Why are some local e-commerce websites failing in Saudi Arabia? The idea of following a trend is all the wrong reasons to enter a business. After short glory, most fail to sustain growth, why? you can’t always point at the economy, you’re part of the economy and you must apply the proper tools to sustain your business. The opportunity is enormous but as long as you’re applying the old trick for short wins you’ll only live short.
Saudi consumer spending on travel, fashion, and beauty are the biggest in the region and Souq thrived on the Saudi market but the question still remains. Where are the local potential brands? Things must change. There are generic problems with E-Commerce, such as a reliable payment gateway but even regional brands like PAYFORT became an Amazon company. In fact, many E-commerce platforms prefer PAYFORT after Amazon bought the company, why? They trust Amazon…the brand.
First and Foremost, you can’t be the Amazon of things. In recent years, young entrepreneurs and traditional businessmen with trading mindsets thought the model of Amazon works for everything. Entrepreneurs dream of becoming the next big thing and this is their ultimate dream but unfortunately, they overlook the reality of things or the basic understanding of how things work besides having the resources
Dreams are big but dreams require tools to become reality and one of the key tools is knowledge. Without knowledge and experience, the risks are high. There is clearly an emotional hype across the region on technology and dreamers are emotionally charged to be part of the next big story. I fully support the way forward but I’m asking dreamers to walk before they fly, each step is a learning experience and very costly. I’m speaking out of experience in my industry where many launched or revisited their brands without prior experience and knowledge. The results were very costly and I’ve published many case studies on Alnahdi, Rabea Tea and Cofique; all available here on Linkedin under articles.
In response to the decline of traditional retail, everyone’s answer was: Go “online” to survive. So both the traditional trader and the entrepreneur decided to buy the idea over value but one can sit behind his/her desk and ask where is the value?
If Amazon, the shark, owns a smaller shark (Souq) in the region and then there’s Noon, a heavily-funded ‘can stand all sorts of waves until they find there market space. The key question is, where should the small entrepreneur fit in this equation or even the traditional local businesses that decided to develop their own E-Commerce platform. Even most websites of local brands failed to become a destination while their Instagram pages have huge followers.
A question to ask is, did all E-Commerce platforms mature as brands? In my humble opinion, few independent E-commerce platforms have matured to be a brand out of necessity due to price, time, convenience and availability and since the price is the ultimate factor compared to others, its either price or the brand.
If we look at some categories point of reference in E-Commerce, there are some that moved away from mainstream and were able to build their relevance ( http://www.dokkanafkar.com ; http://www.cobone.com ) Hunger Station and many more. E-commerce is a reality but being relevant in the most cluttered marketplace is key to success, you can’t be the Amazon of Everything.
The idea of selling everything with a lower price and in volume online is Amazon’s model. Amazon’s expansion strategy outside of Europe and the US is to own the largest share in any leading e-commerce and dictate its value for full transformation as an Amazon Company. Souq is a model and few are in the pipeline in Turkey, Brazil, and a few other countries.
The Amazon of things
The E-commerce market is cluttered with Amazon’s business model and each country has it’s own Amazon wannabe. In short term, this might be viable but in the long-term, it slows growth. Now you might ask why? Well, each sector has generic values created by the category creator and that brand becomes the point of reference. In the case of E-commerce, Amazon is the industry’s point of reference and one of the early pioneers and game changer. If Amazon’s model is replicated by everyone that enters the E-commerce industry then those same values are commoditized by others while Amazon remains the brand, the most trusted one.
So can you become the Amazon of things? Well, before you sit with your friends over shisha and decide the path of your business with a group of people that never strategized in their life or their business success is inherited, you must first believe that traditional business and online business are two different creatures with extremely different sets of values. E-commerce requires a massive investment on all fronts, Startups’ focus should be on differentiating and growth not on “what worked for others will work for me.”
One point that really bugs me is how people get into business without understanding. Being technically savvy and having great business sense are two different things, each compliments the other. If you’re a tech-savvy with zero business logic, I recommend you get help and if you have so much money and you’re in rush to make money don’t enter the E-commerce business or app, it takes time to grow and requires patience. If you don’t believe in written strategies, knowledge, brand building or vision and mission then stop there.
No Strategy, No Success!
Second, business strategy implementation failure is a major drawback in many cases. If you don’t have a strategy, what are you selling? E-commerce at this stage commoditises your business and the only relevance stronger than quality is price and time. How much is it? How fast can I get it? Can you guarantee two days delivery? Most functional values are shared values. You need a robust organization and consumer centric to succeed.
