emerging_markets_internationalisierung_spblog

Successful internationalization of brands – It’s all about the right start!

Authors: Florian Haller, CEO Serviceplan Group, and Niklas Schaffmeister, Managing Partner Globeone

Despite the protectionist demeanor in Washington D.C., German companies have realized record investments abroad in 2017, according to the German Chambers of Commerce and Industry (DIHK). The degree to which a company is prepared to adapt to local market requirements decides which path for the market entry is chosen. Following, we briefly present the four most important strategies. For more detail see the new Springer publication “Successful brand development in the major emerging markets”, written in German, by Niklas Schaffmeister (Managing Partner Globeone) and Florian Haller (CEO Serviceplan Group).

1. Global strategy – Maximizing global efficiency and centralized decision-making

In industries that are characterized by high integration pressure and short innovation cycles, a globally oriented strategy is recommended. In this case, the corporate headquarter controls the operation. Economies of scale enjoy top priority, the brands are highly standardized. However, adaptation to specific local market needs is limited, which may result in problems with local acceptance.

Example: Apple applies this strategy to its iPhones and iPads. Design, production and marketing are controlled by one single unit worldwide. Market-specific adjustments are usually limited to details such as the power cable, which must satisfy different voltages varying from county to country.

2. Multidomestic strategy – Strong decentralization with significant product adaptations

In this strategy business models and products are strongly adapted to local consumer needs. Country units operate largely independently. Economies of scale are neglected in order to achieve a higher acceptance in local markets. However, the high degree of adaptation can turn out to be a problem when the brand has to hold its own against competitors in a highly globalized environment.

Example: US restaurant giant Yum! Brands, operator of Pizza Hut, Taco Bell and KFC, tailors its menus to local tastes and culinary specialties in every single market.

3. Transnational strategy – Combining the strengths of the first two strategies

The transnational strategy aims to combine the flexibility of the multidomestic strategy with the efficiency gains achieved by global standardization. This difficult undertaking is recommended when companies are equally dependent on economies of scale as well as on adaptation to local consumer needs. Despite these adjustments, brands managed under a transnational strategy can continue to use the reputation of their country of origin for their branding.

Example: The Swedish furniture group Ikea is committed to providing its global customers with a unique shopping experience that defines the global recognition value of the Ikea brand. In addition to the standardized portfolio, there are numerous local adjustments. This is why Ikea sells harder mattresses in China at a lower overall price level compared to other parts of the world.

4. Home replication strategy – Limited standardization and little local customization

The home replication strategy is applied when there is little or no need for flexibility or standardization. This strategy aims to open up additional international markets without major adaptations for products primarily developed for domestic consumers. In the long run, however, this strategy includes the risk of not completely grasping local market conditions and thus losing competitiveness.

Example: Media Markt transferred its concept one-to-one to China and ultimately failed because the chain could not prevail over its local competitors with its classic concept and without major adjustments.

The choice of the right strategy will be rewarded in any case. After a short cooling interval, the emerging markets are currently registering a new dynamic. China will outperform the US as the world’s leading retail market in 2018. India overtook China in GDP growth at the end of 2017.

 

So, what does an Online Concept Designer do?

Get to know Ursi Jäger and Helen Birke who are giving some exciting insights about her job as Online Concept Designer at Plan.Net Pulse. Learn more about part 4 of our series Jobtitles Bingo now!

The most relevant SEO News for April 2018

In 2018 the Easter Bunny brought us more than just chocolate, it also gave us the long-awaited mobile-first index from Google. It will be interesting to see what impact this has when it comes to optimising digital assets. I’ve no doubt that we’ll be hearing a lot more about this in the weeks and months ahead. For the time being, however, the SEO news for April has focussed on short clicks, the need for speed in e-commerce, and a new (search) view of the world.

