By Hassan Mikail-head of Shipa E-Commerce
A lot has changed in the Gulf Cooperation Council (GCC) countries, and the whole world, in the last eighteen months. Amid the turbulence of pandemic, lockdown and economic restructuring, social commerce has emerged as an increasingly lucrative market in the GCC — the fastest growing segment of e-commerce in the region.
Social commerce, or “conversational commerce,” is a subset of e-commerce that covers transactions taking place via social media platforms: Instagram, WhatsApp, Snapchat, Facebook, TikTok, YouTube, Reddit, Twitter, Pinterest, and many more.
While still a burgeoning industry, social commerce is expected to rapidly advance in the near future. Grand View Research predicts that this market, worth $475 billion in 2020, will reach $3.4 trillion over the next seven years. In short, it’s a market that’s bursting with potential.
The GCC social commerce landscape
People everywhere are spending more time on social media as a result of the pandemic and resulting lockdowns. We are all relying more on social media to stay connected with friends, to entertain ourselves, to make sure we’re informed. So why is the GCC exceptional?
All the factors that drive social consumption can be found across the Middle East. For a start, there’s a disproportionately youthful population — 28% is aged between 15 and 29. The median age is only 22, far below the global median age of 28. That’s significant because social media penetration is far higher for Millennials and Gen Z than for older age groups.
Add to this growing share of the GCC population that is digitally savvy and affluent. These are people with the time, money, ability and inclination to shop through social media — the perfect target demographic for the social commerce seller.
The potential of this exceptional market is hinted at in broader online sales figures. In the GCC, e-commerce sales rose 52% from 2019 to 2020, according to Wamda venture capital. Asia Pacific might still be the fastest growing region for social commerce, but the incredible growth and vibrancy in the Middle East should not go unnoticed..
The market has expanded rapidly since the pandemic, but there’s still much on the horizon for social commerce in the Middle East. For potential investors, the opportunity is still there for the taking. So what does this opportunity look like?
Social media platforms are beginning to integrate digital purchasing functionality into their apps. Instead of shifting buyers from social apps to an outside site, the whole process will be housed within the platform itself. Instagram is ahead of the pack – but keep an eye on others making moves in this direction.
There is also the area of augmented reality (AR) shopping. New interactive experiences, such as virtual shops that give consumers the ability to “try on” clothes or take a new car for a test drive via social, are starting to surface.
Social platforms themselves are also becoming more sophisticated in the way they collect data and target ads to users. The fact that brands can advertise on a platform where people input their age, sex, interests languages, etc., means advertisers can pinpoint their target market. At the same time, greater personalization and AI mean these ads can tailored to the preferences of individual shoppers — at scale — so look for more of this in the near future.
The culture of social selling
Social selling, once seen as a risk, is becoming an increasingly trusted marketplace. One reason is the proliferation of different payment options that give buyers peace of mind. Until recently online shoppers in the GCC have had a preference for cash-on-delivery, which is impractical and costly for e-tailers and social sellers. The pandemic has accelerated a shift to contactless payment, digital wallets, and traditional credit/debit transactions that are safer, faster and more efficient. With the shift has come faster adoption of social commerce.
As the e-commerce platforms on social media become more advanced, selling on them is easier for solo entrepreneurs, social sellers, or start-up businesses. Many of the advances in social commerce — from consumer engagement to digital tools — are coming from China, where there has been rapid takeup of social purchasing.
An overlooked opportunity?
Many big U.S. and European brands have entered licensing agreements in the region rather than establish expensive brick-and-mortar storefronts that would help them build market share and name recognition. Similarly, many have put off establishment of formal digital selling infrastructure because they have been scared off by the regulatory hassles at customs and GCC border crossings. That day could be coming to an end with a boom in e-commerce, generally, and social commerce, in particular, on the horizon.
The GCC’s digitally active population and the lockdown-induced explosion in consumer demand have created fertile ground for social commerce. Look for that growth to outlast the pandemic.