Explore the captivating world of "phygital shopping" and discover how innovative concepts are reshaping the retail landscape, blending the best of physical and online experiences to create an irresistible shopping journey.
April 28, 2023
Inherent challenges when growing e-commerce in a historically physical-first retail environment
Shopping malls have been playing a vital role in the daily lives of the population in MENA, especially in cities like Dubai where temperatures in summer are climbing up to 45°C or higher. But besides providing an airconditioned, convenient one-stop-shop for a wide range of products and services, they are often seen as social destinations. Still today, shopping malls are places where family members and friends come together to meet, socialize and enjoy their free time while dining, going to the cinema or indulging in other entertainment activities. According to Meydan Free Zone,34% of shoppers in the MENA region choose physical retail because they perceive it as a fun pastime.
Besides, the opportunity to touch and test products before buying is a reason to visit a store in person. High importance is given to being able to enjoy a more exclusive and personalized experience, which becomes especially relevant when purchasing luxury goods like jewelry or limited edition, branded items.
In parallel, online retailers have been enjoying a period of sustained growth in the MENA region.
The value of eCommerce sales in the UAE more than doubled, from USD 12.3bn in 2018, to USD 27.1bn in 2022.1
Undoubtedly, fueled by the Covid-19 pandemic, many consumers enjoy ordering anything from ready-to-eat menus to groceries and apparel from the comfort of their homes.
In certain sectors, online shopping is becoming the new norm.Especially in countries like the UAE, where almost 100% of the population has access to the internet, conditions look promising for that trend to continue. Only 7% of residentssay they never use grocery delivery apps.1
Despite eCommerce being on the rise, physical shopping is still highly relevant in the MENA region, and likely to remain an important part of the retail landscape for the foreseeable future, boosted e.g. by megaprojects like the “New Murabba” in KSA, providing 980,000 sqm of retail space. Retail trends develop towards exploiting benefits of both worlds:
“Phygital shopping”, or “unified commerce” solutions are combining elements of digital shopping with the benefits of physical in-store experience.
An example is the opening of the region’s first “phygital” store in Dubai Hills Mall in September 2022. The concept store, opened by Apparel Group’s fashion destination “6thStreet”, is fitted with tablets to browse and pick items of 1,200+ brands, as well as interactive fitting rooms that allow customers to switch sizes or request assistance. This new retail format showcases how instant physical shopping can be leveraged through multiple digital features, providing a holistic, immersive customer experience. Other examples of seamless retail experience include “click-and-collect” services or AR/VR solutions like virtual changing rooms. Technologies like digital signage, geolocation for digital wayfinding while walking through a store or personalized offers conveyed through push notifications upon entering a store provide limitless possibilities for a sophisticated and targeted customer experience.
Stryber took a look at VC funding volumes in the retail ecosystem in MENA in 2022. Most fall under the category of general eCommerce solutions (~ USD 651m), closely followed by investments specifically into early stage grocery and delivery business ideas (~ USD 437m).
Online retail still faces hurdles in countries like Egypt due to relatively poor infrastructure and unreliable last mile delivery services. However, there are promising solutions to bridge the gap between local and online commerce. An example is "Kenzz," an Egyptian startup that raised USD 3.5 million in seed funding in 2022. Kenzz aims to connect consumers with local manufacturers and enhance the online shopping experience by making it sociable and enjoyable across all touchpoints. For instance, Kenzz offers group order discounts up to 65% for family and friends, which in addition helps to spread word-of-mouth for the platform.
Given the expected continued trend of eCommerce solutions and the identified potential to leverage both physical and digital retail environments to be successful in the long-run in the MENA region, there is plenty of untapped space for new solutions and retail concepts that can be explored.
Attractions beyond regular physical shopping experience will be required to increase customer’s frequency to visit stores, their dwell time and loyalty rates. Incumbents in MENA like Emaar Malls or Majid Al Futtaim are predestined to leverage their facilities and large customer base, and have potential to enter untapped space through new concepts and digital solutions.
Please get in touch to learn more about Stryber, our retail-specific venture examples like the successful launch of a last-mile grocery delivery service or prototyping a live-stream shopping service with our clients.
1 Meydan Free Zone (2023) “Online versus physical retail: consumer trends in the UAE (link)
2 Arabian Business (2023) “New Saudi megaproject: What we know about New Murabba, the world’s largest downtown” (link)
3 Gulf News (2022) “UAE’s 6thStreet.com is out to merge shoppers’ online and store experience” (link)
4 Tech Crunch (2022) “Kenzz, an Egyptian e-commerce platform for the mass market, grabs $3.5M seed funding” (link)