1) Google’s quest for instant search satisfaction

People are often looking for shortcuts, especially when it comes to searching for things on the Internet. We want to find exactly what we’re looking for straight away, with zero hassle. However, it’s never the case that your search query immediately takes you to the result you’re looking for. On average, you have to return to the search results five times, either to refine your search term or to search for something different. These clicks back to Google or Bing are known as ‘short clicks’. You could argue that the primary objective of search engine optimisation is to make these short clicks obsolete, because the aim is to tailor the content of websites to exactly match what people are searching for. Google has made clear its desire to improve and speed up the search experience, and the company has now rolled out a feature which has been extensively tested on mobile devices and in the USA. If you return to Google with a short click, a box with the heading “People also search for” is shown underneath the first search result. This box contains a list of links with similar search queries. This list differs markedly from the list of alternative search queries which is already shown at the end of the search results. The fact that Google has rolled out this short click box globally indicates that the company is taking the issue of laborious, time-consuming searches seriously, and is prepared to take concrete steps to address it. It’s also another indication that short clicks are a negative thing in terms of the users. As such, it’s clear that search engine optimisation teams need to continue with their efforts to eliminate short clicks, with a view to making life that bit easier when you head to a search engine.

2) A real need for speed in the battle for the top spot in e-commerce

It’s now spring, which means the conference season for the industry is well under way. However, if you compare the main topics being discussed at ‘Search Marketing Expo’ (SMX), the leading international trade fair for the industry, in North America and Europe, you might notice that Accelerated Mobile Pages (AMP) is a much bigger topic in the USA than on our shores. On the other side of the pond, website operators and increasingly also e-commerce providers are placing a major focus on this stripped-down HTML protocol. It’s primarily designed to improve the user experience and increase conversion rates by ensuring that pages load faster. What’s more, at this year’s Online Marketing Rockstars conference in Hamburg, representatives from Google also indicated that fast loading times are crucial if you want to stay ahead of the competition, particularly when it comes to the top dog, Amazon. In keeping with this topic, US search expert Eric Enge has published a study which investigates the advantages of AMP technology and aims to dispel four key myths which are presumably holding many companies back from using the technology. Firstly, Enge points out that AMP is not just suitable for news publishers, even though the ‘stories’ format has only recently been implemented on the AMP platform for this. Instead, using examples from India, he demonstrates that the higher speeds available for e-commerce result in significantly higher conversion rates, particularly in markets in which mobile end devices are heavily used. Enge also explains that opting for AMP in no way means needing to compromise on design features. He argues that the responsive website design recommended by the major search engine operators has major weaknesses compared against AMP. According to Enge, more resources would need to be planned to design and implement an optimal AMP user experience as there are not enough use cases in this field yet. The study also expressly warns against half-hearted AMP implementations, as this would make it more difficult to use the technology on mobile devices, and would unnecessarily complicate key functions such as the navigation. Loading speed should already be a central pillar of every SEO strategy. However, if German companies want to prevail against their competitors on the global stage, they too should take a closer look at AMP technology and the benefits it offers.

3) Life through a lens – say hello to Visual Search

“Alexa! Can I show you something quickly?” You might already like to give the latest generation of voice-enabled personal assistants this kind of command, in the same way that you might ask a member of your family. Yet there’s one fundamental obstacle standing in the way of such integration: voice assistants don’t have eyes. This will very soon be a thing of the past, however, through what is known as ‘Visual Search’. Thanks to increasingly deep integration of artificial intelligence, it has now become possible to interpret visual information and recognise objects. Just look at the ‘Google Lens’ as the most recent example. This tool for performing visual searches was launched a few months ago and is available exclusively on Google’s own ‘Pixel’ smartphones. ‘Google Lens’ enables the user to run a search on a photo at the touch of a button. The search engine automatically recognises what is depicted in the photo, e.g. sights such as the Eiffel Tower. It then provides relevant additional information such as directions, opening hours, entry prices and reviews. What’s more, Google Lens really excels with text. Although text recognition is by no means a new feature, Google is able to recognise a photo of a business card as an address format, for example, and convert the information from the photo into a corresponding contact file. However, Google isn’t the only player investing in this field. Microsoft upgraded its Bing search engine with an AI package a few weeks ago, which also contained new features for running visual searches. And Pinterest – the popular platform which has always considered itself to be a tool of visual discovery – has also put visual searches at the heart of the user experience through its new ‘Pinterest Lens’ app. Not only does Pinterest Lens break down scanned images into their attributes such as colour, quality and function, it can also generate shopping links for selected brands from an image search. It’s no coincidence that all major Internet companies are placing visual searches centre stage. According to the market research institute Gartner, around 50 percent of all mobile searches will be triggered either by voice or an image by as early as 2019. As such, the new context-driven searches constitute a growth segment which complements intuitive human behaviour. It remains to be seen whether it will quickly become a real revenue driver in e-commerce, as is currently promised. However, it’s clear that search engine optimisation is facing a steep learning curve that goes beyond keywords and content.

