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Overview of the E-Commerce Market in the Middle East (ME):
The ME is one the fastest growing e-commerce markets in the world, growing from USD 26.9bn in 2018 to USD 48.6bn by 2022 [1]. This growth in online sales is driven by the growth in the smartphone penetration; for instance, 88% of the UAE’s population are internet users with smartphone penetration of 78% [2].
However, only 15% of the businesses in the ME have online presence, and 90% of online shopping import products from outside the region [2]. This gap between supply and demand presents a significant opportunity for online retailers to take-over existing “Brick and Mortar” businesses.
Focusing on the retail market, Carrefour has captured a significant market share in the ME, operating in 38 countries and serving more than 200,000 customers per day [3]. However, in 2017, Amazon announced its acquisition of Souq.com (biggest online marketplace in ME), which marks Amazon’s first move into serving the large untapped ME region [4]. This move presents a significant risk not only to Carrefour, but also to all Brick-and-Mortar retailers in the ME.
Carrefour’s Plan to Protect its Market Positioning:
Majid Al Futtaim CEO, Alain Bejjani, had announced in early 2017 his plan to transform the shopping experience in the ME by leveraging data analytics and machine learning. As a first step, the organization hired 200 employees from Silicon Valley as part of its ambitious strategy to expand its digital and e-commerce operations [5].
In my view, machine learning will help Carrefour protect its market positioning through three levers:
1. Providing product recommendations: As an online retailer, Carrefour can gather customer data and provide personalized recommendations, which enhances the shopping experience and increases cross-selling. This can be achieved by linking customer IDs to historical purchases and assessing the basket of SKUs. By leveraging machine learning, Carrefour can rely on historical data to understand customer behavior and preferences, and based on look-a-like modeling, predict what the customer “will need”.
2. Optimizing promo-effectiveness: By clustering customers and identifying their interests and needs, Carrefour can offer more targeted adds and increase its promo-effectiveness. In addition, it leverages machine learning to predict the effectiveness of future campaigns and the key features that contributed to this effectiveness.
3. Enabling effective business decisions across functions: Machine learning in combination with visualization dashboards offer managers across business units the needed data to make close to real-time data driven decisions. This will help Carrefour not only improve customer engagement and retention, but also enhance operational efficiency.
In an interview with The National [5], Mr. Bejjani highlighted how Machine Learning and Big Data has helped them optimize their assortment: "We discovered that there was one specific biscuit brand that actually had a big impact of people walking out of the store if they don’t find (that brand)” [5].
In addition, Mr. Bejjani launched the first School of Analytics and Technology in the ME [5]. The school aims at covering a wide range of digital and analytics lessons to employees across the organization (front-line to senior executives). These courses will help educate employees on the importance of collecting data (relevant to front-line) and the benefits of leveraging the data to drive decisions across different functions. In addition, the school aims at developing a culture in the organization that enforces their position as a digital retail player.
What’s Next?
With this, Carrefour ME is building their advanced analytics unit in the short / medium term to protect their market from Amazon. However, these initiatives, though crucial, are not enough to protect them in the long-term.
Carrefour should think of effective ways in transforming the shopping experience across its channels by considering innovative initiatives such as:
1. Ultra-fast Delivery: The norm is 2-day delivery nowadays. However, Amazon now is talking about a 30 min drone delivery. Pioneering such a technology could position Carrefour in the forefront of innovation and technology. This will also impact the customer journey in the store, as Carrefour can eliminate the hassle of juggling shopping bags and send the goods to the customers home immediately.
2. Robot Customer Service: Robots offer an innovative form of self-service that customers might appreciate. Robots can speak multiple languages and help customers find and learn about items [6]. The use of robots can vary from robot security guards all the way to robot cashiers. A significant number of start-ups are spending significant time on how robotics can disrupt the retail market, and Carrefour can partner with one of these start-ups.
Thoughts?
1. How can Carrefour further differentiate its product offering to compete with Amazon?
2. What will the role of the retail store be once digital channels take over?
Sources:
[1] The National, https://www.thenational.ae/business/technology/e-commerce-in-the-region-set-to-be-worth-48bn-by-2022-1.745643, accessed November 2018
[2] The Next Web, https://thenextweb.com/contributors/2017/07/18/ecommerce-middle-east-amazons-entrance-difficult-legislation/, accessed November 2018
[3] Carrefour, “About Majid Al Futtaim Retail”, https://www.carrefouruae.com/aboutmafretail, accessed November 2018
[4] Tech Crunch, https://techcrunch.com/2017/03/28/amazon-confirms-acquisition-of-souq-marking-its-move-into-the-middle-east/, accessed November 2018
[5] The National, https://www.thenational.ae/business/majid-al-futtaim-hires-data-scientists-to-capture-growth-1.668560, accessed November 2018
[6] Forbes, https://www.forbes.com/sites/forbescommunicationscouncil/2017/06/20/the-future-of-retail-how-well-be-shopping-in-10-years/#1983b59b58a6, accessed November 2018
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