With the advent of Globalization, companies across the world are seeking the help of the Internet to save themselves. Not only is Internet the fastest mode of communication these days, but it also is the cheapest way of advertising. It exposes a business to a vast sea of customers that use internet all over the globe. Various Online Portals like eBay, Amazon, Yahoo, etc have helped create a platform for businesses to advertise and market themselves online. This helped businesses to sell their goods online faster.
The project was taken up to study the feasibility of the Online Marketing in UAE so as to provide an opportunity for an upcoming UAE Based Online Portal SmilingAds.
To understand this, we first did a secondary research about various other Online Portals and their working models. We also tried to find out which are the commodities that are widely sold online. This would help SmilingAds target their customers accordingly. Further we analyzed if similar pattern would be possible in UAE or not.
After having a background research done, we carried out a survey with the manufacturers, distributors and retail shop keepers. We selected the industries – Electronics, Home/Kitchen ware, Sports Equipments and Car Accessories. The businesses were chosen on Random Sampling basis. This survey helped us understand the market tendencies better and to see what are the anxieties of the business towards entering Online Marketing.
(from findings + recos)
The study can be further enhanced by analyzing different types of industries and segmenting each industry based on the size of the business. This would give a better understanding of how each industry behaves in UAE market and also understand who can be the potential businesses who would want to use SmilingAds. Similarly, this would also help SmilingAds modify its model in a way that would suit its target businesses so as to generate maximum revenue from this portal.
In UAE, online marketing is still in a very nascent stage. Predominantly, businesses use the traditional way of sales, which is done through shops. The modes of advertisements are also limited to TV, Radio, Newspapers, and Magazines. However recently there have been some online portals that have come up. Some businesses did venture in online advertising, in addition to other modes of advertising. SmilingAds, a family-owned start up business, also wishes to step in this market for Online Advertising and Marketing.
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With the advent of recession, a lot of businesses slowed down, some of them closed down too. At this time, businesses needed to sell their goods as soon as possible. Since they were not getting sold in the shops, there was a need of advertising about the sales. Taking advantage of the high advertisement charges in other media, SmilingAds felt the need to create an online portal which would help people advertise at a much cheaper cost. This would be a great opportunity for SmilingAds to enter UAE Market as an Online Portal for Advertising and Sales.
This project was undertaken to carry out a market feasibility study for SmilingAds so as to understand the UAE market better and understand if there is a possibility of growth of Online Marketing in the UAE market. The study was carried out in Dubai only.
SmilingAds decided to frame its business model in order to assist the businesses here in UAE with their sales so as to maximize the traffic on the website. Some of the features offered by SmilingAds would be :
Complete assistance for the sales so that the Businesses do not need to carry out any online activities themselves
Cheaper way of advertising
Provision of advertisement banners on the website to attract customers’ attention
The entire project is carried out in 5 phases :
Statement of Problem
In UAE, businesses have been carrying out their sales in a traditional way. Consumers stop by the shops and purchase the commodities they need. Online advertising and marketing is still in a very nascent stage in this part of the world.
SmilingAds wants to explore this budding opportunity by providing the cheapest way of advertising and selling online. The purpose of this project is to study the market of UAE to understand what anxieties do businesses in UAE face about entering the Online Domain. Also we tried to analyse what is it that can motivate the businesses in UAE to explore their opportunities in the Online World. This project would help SmilingAds to chalk out their plans effectively so as to ensure significant returns in this new venture.
The objectives for carrying out the research are:
To understand the awareness and demand of Businesses in UAE to advertise and sell products online
To understand how to target businesses that are willing to opt for online sales and how to increase the user traffic for SmilingAds
To determine at what costs the companies are willing to sell the commodities Online and for online advertising
To determine what products (overstock / existing) are businesses ready to trade online
To determine if businesses prefer to deliver the commodities or ask the customers to have them picked up by themselves from their warehouse
Information Areas Captured
To understand the market feasibility of the Online Advertising and Marketing for the B2B Sections, the information will be captured for the following areas:
Online Trading and Advertising Websites
Awareness of the websites
Factors that drive them to select these websites
Frequency of usage
Drivers for Online Trading
Reach of Market
How much people are currently spending
Willingness of businesses to go for Online trading and advertising
Categories of Products for online Trading
Sale of Overstock / Existing Products
Quality of products
Reasons for selling/buying
Mode of Delivery
How long people ready to wait for buying/selling
The challenges that we faced while carrying out the research are :
Conducting the Survey with the local shop owners / managers
Asking shop owners who are currently not into Online advertising
The Market Feasibility can be further studied better by enhancing this project in the following ways :
Analysing different industries and segmenting each industry based on the size of the business
Understanding how each industry behaves across various segments
Understanding how each segment of businesses behave across different industries
Analysing which would be the target customers of SmilingAds
Studying the industries with their segments along with the target consumers who would visit SmilingAds and buy commodities
Calculating the Conversion Rate of the website and then modifying the Business Model so as to ensure a high Conversion Rate
The entire process of E commerce can be explained as follows :
Customer enters order with his credit card information and sends it to merchant
The merchant sends an invoice and information certifying his identity and his banks
The consumer acknowledges the same and returns back to the business
The business generates an authorization and sends it to their bank for clearance
The merchant bank send the same information on to the acquirer
The acquirer sends back a response to merchant bank after getting acknowledgement from customers bank
Customer bank confirms to the merchant bank.