Serviceplan Middle East Diary

We’re calling it the Serviceplan Group Middle East Diary: Every week, one of our team members will be sharing what’s currently going on in her or his life at Serviceplan Middle East.

5 Essential Pillars To Successfully Localize Your Digital Marketing Strategy

It can be daunting for a mid-sized company when entering a new international market. Especially so when entering a region as diverse and fragmented as the Middle East. However, no matter where you go around the world, you can’t just copy and paste a strategy that has worked well elsewhere and expect it to succeed in a different market. With digital channels becoming more and more essential in today’s business landscape, here are some key aspects to consider for your digital strategy when entering a new region.

1. Be aware of the competitive digital landscape! Consider having a local website.

You’d be surprised how many companies come to the Middle East and don’t create a region-specific website. Nothing will frustrate your customers more than not being able to find simple information about you when searching online like basic product details, your location and contact information, opening hours etc. According to a recent Gartner report, only 15% of businesses in the region have an online presence. This is quite low hanging fruit, so make creating a local mobile-responsive website your first port of call when entering a new market. Don’t forget to include an Arabic language option for the content on your site, too.

2. Understand your target group’s online search behaviour! Local Keyword Optimization is key.

Speaking of customers searching for you online, it’s important to realize how people’s search behaviour differs around the world. It is essential to treat each market separately when it comes to Search Engine Optimization (SEO). Conducting simple localized keyword searches around topics related to your product or services is a must, as well as doing so for the Arabic language also as the most highly-searched keywords can differ across languages. Don’t forget to include the local country in the meta tags of each of the web pages in the process, and make sure to create business listing pages on Google for your head office and retail locations. Make it as easy as possible for your customers to find out about you online.

3. Get ready for a pioneering social media ecosystem! Reach your target group on Social Media.

With almost 50% of the people living in the Middle East region being under the age of 30, it’s no surprise that social media is incredibly popular here as a form of expression and communication. In such a diverse region, visual channels such as Instagram and Snapchat have become especially popular in recent years as a way of propagating a common visual language. Similarly with video content. YouTube is the most used social platform for video consumption in the region. Saudi Arabia, with a staggering 90+ million active daily video views, has even surpassed the USA to become the #1 consumer of content on this platform!

The Middle East as a region is built on respect for people and culture. Whilst most markets in the region have been adopting a more relaxed approach to social content, countries like Saudi Arabia have far stricter rules regarding the type of messages and imagery that can be leveraged. Despite, or maybe because of that fact, User-Generated Content (UGC) is an extremely popular form of content that brands here try to encourage. The Middle East also has its own community of super-influencers who use Instagram, Twitter, Snapchat and YouTube to collaborate with brands and communicate a more relatable, yet personal story. This could be a relevant approach to consider when entering a market in the region.

4. Learn how consumers shop online! eCommerce continues to grow.

While some markets around the world embraced online shopping more than 20 years ago, the Middle East has been somewhat slower to join in. Up until recently, most purchases made online would be paid for in cash on delivery as many customers remained sceptical of paying online. This has changed over the past 5 years, with more and more businesses accepting online payments and customers finally feeling comfortable with handing over their credit card information to companies online.

Amazon’s acquisition of Dubai-based Souq.com in 2017 was a boon for the region and signals a validation of the concept of eCommerce here in general. According to the Middle East-based online payment platform PayFort, the eCommerce market here is set to double to more than $69 billion by 2020 with the UAE accounting for $27 billion of that and the Kingdom of Saudi Arabia $22 billion, making them by far the two largest eCommerce markets in the Middle East. Food for thought when considering whether or not to facilitate online payments on your local website.

5. Be prepared for your market’s technological fluency! Don’t forget about tech adoption.

In case all of the above didn’t convince you of the importance of a localized digital strategy in the Middle East, maybe these statistics will! Even though many people around the world might consider the Middle East to be a region sticking to its traditions – the population is surprisingly tech-savvy.

