• Paypal – You and I can use Paypal, however you are unable to withdraw funds as a merchant from banks here (they have yet to make agreements on that) – You can set up as a merchant in USA / Europe using Paypal account there – you will be withdrawing from a UAE bank on an American Bank account – currency charges will apply – Can still be cheaper though depending on # of sales
Network International• NI is the Emirates Bank Payment Gateway for authorisation & processing of online transactions• Supports online transaction processing and merchant payments of Internet transactions through eCompany (A business unit of Etisalat for e-business solutions)• DEWA / DED / DIC / Police etc using this solution
Some Stats for NI• Network International provides credit-card payment processing services to 70 banks and 17,000 merchants.• Its 45,000 card readers are in 28,000 stores across the region• It also operates about 700 ATMs in the Gulf• Abraaj owns 49% of NI (paid 2 billion AED for it)**Purchase price contingent on NI meeting certain profit targets
What it offers• Offers MIGS (Mastercard) / Comtrust (Etisalat) and Enterpayment as different types of gateways• Incentivizes merchants to bill customers in their currency of choice (dynamic currency conversion / Planet payment – pay in your currency) – good for tourists….• Also has a GPRS solution for payment processing• Also requests $25,000 security deposit!!
• Payment gateway costs – can be any or all of the below: – Set up costs – Per Transaction fee – Monthly or yearly subscription fees – Per currency fees – Deposit at bank to counter fraud
• Example: Item listed at $25• 3.99% transaction charge = $0.9975• Additional $0.45 transaction fee• = $1.4475 (merchant bears cost)• Sell at $26.5• 100 sales per month = $45 (transaction fees)• 500 sales per month = $225
• 500 sales of item priced at $25…• $0.9975 * 500 = $498.75• $0.45 * 500 = $225• Total fees = $723.75 (plus your monthly fee of $5.99!) – ($729.74)• If you buy at $17, sell at $25 – you make $4000• Minus $729.74 for processing• 18% of your margin is being eaten by payment gateway!• Don’t forget costs for usual business overheads as well…
Example: Innovate Payments vs Cashu• Transaction fee – IP – 3.5% – Cashu – 3.3% + 2 aed• Set up fee – IP - $200 per currency, (dirhams and dollars offered ) – Cashu $1000• Monthly payment – IP - 150 AED – Cashu – annual $1k -$3k depending on how many products you have and sales volume• Security deposit – Approx $10k for both
Comparison outcomes:• Innovate - $700 per year (1 currency) + deposit• Cashu - $3000 per year + deposit• 500 sales of $25 item: – Cashu $272 (transaction fee) + $412.5 (% fee) = $684.5 – IP - $437.5 (about 10% of your margin)
• Trade licence – 30,000 AED + 100,000 AED in bank (working capital)• Merchant account (fees?)• Payment gateway deposit – 20,000AED – 40,000AED….• Estimate $40 - $50k just to set up a business with a payment gateway in place in UAE….
• Issues: – Lack of easy to compare pricing across payment providers, banks and free zones – Pricing can be low per transaction – if you have volume payments – need to factor this into business model over time – DON’T FORGET DELIVERY COSTS! – Still better than COD (cash on delivery) in long term…..
E-Commerce stats (by Aramex)• 50% of online shopping in Saudi originates outside of major cities (think m-commerce)• Amount of returns for COD is 7 times higher than when people pay online• Biggest markets for Shop and Ship – – Kuwait, Saudi, UAE• Biggest markets for E-commerce in general – UAE, Saudi, Egypt• Who pays more online? – Jordan, Bahrain, Oman, UAE and Qatar
Something startling• Although everyone says, people in the region like to “touch” and “feel” stuff, look at the top category for online purchases: – Apparel – Electronics – Books – DVD/CD – Shoes – Bag/Case – Mail & Magazines
Some ideas to get started• Spend your money on testing before you invest in your own ecommerce platform• Set up shop on www.nahel.com / www.souq.com / www.dokkankom.com / www.shopgo.me• Test various customer acquisition and marketing strategies• Co-market with others in the same vertical• DATA DATA DATA!
Points to consider• Dropshipping vs Warehousing, inventory management and logistics – Aramex / Fedex / DHL• Time to process customer payments into your bank account and then to suppliers• Returns – how can you minimize these and how much will they cost you?• Customer service
Some useful contacts• @hudz from www.glowskies.com• @okassim from www.jadopado.com• Rania Kanaan from www.ananasa.com• @nadersm from www.nahel.com• @mohanadgh from www.shopgo.me• @ronmou from www.souq.com• And www.wamda.com• http://www.wamda.com/2012/06/debates-day- one-of-coeecommerce