Merchant bank sends an authorizing message back to Merchant.
Based on this the merchant authorizes the transaction and ships the product to the customer.
Role of Ecommerce in helping businesses
Ecommerce is one of the important innovations in the age of the internet. It involves buying, selling and fulfilling payment through digital communication. A set of computers are connected through a network on which transactions are done. It eliminates the barriers of time and distance. It allows the end user to log on to the internet at any time may be day or night and purchase or sell anything with the click of a button. As the transactions are done electronically it eliminates any human error while processing the transactions, increases speed and reliability and also the cost of sale is lower. It is more useful for listing niche products as customers for these products are generally few but in a vast marketplace it tends to gather good number of customers. It is also the cheapest means of doing business. Ecommerce also helps in reducing the cost of sale which provides the businesses with higher profit margins.
From a customer’s point of view it reduces the time taken to shop, they are able to make better decisions, resolution time is reduced on invoices and also showcases the various products to the buyer. It specifically reduces the time, manpower and cost towards documentation, error detection, correction, supervision and paperwork. The other benefits are in the operational area by helping to reduce both the manpower and time.
Business model of top ecommerce websites:
EBAY was formed in the year 1995. The vision was to create a virtual marketplace for buyers and sellers to interact for the sale of goods and services. The products listed ranged from collectibles to more traditional industry like the automobiles. The goal of EBAY was always to increase the average selling price as this would benefit it to earn more money. Buyers get to view and buy free of charge whereas the sellers have to pay two transaction fees one which is insertion fee for listing the product online and another one is the final value which is charged after the sale of the product. EBAY also introduced the concept of highlighting some of the listings and charged a higher premium to the product lister. The payment and shipment is then upto the buyer and the seller. EBAY however collects the transaction fees based on the final value. Ebay has a 11.5% customer conversion rate.
Classification of the sections in the EBAY website:
There are 3 main sections in EBAY. They are BUY which is for the buyers, SELL which is for the sellers and Community which is for sharing experiences and product surveys by customers. In addition they have two additional sections called as My Ebay and Help. My Ebay section is used to track the customers account and the Help section is used to provide all information on help related topics.
Amazon predominantly uses online as the mode for sales, whereas its competitors were predominantly selling using brick and mortar as in physical stores. This is extremely costly as they have to pay premium rents for central locations and also have to pay salaries. Amazon on the contrast has a central distribution center which allows them to sell for a lower price by paying lower rental prices. They also believe in taking advantage of the consumer shift towards the internet. By also having a large central warehouse Amazon is able to store large quantities and various varieties of books, as compared to its competitors. Its competitors have now started to move online but the competitive advantage clubbed with the good reputation of Amazon has made its tough to penetrate to the online space.Amazon has a 9.6% customer conversion rate.
Classification of the sections in the Amazon website:
Products are classified based on departments. There are separate sections for advertisers, sellers, businesses and developers. All the latest products are listed on the homepage. There are also additional sections for “Get to know us”, “Make money with us”, “Let us help you”.
There are also two additional sections for “My Cart” and “Wish List”.
Top products which are sold online:
Health and Beauty
Tools and Garden
Competitors of SmilingAds :
Some of the other online portals in UAE:
Analysis & Interpretation
We conducted the survey at 36 shops in Dubai. The shops were selected at random, but the industries that we concentrated on, were Electronics, Apparels, Perfumes, Sports Equipments, Household Commodities.
The pie chart above shows the industry-wise breakup of the companies that we interviewed.
We selected only those companies where we could talk directly to the person in-charge of deciding when and where to advertise and sell commodities for their company. The rest of the companies, we screened out since the decision makers were not available. Most of them were the Owners/Partners, Advertising & Sales Managers, etc.
Mode of Advertisement
The pie chart below shows the breakup of the modes of advertisement that companies that we interviewed use currently. The count is more than the actual sample size because of multiple responses by the respondents.