Middle Easterners are a very well-connected bunch with more mobile connections here than there are people (128%), higher than in the Americas, Asia-Pacific and Africa. Smartphone penetration is exceptionally high here. At 80.6%, the UAE has the highest smartphone penetration rate in the world according to Newzoo’s 2017 Global Mobile Market Report. Saudi Arabia is not far behind at 65.2%.

When it comes to internet penetration, UAE (99%), Qatar (99%) and Kuwait (98%) are the three highest ranked countries in the world according to the 2018 Hootsuite & We Are Social Global Digital Report. Mobile internet usage in particular is very high, with Saudi Arabia (64%) and UAE (61%) in the top 12 countries globally when it comes to using a smartphone as opposed to a computer to access the internet (StatCounter). Make sure your communication is mobile-friendly.

Last but not least:

While it might seem like a lot to take in, you should consider digital channels as an opportunity rather than a challenge to overcome when entering a new market such as the Middle East. Understanding the region with its 17 countries and how the consumers use digital technology in their day-to-day lives can help you build up a loyal customer base and create a solid foundation for future success.

The formulated essential pillars are representing our knowledge and digital communication experience for a successful market entry in terms of brand and product communication for SMEs.
We, the Serviceplan Group Middle East, are giving an overview of the region, it’s opportunities and challenges not only during insightful business events, but also to people and brands who would like to learn more about it. We summarized our findings in a booklet about the region, which we are more than happy to share with you! Please get in touch by sending an email to middle-east@serviceplan.com.

They Don’t Make (Mad) Men Like They Used To, But Grey Suits Still Abound

Unfortunately, top men in advertising these days are a lot less chauvinistic and self-absorbed. Gone are the mad men days of pompous egos and flannel suits, of dry witticisms and cynical arrogance oozing from the Roger Sterlings and the Don Drapers of this world. Instead, we see ad men strutting around with undeniable charisma and sensible charms, making it all the more difficult for women to break the proverbial glass ceiling as men continue to dominate the industry’s ruling seats.

Indeed, there is much talk about gender diversity in advertising, about empowering women to take control of the helms; but truth is, there is hardly any effort and scarcely any evidence of progress in this topic. Women continue to be relegated to positions – albeit high enough in the corporate ladder – still subordinate to male leadership. It is as if women have the power to create, to curate, to cast visions and to launch the brightest of ideas, but men must have the final signature that seals the deal on the much-coveted dotted lines.

If anything, it’s a classic fairy tale retold in the language of today’s social world. The knights in shining armor go out to conquer the lands, while the all too capable damsels are left “protected” within the castle walls, abuzz with their crafts but far from the battles that make and break kings and fiefdoms.

Top roles in advertising are no different. You see a throng of men charging into client boardrooms, flanked by a handful of women who will eventually find themselves positioned a few seats down the round as the men embark on their pitch rhetoric. At the end of the session, you would have heard much from the men, but very little from the women who are merely there to hold the fort, to ensure that all of the client’s feedback and verbatim comments are taken into full account and addressed in painstaking detail back in the drawing boards.

Whether we like it or not, we must admit that such is the blatant and pathetic case still running the rounds in client and agency boardrooms these days. I should know; and I can definitely recount those pivotal instances when I would get quizzical stares from both men and women across the room as I would take control of a front seat, and later engage the audience with a piece of my mind.
While I would see my audience eventually warming up in the end, I would often leave such boardrooms with a desolate feeling inside.

For the rest of the crew, the battle is definitely centered on getting the agency’s product and ideas bought, but for a woman like me, the battle is to get heard and taken seriously in the first place. Again, it doesn’t help that the men in my team are sensible and charismatic in their own right, effortlessly winning clients with a genuine passion for their craft. My battle is psychological.

If we are to truly take women empowerment in advertising seriously, I say it should start with a change of perspective, both within agency flanks and within client circles. Ad agencies should start recognizing that the industry is now being shaped by the amount of relevant creative content our highly social, always-on audiences are clamoring for.

