In the “Rethinking Experience: The Customer of the Future” panel, Mukatafa’s partners Bin Dawood Holdings, Noon, and Lulu Group International, participated in a riveting discussion alongside the Alshaya Group to discuss new market trends in the world of e-commerce and online shopping.
Ahmed Bin Dawood, CEO of Bin Dawood Holdings, is also responsible for leading digitization and the brand’s e-commerce app, Danube online. Bin Dawood spoke at length about how consumer behavior had changed for their customers since the novel coronavirus (COVID-19) pandemic began in early 2020.
According to Bin Dawood, customers of the Bin Dawood and Danube hypermarkets began seeking healthy food and products, primarily those that would help boost their immunity, such as those rich in calcium, zinc, and vitamin C.
Bin Dawood also reported that their online app downloads spiked 400 percent during the pandemic, and their sales spiked about 200 percent.
“Customers seek convenience,” said Bin Dawood. “Having all this data around food, they were looking for more engagement. For that reason, we started adding additional information for them, such as nutritional facts on every item and giving them more options for organic and healthy foods. All this is changing the way we look at consumer behavior and shopping preferences.”
Faraz Khalid, CEO of Noon, the region’s homegrown e-commerce hub, called the last 18 months an “extraordinary time” and stated that the region has always been on the cusp of a breakthrough in e-commerce adoption.
“I think over the last 18 months, in particular, the region has been forced to shop online, so we saw up to ten times more demand in certain categories. Electronics, beauty, and fashion tend to be the main categories, which was true for this region before 2020. But with COVID and what’s happened over the last year, we saw a dramatic shift in categories and demand patterns. We see people shop for more consumables and staples online. That’s a very encouraging trend because 40% of all retail is concentrated in those categories.”
Khalid also said that there had been a “jump” in e-commerce adoption, estimating that the Kingdom’s e-commerce penetration rate had gone up from 3% to 6% over the last 18 months.
He also pointed out how the pandemic had affected the way people were paying for goods and services.
“Cash on delivery used to be the dominant option, but when the government banned cash for digital transactions during the pandemic, we went to 100% digital payment adoption. This caused a baseline shift in transactions. The rate of cash on delivery used to be 70 percent, which has now shifted to only 40 percent. And that shift is permanent.”
This trend is not exclusive to Noon either. Mada Pay, a local electronic payment network, reported that e-commerce transactions in the Kingdom have gone up seven times more than in 2019.
Yusuff Ali, Chairman and Managing Director of Lulu Group, also stated that consumer behavior had changed noticeably since the pandemic.
“Customers started seeking healthier options. Gluten-free, sugar-free, egg-free, we noticed that those types of products received more attention from consumers. We also noticed a definite increase in digitalization and e-commerce. Our business increased 500 percent in e-commerce alone. Consumers started buying digitally, so we started supplying according to that.”
He also stated that while the Lulu Hypermarket chain mainly specializes in food retail, they were starting to consider even more significant expansions in terms of the products on offer.
“The consumer demand is there. We operate mainly in food retail, but we would like to give more options for the customer. People used to come to super-and hypermarkets to browse, to select by themselves because seeing is believing. This trend has changed due to COVID. Now we have hypermarkets, fulfillment centers, and the goal to reduce delivery times. We supply ingredients from the nearest branch to cut down on timing.”
He also said that Lulu Group was looking to offer more locally-grown products in their stores due to government initiatives to support local farmers and produce providers.
“It is our responsibility to market locally grown products, and now we are focusing on that,” he said.
John Hadden, CEO of Alshaya Group, said that in his experience, “the young digitally native mobile consumer” has changed dramatically in the last two years.
“Everybody now is on their mobile phones checking prices and ordering things, and I think that never existed four or five years ago. COVID for us was a gamechanger in so many different ways; in terms of how we interact with our consumers, where they searched, and how they shopped.”
During lockdown in early 2020, when brick-and-mortar stores were off-limits and customers were confined to their homes, Hadden said that this was when they realized that things needed to change.
“What we managed to do over the course of the last 18 months is create a 500 million dollar digital business by putting all of our brands online. We have over 100 e-commerce sites and mobile apps across the MENA region, the largest digital footprint of any retailer across the region. And what we’ve seen is the consumer now is choosing how they want to play. Choosing how they want to interact. One of the changes we’ve made as a business is tell all our merchants, ‘you go wherever the consumer goes.’ We can’t assume they always want to go into brick-and-mortar stores anymore. Wherever the consumer goes, we have to be there.”
As far as trends reshaping commerce and business, Khalid speculates that more and more online users will become internet shoppers over the next five years.
“Internet shoppers will buy online more frequently. One thing you can be sure of is that expectation is always going to go up. Globally you can see that quick commerce is coming up, and instant gratification is real. People don’t want to wait till tomorrow for their order; they want things now. It’s like when people order food online, and it comes to them in 30 minutes, they want to press the checkout button and hope the doorbell rings half an hour later. We believe our region will really leapfrog many other developing markets in this.”
He also predicts that the density of dark stores and “sheer ubiquity” of quick commerce will go up dramatically in all emerging markets.
LTR: Prince Waleed N. F. Alsaud, CEO of Mukatafa; Ahmed Bin Dawood; Razan Alaqil, Director of Advocacy at Mukatafa