We observed that many companies do not advertise at all. They rely on the location of the shops to tap potential customers. They do believe in having their own Customer base and stick to it.
We also observed that not many companies prefer going online for advertising. However on probing, we came to know a UAE-based Online Portal had carried out a Sales Pitch where they had sent salespersons to various shops in the markets for putting up advertises for their firm. Only at that time did the companies went ahead and put up their ads on the Online Portal.
The respondents were not very comfortable in disclosing the investments in each mode of advertisement, whichever they used.
But based on a few positive responses that we got, the following are some of the investments :
Newspapers : AED 3000 – 5000 per month. Some were only one time advertisements, while a few were yearly basis advertises
Television : This was a very rare mode of advertising. It cost around AED 30000 per year
Radio : As per most of the respondents, this was the most popular and effective way of advertising in Dubai. Approximately it costs AED 20000 per year
Magazines : This is also quite popular, especially for the electronics industry, with an investment of around AED 3000 – 5000 per year.
Online Portals : Some companies use the Free Ad Listings that are available. But some invest around AED 100 which is generally a one-time fee.
Own Websites : A lot of companies prefer having their own websites. But they do not advertise these websites in other channels.
Pamphlets : This is a very common way of advertising that is used in Dubai. Approximately AED 2000 can be spent on this mode of advertising.
Sponsoring Events : This mode is common for the Apparels and Electronics industry. Companies sponsor events or even put up their banners at some events for advertising.
Also, though approximately 75% of our respondents were satisfied with the advertisements based on the increase in the footfall in their shops, around 25% were not satisfied as the advertisements did not result in increase in the footfalls in their shops.
Need to Sell Goods that were not being sold in shops
When asked if any stock was not moving out or any other commodities that needed to be felt, below is the breakup of the responses.
However, the goods that were to be sold were the stock that the shops sold, and not anything apart from the core business.
Modes for selling goods
The pie chart below shows the breakup of the various modes used for selling goods. The count is more than the actual sample size because of multiple responses by the respondents.
It was clearly seen that businesses here in UAE prefer the traditional way of sales by selling directly to the buyer or using personal contacts. The companies who were advertising in different channels, used the advertisements for publicizing about their sales.
Advertise or Sales Online?
Below graph shows that most of the businesses are not advertising online. A few of them are using Online Media for Advertising. But hardly any businesses use online media for selling their goods.
As it can be seen from the graph, most of the companies here in UAE do not prefer to advertise online. However it is observed that there are some companies who do use Online Portals to advertise online. A very small portion of companies use online media to advertise as well as sell their goods.
Commonly Used Websites
The graph below shows the usage of some commonly used websites.
However in Dubai, we found that most of the companies who resorted to the Online Portals prefer websites that are UAE based.
Factors for selecting website
The pie chart shows the factors the companies consider to choose their Online Portals.
We found that some of the companies selected the Online Portal only because of the Online Portal sending salespersons personally to visit their shops and providing complete assistance to them.
Reasons for Not Advertising Online?
We found 27 out of 36 companies that had not advertised online ever. When we probed to find out what are the reasons for which the businesses are not into advertising online, we found only 4 companies who said they were thinking of entering online advertising and setting up their own websites.
But the rest 23 of them had a negative take on advertising, especially Online Advertisement. We found 11 companies who were not interested in advertising. They believed in their own customer base that they have and do not believe that advertising will help them expand.
Also the rest 12 companies were satisfied with the current advertisements that they had in other media. They feel that their customers are not Internet Savvy. So they won’t get much response if they go online. This is a major reason why businesses in UAE are yet not exploring their options in the Online World. Besides, knowledge about Online advertising and marketing is a major hurdle.
Selling Goods Online?
We found only 3 companies out of 36 that were selling goods online. The pattern of choosing the website was varied. Two of them use Amazon.com, while other uses its own website for the sales. One even chose UAE based website to sell goods. The reasons for choosing these websites were mainly due to the high Consumer traffic and Reputation of the websites. However for all the 3 companies, it doesn’t matter if the Online Portal is dedicated to the UAE market.
Two of the companies priced their goods at a discount for Online sales, while one company priced the goods at par with the price offered in the shops. Two of the companies were satisfied with the sales online, and one was not, only because of the website could not attract Consumers.
While one company preferred to sell their goods online without mentioning the brand name, the other two preferred mentioning their name while selling online.
Also all 3 companies preferred delivering the goods at the doorstep of the buyer by charging an extra cost. However one company was open to having the buyer come down to their shop to pick up the goods themselves.
