Consumer demand for cash on delivery (COD) payment methods is holding back e-commerce in the Arabian Gulf region even as revenues grow, retailers said.

“COD is an obstacle to growth and taking more risk,” said Hosam Arab, the managing director and co-founder of the fashion retailer Namshi, which has had triple digit growth in the past year. “We use it as a marketing tool, but if we hadn’t added major controls to deliveries we were looking at a 40 per cent return/undelivered rate which is obviously unsustainable.”

More than 90 per cent of Namshi’s business comes via COD sales.

“If you want an e-commerce business to include Saudi Arabia, you have to offer COD because credit card proliferation is so low and the customer does not trust the online ecosystem yet,” said Sohrab Jahanbani, the founder of the UAE’s home grown daily deals site GoNabit.

E-tailers in the region – where 110 million people or 80 per cent of the population are online – have had to focus on the “last mile” to ensure an efficient delivery.

“This year we have covered the whole process from payment to delivery,” said Mary Ghobrial, the chief strategy officer of souq.com which gets 76 per cent of sales via COD payments. “By consolidating this whole process we have tightened any perceived loopholes or potential gaps that customers have had to face with online shopping in this region.”

Souq.com said revenues jumped 97 per cent year-on-year thanks mainly to better management of its supply chain and rising demand for smartphones.

Earlier this week the lender Mashreq and CCAvenue, the Indian online payment services provider, launched an “instant” payment solution which they said would speed up the “go live” timeline for a merchant from a few weeks to just a few hours and “power the growth” of e-commerce in the UAE. They have received high demand from the sector for innovative online payment systems.

“Our aim is to ensure that everyone from an online florist to individuals who are running events, training, coaching classes to large corporates get world-class and easy to integrate payment solutions,” said Nimish Dwivedi, the head of payments at Mashreq.

According to yStats.com’s Mena B2C E-commerce Report 2014 digital sales are growing in the UAE at a rate of more than 20 per cent annually amid increasing internet and mobile coverage. The size of the opportunity for e-tailers is significant with Google saying that the region’s digital space only accounts for about 1 per cent of retail spending compared with more mature markets where 10 to 15 per cent is spent online.

“The GCC represents one of the fastest growing markets for e-commerce in the region, and in the UAE in particular we expect double-digit year-on-year growth, fuelled by a greater reliance on technological advances and a burgeoning financial services and retail sector,” said Ian Gomes, the head of advisory at KPMG Lower Gulf, which valued the UAE’s e-commerce market at more than US$2 billion.

Dubizzle, the classified ads site, said it has invested in personnel and property to ensure it can meet demand as its page views per month increased 30 per cent year on year to 250 million.

“We have had more than 60 new team members join dubizzle, and moved our headquarters into an 18,000 square feet office in Dubai Media City,” said Barry Judge, the general manager of dubizzle. It is the sixth most visited website in the UAE, he said.

“The average duration of the visit is 20 minutes. Our most popular sector is the properties page with over 2.4 million visits per month. This is followed by our automotive page with over 800,000 visits per month,” he said.

Find out more:  http://www.thenational.ae/business/retail/cash-on-delivery-demand-still-holding-back-e-commerce-growth-in-gcc