By Omar Syed, Managing Director, The Abraaj Group
It is no surprise that lifestyles and consumer habits are changing radically throughout the world. Urbanization is playing a fundamental role in shaping these societal patterns, supported by an educated and aspirational middle class that is at the forefront of such change.
That growing middle class is now supporting an increased use of mobile, particularly smartphones, bringing much wider internet penetration to markets. For instance, in Turkey, 58% of the population now has access to the internet, whilst 34.9 million out of a population of c.79 million has access to a smartphone. This is complemented by a rise in dual income families who are time poor and seeking convenience and efficiency to better manage their time.
I believe that the e-commerce story in our markets is only just beginning, a story that will be played out on the screens of billions of new smartphones. While the computer is still the number one device being used when executing ecommerce transactions, the smartphone is catching up fast and could soon become the enabler of choice. Disruption will continue to fuel the rapidly ongoing digitalization process as wearable devices and cutting edge technologies like machine learning, and virtual reality becomes an integral part of e-commerce.
Abraaj’s e-commerce businesses have responded to their specific markets to deliver bespoke solutions to regional or local challenges. For instance, in Western markets, online payments are predominantly made using credit cards. In growth markets, however, we often see cash on delivery. Some of the major online retailers in the Middle East are seeing 60-70% of sales paid for in cash when products, purchased online, arrive at the customer’s door.
We have also seen real developments in logistics technology and infrastructure. If you look at Turkey as one example of this improvement, you can now deliver a package from the East to the West of the country within two days, and within a big city, delivery time shrinks to 24 hours. New start-ups in Turkey and other growth markets globally are developing innovative models to further reduce delivery times to 1-2 hours. This enables us to deliver that ‘instant convenience’ that consumers are demanding.
The product landscape is also changing on digital platforms. As the consumer becomes more experienced and sophisticated in their e-commerce habits we are seeing growth in the types of products being offered for sale online. Initially it was products such as electronics that were being sold; now we are seeing a rapid shift to non-electronic categories as diverse as garden furniture to baby products.
Social media platforms are also playing a crucial role in the development of online shopping in growth markets. They provide e-commerce sites and brands with space for product description, availability status, pricing and delivery information. But perhaps the most powerful element of social media in terms of online shopping is users sharing content and recommending brands to their networks. In growth markets, the impact of shares may be greater than in developed markets as the majority of the top 10 countries in terms of social media users are actually growth markets.
We are also seeing a shift in the gender of our typical customer. The female shopper segment at Hepsiburada, an Abraaj partner company in Turkey, has been growing over the last years. That shift to more female shoppers is likely to continue as the number of dual-income families increase and more non-electronic goods are available on e-commerce sites. For example, on the Hepsiburada platform, we have tailored the online experience towards women, for instance with a focus on products in health, beauty, FMCG, fashion and baby products. Increasing Hepsiburada’s share of non-electronic sales, including the recent fashion category launch aimed towards attracting more female shoppers to the website, was one of the key opportunities identified as part of the Value Creation Plan. As a result of the marketing and promotional activities coupled with a revamped product assortment, fashion category monthly traffic increased to its highest level in November 2016 and became the second most visited category.
Leveraging our e-commerce expertise
Abraaj has been focused on developing its expertise in the e-commerce arena. The first investment at scale in this marketplace was Hepsiburada which we partnered with in 2015 and since then, we have been strategically widening and building our expertise and market exposure.
Abraaj has been able to leverage broader supply chain expertise across our platform to drive success within the e-commerce space. For instance, we were able to use logistics experience from our involvement with one of our earliest investments, Aramex, to support effective development of the delivery service for Hepsiburada, for which we helped to build the largest and most sophisticated e-commerce warehouse in Turkey with automated picking and sorting systems and launched our own dedicated last-mile delivery business.
Similarly, we have used our knowledge of digital payments systems in other markets to inform the launch of our own payments business for Hepsiburada. This payments platform is open to both merchants and customers and has smoothed our growth in the market and helped reduce barriers to expansion.
We are now extending this expertise into other markets where Abraaj invests. For instance, in 2016, we invested in Big Basket, the largest FMCG platform in India that sells groceries nationwide, as well as Ninja Van, a last-mile delivery business based in South East Asia. Our sights are now set on tangential industries and business models, for instance, online travel and classifieds.
At Abraaj we are working with some of the most innovative and dynamic companies in the marketplace. By partnering with regional champions who know exactly how their local market operates, we can navigate rapidly evolving trends and stay ahead in this crowded and competitive sector.
This is a time of change and challenge in growth markets but both come with great rewards for those companies able to give the new middle class what they need – and in the way they want to purchase it.
 Turkish Statistical Institute
 Nielsen Global Connected Commerce Survey, Q4 2015