All the 3 companies gave an equal preference to online sales as well as sales in the shops. Also while one company generally waits for 4-6 weeks to sell their goods online, the waiting time for sales online doesn’t matter for the rest two companies.
For handling the online sales, two of the companies have their dedicated team to work on the online sales. But one company gets assistance from the website for the same. Similarly, one company prefers to have an Online Portal that provides the complete assistance with the sales online, whereas the other 2 companies would not prefer any assistance for carrying out their sales online, since they already have a dedicated team for handling the same.
Does not Sell Goods Online
We would prefer to advertise online, but not sell goods online.
When posed this question, 13 of the 28 companies who did not sell online disagreed and gave the input that they would like to sell online. However 10 of the companies agreed to the statement that they would go online only for advertising and not selling.
We consider advertising online to be the cheapest mode compared to other channels.
The above graph represents the responses that we got. It represents the fact that businesses in UAE do not view advertising online to be the cheapest mode. This was because they haven’t explored it to find out about the options that they can have for advertising Online.
We would prefer the websites having high number of customers viewing the products.
As seen in the graph above, most of the businesses prefer websites having high number of customers viewing the products.
We may use online sales of products to dispose off old products
The above graph shows that businesses in UAE strongly disagree to this statement. A common statement that we got when we posed this question was that they generally reduce the price and sell off old goods in the shops. But they would not use Online Media to do the same.
We would prefer to sell the goods without using the Brand Name
Again here most of the businesses strongly disagreed to this statement. One firm statement that came up very commonly was that they would always sell their goods with their brand name.
We would enter Online Sales only if the Online Portals provides us with all the assistance to carry out our sales online, without we having to do it ourselves.
From the graph above it is clear that most of the businesses did agree with this statement. However a significant portion of the samples have strongly disagreed to this statement. These are the companies which may have their own infrastructure required for venturing in the Online World.
Demand of Online portals that are dedicated to the UAE Market
There is a large proportion of businesses saying No. This is because they regard entering Online Media means the access to the entire world. They would not want to restrict themselves to UAE Market alone.
Inclination to try SmilingAds
As per the responses we got, most of them who said Yes, mentioned that they would decide trying out SmilingAds only if it is not too expensive.
Conclusions & Recommendations
From our research, we arrived at the following conclusions
Businesses in UAE prefer to carry out their businesses in the traditional way by selling directly to the Consumers. They are not much inclined towards advertising.
The main anxiety of the Businesses is that if the Consumers are not Internet Savvy, it doesn’t make sense for them to go Online for advertising and selling their goods. It will not yield in any returns.
Businesses in UAE are not Internet Savvy. But they might be ready to try out Online Advertising if they are convinced.
Based on our survey and analysis of the findings, we recommend the following to SmilingAds
Since Online Marketing and Sales is in a very nascent stage in UAE, it would be better to launch SmilingAds website in 3 stages
Stage 1 : Online Advertising
Here we can let the Businesses not just post the ads about their contact details, but also give them spaces for creating their ad about their sales, discounts, etc that can attract consumers.
We can keep a track of the number of Consumers that visit our websites. Also we can ask the Businesses on a regular basis about the footfalls in their shops. This would let us know if we have created a website that is effective with respect to Advertising.
Stage 2 : Online Marketing
Once Step 1 is achieved, a survey can be carried out to see if the Businesses who have posted ads on SmilingAds are interested in selling their goods online on SmilingAds. At this stage a Go-No Go Decision can be made about setting up system for online buying and selling.
MODES OF Advertising for SmilingAds
The businesses in UAE respond well if they are convinced to go online. We recommend SmilingAds to have a strong Sales Pitch which would include visits to the shops to ask them for putting up their ads on SmilingAds. This would ensure the businesses to consider SmilingAds for Online Advertising.
Also since usage of Internet is still in a budding stage in UAE, advertising for SmilingAds can be done through Radio, which is a very effective way of advertising here in UAE. A Newspaper Ad can also be given to promote the website. This would attract Consumer traffic to the website.
The advertising campaigns may include attractive and catchy information that Consumers look for. Make it appear that SmilingAds will encompass all information under one roof. For example “Know about the sales and discounts in your city”, etc. This would make the Businesses feel that this would attract Consumer traffic. Hence they would want to put their ad on the website.
The website should clearly indicate the Call Center number such that it stands out. This would help Businesses which are looking out for assistance to call SmilingAds for Sales Guidance, and eventually post their ads on SmilingAds.
The website should be designed in a way that gives a professional look and also convenient to use. The target audience should be kept in mind while designing the website. It should be easy for a user to find the required information. Besides, the companies could be categorized as per their industries. This would make it easy to locate a company.
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