The dynamic of how things change fast requires an organization structure that adapts easily to all changes and is able to survive threats as well as embrace the ‘new’ part of the ongoing change. E-commerce business is mainly built on trust and you’re tested every second of the customer’s journey and unlike traditional business, the journey doesn’t end at the cashier. The journey takes much longer and sometimes up to a month, that depends on your time and how fast you deliver, guarantee, warranty, exchange, refunds or returns. The customer owns the journey and his words matter the most, the values he experienced build a certain image in his mind which can either be positive or negative. The only way to build a great online brand is to become a “customer-centric” organization and to travel on the same journey that great brands traveled or else you’re doomed.
The Mind Challenge
A trade mindset will suffer as an online business. A trader’s purpose is money earned immediately and online business requires a much longer time to mature or even breakeven. It took Amazon over twenty years! why would it take you a lot less? Online business is a cluttered market and in order to stay relevant, you must continuously innovate. It requires constant investment in innovation, brand, and point of difference. To survive in E-commerce you must focus on being relevant and that requires a massive investment on people, marketing and technology.
Back in the ‘50s or even late ‘40s, the service industry was relatively new and brand as a subject was less scientific, today with E-commerce we’re back in the same age but in online trading instead of the old traditional one. In the near future, as the industry evolves, no business will survive unless it owns a unique set of values. Imagine someone blindfolds you and requests you to walk an entire block alone, the first thought is to remove fear and that requires “Trust”, so who will you trust? You’re all alone to explore this new experience.
For a new E-commerce platform to win, it must realize the Blindfolded Customer’s experience and find ways to build “Trust”;. This is the reason why Amazon decided to position its brand as “Customer Centric”
Those who are successful in traditional business and managing a successful business model will face difficulty adapting to new trends. Why? Online is a different nature and requires a completely different strategy. Some bet on their brand equity or relevance to help penetrate the online market. In fact, airlines sell more tickets through other online vendors than their own. Hotels sell a lot more rooms through other channels than their own.
Brands like Expedia, Booking.com and few others are online travel destinations that have become the points of reference for the online experience knows as ” Booking” the value to book instantaneously. versus the old traditional travel agencies experience was known as “ticketing” values dictate experience.
Where is Thomas Cook today? the once ticketing giant. Thomas Cook is thriving, they revisited their business strategy and repositioned from a ticket company to a holiday company. Thomas Cook today is thriving as a brand both online and offline and only a few Thomas Cook retail offices are available in major metropolitan cities across the globe.
The One Man Show!
The one-man show hurts culture and values. You can’t have growth based on a few individuals, it’s the organization that matters over a few individuals. There are decision-making flaws such as centralized decision- making, interrupting a working strategy or even controlling the details.
E-commerce is dynamic and too fast and as a leader, you must create decision-makers across the board. Sadly, the reality in our region is that our decision-making is centralized i.e. “The One Man Show.”
Let’s look at key functional values in e-commerce global trend:
A, Easy returns is one of the key factors to be successful.
B, It’s a price war… (Get out if you can’t fight).
C, Your sale doesn’t end at click-paid button. The sale is not
finalized until the 14 days return period is over.
D, Customer trust is not just on purchases but exchange/return and
E, Customers control the rating and reputation and this is
everything. If you don’t understand brand-building, don’t get into
online ventures. Unless you own a strong offline brand, don’t go
F, Two to three days delivery max or forget it.
G, Warranty all across and guarantees on delivery.
H, Easy returns and hassle-free (Mental comfort is key).
I, Hardly any offers that lures the audience or they’re poorly packaged.
E-Commerce is an uphill battle. You’re fighting giants on values they strongly own and helped build their brands, to America E-commerce is Amazon and to the Middle East it”s Souq. I strongly believe that the future of E-commerce is specialty. Today’s small players are tomorrow’s big players. Stick to your specialty, it’s the road to brand building.
Baaghil N’ Brand
After two years of data analysis, I came up with a model that helps both online and traditional businesses on how to build their brand without the need for advertising.
My 8-steps brand-building model answers every problem of customer and user experience. A brand needs to be in the heart of every touch point and brand building comes through interaction, that’s the most genuine brand building process over a false claim.
Your brand is the point of reference and must become relevant. Your Customer experience means nothing without brand values and just how your customer experience and its design means nothing without customer retention. This image illustrates the 8-steps required to become relevant in the brand building process. Feel free to contact me for a 1-day session on Brand Maturity: the steps required for Brand building. Don’t waste your resources on advertising, own a BRAND!
Baaghil is Middle East’s most recognized name on Brand. His unconventional way of thinking has earned him recognition on the world stage including endorsements by America”s best.