Women are the best creators of such content. They are insightful bloggers, they write a whole lot and articulate themselves well. They are a lot more engaged, creating and curating content, and interacting with other created and curated content. Advertising today is no longer about pushing out ads in Mad Men fashion, it is a lot more about how content is effortlessly crafted and where content is seamlessly served to which audiences.

Women are natural at these, so much so that agencies who recognize that advertising has shifted from ad views to content consumption are those who would eventually put women at the helm, knowing that women are at home in such a habitat.

Clients should look beyond Mad Men charms and start recognizing high-heeled substance. Women are creators in as much as they are orators. They too can brandish flags as they charge on to battle in the front lines. If at all, they are quick to make critical decisions on the fly.

In this region’s game of thrones, I believe women in advertising are being defined less and less by the titles they wield, but more and more by the weight of their more substantial words in a boardroom full of grey suits.

 

This article was first published in Campaign Magazine Middle East.

The most relevant SEO News for March 2018

Following the major cold snap in February, spring is now well on the way in terms of SEO. Appropriately enough, the hot topics for the month of March are AMP, backlinks and Bing.

1) Google liberates stories format from confines of an app

The popular information and entertainment format of “Stories” is breaking new ground. Originally invented by Snapchat and quickly pounced on by Facebook and Instagram once it proved successful, the handy multimedia gallery has since been confined to the closed systems of smartphone apps and social media worlds. Google now has plans to liberate stories from captivity. The search engine has developed a stories format for the stripped-back Accelerated Mobile Pages (AMP) HTML protocol, which it presented at this year’s AMP Conference in Amsterdam. The aim is to combine the narrative options of the stories format with the technological benefits of AMP, such as fast loading times and optimum display on all platforms and devices. The new format supports videos, images, GIF animations and links. Publishers including CNN, Hearst, and Mashable supplied three sample stories on the “open” internet as part of an initial showcase. Fast loading times and platform independent user experiences are two key ranking factors for search engines, so it is worth news publishers and content producers taking a closer look at the options afforded by AMP stories. In addition, it has previously often been shown that the Mountain View search engine sometimes prioritises its preferred technologies in its search results. For instance, this is what happened with the markup for structured data. It remains to be seen whether the introduction of the stories format will accelerate the spread of AMP technology. Despite the benefits, there are also limitations in terms of the feature set and the implementation of tracking.

2) Old school? You must be joking: SEO success with backlinks

Optimising a website to increase its organic reach to the right target group is a complex undertaking. The explosion in the number of ranking factors and signals across a range of new platforms, and the expansion of the search function to include new interfaces such as voice and image, means that SEO managers are spoilt for choice when selecting the correct approach for a project design. So it’s time to remember the origins of our craft and consider a good old-fashioned backlink campaign. In an article for the Search Engine Land blog, US columnist Andrew Dennis explains that the use of brand mentions and shrewd competitor research can substantially boost reach, even for completely new domains. Dennis quotes the example of an offline brand with a relatively small digital marketing footprint. Despite this, the brand manages to attract a high level of attention in relation to news and blogs in its niche industry. Dennis states that this initial position applies to many companies in the cybersecurity, STEM education, payment, fitness and hotel industries, in particular start-ups. The first tactic was to generate brand mentions, i.e. unlinked mentions of the brand on third-party websites in the most positive context possible. By involving the right managers, a large number of brand mentions were obtained through the PR and HR departments, as well as industry associations, press interviews and charitable work. The second tactic involved analysis of the most successful competitors’ backlink profiles, whose key link sources were automatically relevant for the company wishing to make improvements. According to the author, it did not take much effort to identify a large number of portals and directories where backlinks could be acquired, including those not featuring expensive content. The effort put into link analysis and developing brand mentions resulted in a total of 64 new links and a 43% increase in organic traffic over a six-month period. This example in itself is nothing out of the ordinary, but illustrates how relatively simple results can be achieved in our trend-driven SEO world by applying classic analysis and common sense.

