Introduction
The concept of ecommerce is rapidly gaining popularity in the world today. The major driving force behind this growth is the rapid development of information communication technologies (ICT), especially in relation to the internet. According to Turban et al., ecommerce refers to the process of conducting business transactions on the internet (21). It entails carrying out digitally enabled commercial transactions. It involves exchange of goods and services between organisations or individuals.
Just like in any other parts of the world, the ecommerce industry in the Middle is developing very rapidly. The industry is particularly fuelled by the increasing global demand for energy, of which the region is the biggest supplier. Consequently, the wealth of the Middle East economies is increasing by the day. According to European Travel Commission, the number of internet users in this region is estimated to be about 90 million (par. 1). However, only 15% of the businesses in the region have an online presence. In spite of this, the European Travel Commission predicts that by 2015, B2C ecommerce sales will rise to about US$15 billion (par. 1). The value of ecommerce in the region is also expected to hit the US$4.9 billion mark within the same period (European Travel Commission par. 1).
Kuwait has the third largest ecommerce market in the Middle East. The market is worth $280m. The first two slots are occupied by Qatar (with $375m) and Saudi Arabia [with $520m] (European Travel Commission par.1). However, it is important to note that in spite of these figures, the prevalence of ecommerce in this region varies across the countries. For instance, UAE currently leads at 46%. It is followed by Kuwait at 35% (Ipsos 17). Kuwait has the highest rate of online shopping, where 19% of internet users do their shopping via the virtual market (European Travel Commission 1).
Given this level of ecommerce penetration and adoption in the Middle East, an idea of a business model that relies on the platform seems viable. Kuwait is one of the leading countries in the region. In addition, it has a well established ecommerce infrastructure. The developments provide support for the establishment of an e-shop. Souk’s e-storefront will focus on the Kuwaiti gifts and greetings cards industry. However, the shop will serve other markets in the region using the ecommerce model.
Business Description
A gift shop can be generally considered as a business that is involved in the sale of items meant to be given to others. However, most of the items (gift) add no material gain to the recipient. The businesses are also known as souvenir gift shops. The items sold include, among others, handmade collections, t-shirts, stuffed animals, postcards, and coffee mugs. Souk Gift Shop deals with these and other types of gifts. Most of the souvenirs found in the shop however are of Arabic origin. In addition to the native Kuwaiti citizens, Souk intends to serve tourists visiting the country. It also aspires to do business with people from other Middle Eastern markets.
The ecommerce platform is a convenient channel for reaching out and serving the wide range of customers. The products are designed to appeal to the various customer groups in the region. For instance, there are gifts for the different age groups and genders. There are also those items meant to serve personal interests and to be used during celebrations. As such, Souk Gift Shop caters for need of clients during seasonal occasions, such as religious celebrations. It also provides goods for sentimental connections between individuals.
Individual gift buyers are the primary customers for this market. In addition, Souk Gift Shop has the capacity to serve departmental outlets, boutiques, and chain stores in the region. Consequently, the online gift shop complements the physical establishment. The primary objective of setting up the e-gift front is to sell products online. Currently, Souk does not have an ecommerce outlet. However, the organisation has various outlets in major cities in Kuwait. Customers have to physically visit the outlets to purchase a product.
Business Ownership and Management
The e-shop storefront is an extension of Souk Gifts Shop. As such, the ecommerce platform is owned by the proprietors of the parent organisation. Souk Gifts Shop is a sole proprietorship, owned by one of the wealthiest families in Kuwait. The extended family of Masoud Al Malik is the principle financier of the establishment. However, the Masoud’s kin do not operate the business on a daily basis. On the contrary, the shop is under the stewardship of 130 employees. In addition, other employees provide outsourced services, such as courier and delivery.
The overall operations of the business are overseen by a general manager, who is the president of all the branches in Kuwait. The various shop outlets in the country are headed by branch managers, who oversee the functions of the individual establishments.
Business Plan
Mission and Vision
Every business organisation needs to have a mission and a vision to guide its operations. Souk Gift shop is no exception. The mission and vision statements of the business outline its long-term objectives and intentions.
