The Realities Of Retail Post COVID-19: Insights From The Latest Edition Of Dtec Forum, Powered By Entrepreneur Middle East
The event which saw the Dtec team work with Dtec-based company Outreal XR, to utilize its Holofair platform, concluded that the COVID-19 crisis was a masterclass in risk mitigation.
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The COVID-19 crisis has accelerated the growth of online sales to approximately 30% by 2025, revising the previously estimated growth from 12% to 25% by 2025 that was predicted by research in 2019, said Edward Sabbagh, Managing Director – Middle East, Farfetch, a British-Portuguese online luxury fashion retail platform, at the latest edition of the Dubai Technology Entrepreneur Campus (Dtec) Forum, powered by Entrepreneur Middle East.
Indeed, Sabbagh's insights on how the pandemic disrupted the retail landscape, causing big brands to reevaluate their whole supply chain, while also making space for new and smaller businesses in the sector, echoed the very reason why Dtec decided to dedicate the 38th edition of its Forum to the topic of "Realities of Retail in 2020: Offline to Online."
"Every Dtec Forum edition focuses on a trending topic, and tackles issues that are affecting technology and entrepreneurship industries," said Hans Christensen, Vice President of Dtec, a part of Dubai Silicon Oasis Authority (DSOA), the regulatory body for Dubai Silicon Oasis (DSO), the integrated free zone technology park. "We aim to explore, educate, and provoke discussions that pave the way for knowledge exchange and potentially yield collaborations beyond the forum. The year 2020 has been challenging for everyone across the globe, and crucial for the e-commerce industry in the MENA region. Retailers have had to completely rethink their reliance on physical outlets and shift to online platforms, as well as delivery modules, which has unveiled substantial data-driven insights that led to new business strategies."
Edward Sabbagh, Managing Director - Middle East, Farfetch. Source: Farfetch
For this edition of the Forum, the Dtec team worked with a Dtec-based company, Outreal XR, to utilize its Holofair platform for the event, which, Christensen noted was "testament to the innovation of startups at Dtec, and our support for DSO's business community. This instalment of Dtec Forum saw Sabbagh, who has been overseeing the development of the Farfetch brand and business in the Middle East, including the launches of Farfetch's Arabic site, app, and the first local office in the region, speaking with Entrepreneur Middle East Managing Editor Tamara Pupic in a session entitled "Digitizing the Luxury Experience."
"Growth of sales through online channels was always predominant in the growth factor of the whole sector, as compared to offline sales," Sabbagh said. "Hence, the growth witnessed during the COVID-19 pandemic was not surprising, but there definitely was an acceleration. In 2020, online sales in the personal luxury goods industry is estimated to have grown to 23%, almost two-fold." Furthermore, Sabbagh highlighted that although sale transactions may conclude offline, the customer's purchasing journey is not exclusively offline– customers can browse products online and complete the purchase offline, and vice-versa.
Therefore, a brand's online presence, whether through a website or social media channels, is a must. Sabbagh quoted a recent Farfetch survey of its customers during the COVID-19 pandemic aimed at understanding whether they opted for online purchase only because they could not go to a neighborhood store, or for some other reasons as well. "The findings were really interesting because we found that nearly half, 45% of them, said that they would continue to do more of their shopping online, because they have grown accustomed to it, and 43% said that they would do most of their shopping online," Sabbagh revealed. "You can call this [COVID-19] period an inflection point [for the growth of online sales], although I personally think it happened before."
As such, Sabbagh advised entrepreneurs looking at opening an online marketplace to discover a unique, compelling advantage of their platforms that would help them stand out from the e-commerce crowd. "Today, shopping online is just about convenience, but when I think of online sales, especially in the luxury sector, I have a different opinion," Sabbagh said. "For example, Farfetch is not a marketplace only for Dubai or Dubai boutiques, because although we have a service called F90 (meaning that we deliver in 90 minutes if you want something urgently), we strongly believe that convenience and shopping from home is not necessarily our competitive advantage and what we really want to do."
In Sabbagh's opinion, shopping online has to offer extra value. "When you go to the mall, you can try your size, but when you go online, what we want by aggregating the world's best boutiques, is that you are actually able to shop the world's best fashion and the best curated fashion from around the world," he said. "That is an experience that you cannot find offline."
In addition, Sabbagh cautioned new entrepreneurs in the retail space to be mindful of the value they are offering to their suppliers. "If you are just eating from their pie, at some point, a competitor will come in and undercut you, or they will simply stop working with you," he explained. "In our case, for example, one of the biggest values for our suppliers is that by connecting to our platform, we are opening the whole world to them. In fact, we know that, on average, we actually represent 35-40% of our suppliers' sales. This is added value. So, I think that it is really important, as the world moves online, to go back to the sustainability of the system."