3) Bing in favour of a balanced argument

We have become so accustomed to using search engines to help us in almost every aspect of life that it is high time we started to question viewpoints supplied by a machine (in this case the search engine). Following on from Amazon’s announcement of plans to give personal assistant Alexa her own opinions (as reported here), Microsoft has now added a new feature to its search engine Bing – the multi-perspective answer. This may initially sound incredibly academic, but actually makes perfect sense on closer inspection. For example, asking whether a hot yoga session is good for the body will result in contradictory responses, as will many other queries. Bing now lists and compares the pros and cons in a neat box on the search results page, similar to the Featured Snippet Box on Google. According to Microsoft, the viewpoints are selected via a self-learning neural network that uses reputable content from trusted, high-quality websites. The company states that another requirement for a place in the response box is the indexability of the content on the original site, where it must be displayed prominently and clearly. Early examples of multi-perspective answers from the USA relate primarily to health and nutrition issues. However, Microsoft has announced plans to roll out the feature in the UK initially and then to other markets, as well as expanding it to cover other topics.

 

The most relevant SEO News for February 2018

The New Year is not giving us any breathers. The New Year’s Eve fireworks have barely died down and we are already invited to enthuse about the long-awaited relaunch of an important tool. How it’s not too long before we’ll be browsing with our reading glasses and why voice assistants are likely to get on our nerves soon – this and more you’ll find out in the SEO News bulletin for February.

1) Hooray, the new Google Search Console is here!

With the start of the New Year, the mailboxes of webmasters, in-house SEOs and agencies far and wide have been overwhelmed with countless emails. What initially looked like spam soon turned out to be a long-awaited message from Mountain View. After a test phase lasting many months, the new Google Search Console is now available to all users. Though officially still in its beta phase, the data portal for monitoring the organic search aspect of website performance formerly known as Webmaster Tools has had its design completely overhauled. Alongside its fresh look, the Search Console also offers real improvements, such as access to historical data from the last 16 months instead of the previous mere 90 days. There are new functions too, like the Index Coverage Report, which enables superior tracing of the search function performance for individual URLs. Although some basic functions are still missing, Google has announced that it will further expand the range of functions for the new Console within the year. At the same time, new functions will also be added to the API. The fact that the highly-anticipated rollout took so long was mainly due to the need to collect and evaluate the beta testers’ feedback, a Google spokesperson said. Google is also still interested in Webmasters’ input. They have been asked to submit ideas to Google for useful reports and functionalities. SEOs and Webmasters should not let this opportunity slip by to further adapt one of the most important tools of the sector to the changing needs of our time.

2) Voice search ranking: new study reveals first figures

The British online performance agency Roast has run a study to investigate the connection between rankings of classic Google search results and responses of the Google Home digital voice assistant. To this end, 616 top search terms from the areas of medicine, retail, travel and finance were entered as queries, and in the UK, an “answer box”, the so-called featured snippet, was shown as the search result. The Google Home voice assistant could answer roughly 75% of the queries through its automated search process; the remaining 25% left Google speechless, although the desktop search showed a corresponding answer box. No statement could be made about the rules governing the answers displayed, as the study shows. What’s more, about 20% of the queries answered by the voice assistant did not tally with the featured snippet on the desktop. For search marketing, these results mean that a successful battle for featured snippet ranking in a desktop search is far off from guaranteeing an equivalent reception on Google Home, and the Google My Business tool is still indispensable for managing information that serves search queries for local services.

3) Visual search on the rise

While we’re still waxing lyrical about the influence of voice search on digital marketing, AI is yet again opening up totally new avenues. With new apps like Google Lens and Pinterest Lens, as well as expanded functions on Microsoft’s search machine Bing, we’re advancing in the visual search era. Since the early days of Google we have been able to look for images using key words; later came reverse search for image files with the aid of structured data. In the next developmental step of visual search, AI will recognize the content of photos or only sections of images, completely without context, and will not only come up with similar images in its results list, but also detailed information on the properties of the depicted object. For the e-commerce sector, this means a new access point on the customer journey. Information searches and purchase decisions can be conducted quickly and intuitively. The need to translate your own search purpose into a written or spoken search phrase becomes obsolete; results are instantly reflected in an augmented image. For search engine optimization, this development means that providing product information via automated data feeds and data banks will become even more important. In this way, suitable information be stored in the search systems and successfully served by this kind of push paradigm. The transferred content – images and text – need to be optimized for quality and relevance and be able to excel as structured data in order to take their place in the competitive data world. The integration of visual search in cameras, browsers and apps will take place very quickly and accelerate the transition from on-page to data optimization even further.