Sabbagh also advised new retail entrepreneurs to follow an organic cycle when growing their businesses, remaining focused on building a community and being relevant to the consumer. "So, you cannot really jump the queue, because any brand around the world, big or small, needs to be relevant to their customers," he said. In the ensuing panel discussion entitled "Offline to Online – Taking Advantage of the E-Commerce Boom," Khalil Alami, CEO of Telr, an online payment processing gateway, Rayan Osseiran, founder, Shorages, an on-demand storage and fulfillment provider, and Renaud de Gonfreville, CEO of Ziwo, a cloud contact center software startup, further outlined the opportunities that the rapid growth of e-commerce due to the COVID-19 pandemic has brought to the sector.
Khalil Alami, CEO, Telr. Source: Telr.
In Alami's opinion, the COVID-19 crisis had a stimulant effect on the digitalization of industries, such as fintech and e-commerce. "From my perspective, pandemics and crises like this are considered authors of a new era, a major paradigm shift, and all business sectors have to adapt to a new business model," he said. "The COVID-19 period has showed to the world that e-commerce platforms and payment gateways are the backbone of any economy. Now, there is a lot to develop in the e-commerce world, especially in our region where it has not fully matured yet, but digital payments are indeed the future. There is no doubt about not going back to cash. In fact, there is a vision set by the UAE government, and also by the millennials in the economy, that cash is going to shrink and everything will be digitized."
Digitization is also at the core of Alami's advice for other entrepreneurs. "Focus on customer experience and user experience, so called CX and UX, and not just in terms of interactions, because you will no longer need to talk with anyone, as everything will be digitized, but in terms of how I, as a customer, talk with your brand digitally without actually talking to anyone," he said. "The other advice for any entrepreneur during these unprecedented times is that cash reserves and maintaining your cash flow is the key of survival. We at Telr were lucky that we were in an industry that was positively impacted, but at the same time, we had to maintain that because we didn't know what was going to happen. So, there were so many variables and surprises, and we made sure to handle our cash smartly. At the same time, we needed to maintain the sanity of our team because it is what leaves that value proposition on the table for the customer. So, cash management, human capital, and the overall ability to be agile as the situation develops. There's no doubt that digital payments are the future."
Rayan Osseiran, Founder, Shorages. Source: Shorages
When giving his overview of how the COVID-19 pandemic impacted the business sector, Osseiran stressed that it shattered a list of reasons which used to prevent brands from opening online shops, leading many of them to jump on the e-commerce bandwagon. "For any business, COVID-19 was a masterclass in risk mitigation," he said. "I know many fellow entrepreneurs whose companies performed very poorly overnight, not because they did something wrong, but simply because their industries vanished, such as travel, tourism, and the like."
Renaud de Gonfreville, CEO of Ziwo. Source: Ziwo
Adding that the events like COVID-19 were impossible to predict and plan for, Osseiran opined that the biggest adversary for any business today was time itself. "The longer that you survive over time, your business has a better chance of succeeding," he explained. "As long as you are surviving, either the market is going to change in a way where it fits your product or idea, or you as an entrepreneur have pivoted in order for idea to meet what the market requires. Obviously, surviving time is something that is easier said than done, and it requires building a sort of business that is lean and that does not break when put under any stress. Personally whenever I have to make a decision, I think of if things go wrong, what impact this will have on my business. For example, from the get-go, we decided to be very asset-light when building a fulfillment center, even though it is a capital-intensive investment. But we managed to make certain decisions which have enabled us to build it in a lean way, such as that is a crisis happens that is similar to COVID-19 but this time we end up at a negative side of things, that our business won't break. That is my main advice- to build businesses that will not break simply due to any market crisis."
On his part, de Gonfreville reminded the Dtec Forum audience that the COVID-19 pandemic was not the first crisis that humanity encountered, and it certainly would not be the last one. "My takeaway from this crisis is that at any moment in time, you have to expect the unexpected," de Gonfreville concluded. "It can come from a disease, a market condition, from a disruptor or a competitor, but you need to prepare your organization and business model for that. The best way to do that is to embed agility in everything that you are doing. Also, cash is king, so managing your cash flow, and always anticipating a risk or a problem that you might have is a mindset that you need to have. Hope for the best, but plan for the worst. Lastly, always assess whether your value proposition is still relevant to the ever-changing world. Value proposition and product-market fit are something really important if you want to sell something, because the world keeps on changing, and you need to constantly validate that relevance."