4) Alexa gets her own opinion

In the meantime, we know that digital voice assistants like Alexa and Siri have female voices because studies verify that both men and women find the female voice more trustworthy than its male equivalent.
But apart from fact-based question-and-answer exchanges, so far it has not been possible to carry on a conversation with the voice assistants. This should now change through an Amazon decision. According to Techcrunch, Alexa will be endowed with her own opinion and also express this confidently in conversation with her user. By way of example, the company gives comments on films in its own video product range. As she once did with the funny character at the video shop counter, (the older reader will remember this), in future Alexa is intended to start up conversations with users looking for the right evening entertainment – which will not be based on content curated by humans. Instead the artificial intelligence of the voice assistant will independently generate the necessary portion of attitude and humour that is crucial for lifelike conversation in all its nuances and suitable for the market. With use of this strategy, Amazon expects to win an advantage over its competitor Google, which has recourse to information and facts from a disparately larger data set, a company spokesperson has explained. Thus, Alexa is today already declaring the US beer brand Budweiser to be her favourite drink. Humour aside, a machine’s skill in conducting a natural conversation with a human will shape and change the future of search marketing in a more decisive way than any leap in technology we have experienced so far.

E-Commerce in the Middle East

In the last couple of years, entrepreneurs across the Middle East have launched new products, businesses, and have shown the possibility of creating a vibrant startup scene similar to Europe and the United States.

Startups from the region have shown great promise. An example for this is the recent acquisition of Souq, an e-commerce player that got acquired by Amazon for close to $800 million. Another notable exit from this region is Talabat which was acquired by Delivery Hero based out of Germany.

According to a report published by MAGNiTT, a research agency, more than $870 million were invested in Middle Eastern startups last year and each company raised more than $500k individually.

E-commerce, however, is a crucial domain in which startups can do much more to fill the gap in the market, so let’s take a closer look at this vital industry.

Present and future of e-commerce

According to a report published by BMI Research, the Middle East is one of the fastest growing e-commerce markets in the world. The same report also projects that the sales volume of this region will expand to $4.3 billion in 2020 from $22.3bn in 2016.

Out of that sales volume, $19.8 billion will originate from the United Arab Emirates (UAE) as currently close to 88% of UAE’s population are internet users with a smartphone penetration of 78%.

But when looking at the current state of the market, Gartner reported that only 15% of the businesses in the region have an online presence and 90% of online shopping import products from outside the region. These statistics clearly show the tremendous opportunities that lie ahead for the online retailers.

Who’s shopping?

Across the region, men are more likely to shop online than women. For instance, in the UAE 59% of online shoppers are male, while Egypt shows the biggest disparity – with 77% of shoppers being male.

Younger web users are contributing to the drive of the e-commerce market too. In all the markets analysed, 26-35 year olds are more likely to make purchases online than any other age group.

In Egypt, a massive 50% of digital shoppers are 26-35 years old.

As for products bought, air tickets, electronics and fashion items are the most popular goods purchased online by shoppers in the Arab World.

E-commerce is getting social

The leading way for e-commerce brands is to connect with shoppers across the Arab region via search engine optimisation and social media.

Facebook is the leading social channel among Arab online retail brands, with 41% using the service. Instagram is also proving to be popular – with 23% of these companies making use of the photo sharing app.

It’s good to see an increasing in-depth coverage of the digital market(s) in the Middle East. E-commerce growth has certainly seen an impressive growth.

For those looking to connect with online shoppers across the Arab World, brands need to be aware of the comparatively acute demographics currently making purchases online at the moment – i.e. men aged 26-35 – and trying to understand what makes other web users to try online shopping.

Access may be an issue for certain consumers. And we can also see that certain product types may be better offered through online channels than others.

Social and SEO are seemingly proving to be increasingly vital for e-commerce companies to reach more and more customers, so it will be interesting to see how digital shopping continues to evolve in terms of a search tool, and seeing an increasing adoption in social and more mobile technologies over the coming years.

Challenges in e-commerce

Although the prospect for the e-commerce market in the Middle East is huge, there are many obstacles restricting the progress. Here are some of the key issues:

Clogged logistics

There are high trade barriers in the region which makes it difficult for online retailers to ship products. Moving goods through customs can trap any company in a bureaucratic nightmare — especially when you add high tariffs, changing regulations and volatile currency exchange rates. Amazon’s Souq, which delivers products primarily to the six countries in the GCC customs union, is an exception.

Financial regulations

Most startups would probably fail if being faced with the adverse conditions in the Middle East. In Egypt, for example, there are no bankruptcy laws. That means an entrepreneur could end up being jailed if debts are not cleared on time.

Simply closing a company to start a new business can also prove to be extremely problematic. Endless amounts of regulatory paperwork is involved and it can take up to 5-10 years. According to World Bank, the average ranking for starting a business in the Middle East stands at 117, which is far below the rankings of the US and the UK. So it’s safe to say that there are still quite a few hurdles in the way for Middle Eastern startups.

Talent acquisition

Usually, startups attract new talent by offering employee stock options. This is true for most of the world but it’s an alien concept in the Middle East as businesses are forced to operate with outdated legal and regulatory systems.

Labor laws also make it difficult to fire employees, especially when it comes to foreigners, while the existing education system in the region fails to provide locals with crucial technical skills, such as coding.

Amazon’s entry

Amazon’s arrival is definitely a dangerous signal for the local e-commerce stores. Amazon is more of a gigantic logistics facility than an e-commerce store and the acquisition of Souq.com will help them to build stronger facilities in the Middle East. Amazon can definitely offer a wide range of products and outpace the local e-commerce stores in terms of delivery time. They will also be driving huge marketing campaigns to get locals in the region onto Prime membership.

Amazon’s customer-centric approach and the mission to provide the widest range of products at the lowest price possible makes it an intimidating competitor of any local player.

Fostering adoption via government’s efforts

If the industry is supposed to succeed, the governments in the region will have to play a crucial role in promoting e-commerce, in addition to the efforts of private companies. One of the major ways to build trust can be enhancing e-governance and digital services.

Most of the countries need to integrate the traditional offline services such as visa programs, transportation services, utility services and more online platforms that can leverage online payment gateways to provide efficient services to the local population. In fact, other countries can get inspired by the UAE which has established the world’s first purpose-built duty free retail hub — ‘Matajircom’. There should be concrete efforts from the government to work in conjunction with the regional and international firms to boost e-commerce in the Middle East, so that they can keep up with the rest of the world.

Notable e-commerce startups

Despite the problems that startups in the region face, many have managed to beat the odds and reach notable success. One of the most prominent startups in the Middle East is Wadi.com, an Amazon-like e-commerce store that raised $67 million in a Series A round with an undisclosed valuation.

Contrary to Amazon, Wadi sources products from a diverse set of retailers and sellers (without maintaining warehouses) and operates online in the UAE and Saudi Arabia. This helps them to deliver products at a much faster speed than Amazon and staying ahead of the international giant.

Mumzworld.com is another notable e-commerce store that’s targeted towards mothers and baby products. The startup secured multi-million dollars in a Series B funding round from Wamda Capital, twofour54, and Endeavor Catalyst.

Souq.com, which was acquired by Amazon, has established its business throughout the GCC and Egypt and currently commands the largest market share with more than 23 million monthly visitors.

Other e-commerce players that have a strong ground in this region are Aido.com, Awok.com, and Zappos clone Namshi.com. Another popular e-commerce store is Cobone.com which is centered around daily deals.

Takeaway

The future holds a lot for the e-commerce players in the Middle East and it’s definitely great to see companies succeed in spite of the intrinsic barriers. Their success is inspiring for other players to build great products and services apart from building trust in the local community.

Economic reforms, diversification and improvement in labor laws coupled with steady growth in internet penetration will propel the e-commerce market to new heights in the next decade. This can also be seen from the chart below.

The new shining beacon for retail

Imagine if “talking” products existed in the retail trade. Imagine if every retail surface and every product could act as a stage for brand and product presentation. Your favourite celebrity chef could pop up in the supermarket as a hologram and offer you cooking tips for the products on display on the shelf. When looking for the right golf club, a 3D light figure of your favourite sports star could appear in the room and talk you through the best products available in the sales area. Does that sound like something from the future? Well, it actually already exists today: Mixed Reality makes experiences like this possible.