Mission statement
Souk Gift Shop’s mission is to foster human relationships by linking people through gifts. The organisation seeks to inspire moments of happiness and optimism among the people by creating tangible value for various occasions and events. The mission statement reads:
To promote human relationships through sharing of memorabilia
Vision
Souk Gift Shop’s vision provides a framework to guide the various aspects of the business. The organisation intends to be the choice channel for the conveyance of positive emotions between individuals in Kuwait and the Middle East. The vision statement reads:
Keeping memorable moments alive
The mission and vision statements reflect the beliefs and aspirations on which the business is founded. It is a common practice for people all over the world to exchange memorabilia. Individuals foster goodwill by exchanging gifts.
Objectives
The company’s organisational objectives reflect what the business intends to achieve and offer its customers. The objectives include:
- To make the tradition of exchanging gifts in the contemporary society easier and more convenient through ecommerce.
- To offer customers and gifts enthusiasts quality souvenirs and other memorabilia.
- To create and enhance a culture and custom of exchanging gifts between residents of Kuwait and other countries in the Middle East.
- To offer customers a unique and diverse range of products customised to communicate their desires and intentions.
- To become the leading gift shop in Kuwait and the Middle East through the adoption of ecommerce and conventional platforms.
- To create customer loyalty through quality, convenient, customised, and affordable offerings.
Marketing and Market Analysis
Overview
The modern society has embraced the idea of souvenirs. Individuals need to keep memories of what they do and places they have visited. In the past, gift shops involved small operations in airports and other tourist destinations. However, today, this trend is rapidly changing, especially due to the capabilities brought about by information communication technologies.
The establishment of Souk’s e-gift shop requires the analysis of two aspects of Kuwaiti market. The elements to be analysed include the gift novelty and souvenir industry and the level of internet and ecommerce penetration in the country.
Kuwaiti Market Analysis
The development of Souk’s e-gift shop depends on various factors related to internet and ecommerce penetration in Kuwait. Essentially, without proper and supportive internet framework, developing an ecommerce enterprise in any country leave alone Kuwait would be almost impossible. According to European Travel Commission, Kuwait is the second leading country in relation to ecommerce penetration in the Middle Eastern region, a 35% adoption of the same (par. 1). Consequently, this makes the country a very ideal location for implementation of Souk’s e-gift shop storefront.
Kuwait’s recent economic indicators also illustrate a positive trend in the overall economy of the country. For instance, Shanthi indicates that the oil revenues for which the Kuwait economy relies heavily are rapidly boasting consumer income, hence facilitating demand (24). In addition, low inflation in the country and improved credit are other factors increasing consumerism in the Kuwait. Kuwait’s recent political instability and anti-regime protests constitute a major concern for businesses, including Souk Gift Shop. However, these have been contained recently, leading to a rebound in consumer confidence (Shanthi 25).
Regarding legislations regulating businesses, Kuwait has very warm taxation policies for businesses. In addition, the country is a member of the GCC custom union, hence enabling free flow of goods produced in the member countries (Shanthi 27). All these factors on Kuwait macro-analysis project a positive environment, under which Souk’s intended e-gifts shop can be established.
A SWOT Analysis of Souk Gift Shop’s Industry
According to Chermack and Kasshanna, SWOT analysis entails a structured method of evaluating the strengths, weaknesses, opportunities and threats (383). The method can be applied to a product or service, industry, person or even place. Souk’s Gift Shop industry analysis in relation to the e-gift storefront would determine the feasibility of the undertaking in Kuwait.
Strengths
Strengths refer to the internal attributes of an organisation, which give an advantageous position when compared with others (Chermack and Kasshanna 384). Souk Gift Shop boasts of brand recognition as its major strength in Kuwait. The strategically located outlets of the organisation in the country, coupled with marketing campaigns have made the business reputable. Such brand awareness means that the business is relatively established in the market, as opposed to new entrants.
Weaknesses
Weaknesses refer to the external attributes that place a business organisation, at disadvantage relative to others (Chermack and Kasshanna 384). The major weakness of Souk Gift Shop is its present lack of any ecommerce presence, at least in Kuwait if not in the other Middle Eastern countries. In addition, Souk Gift Shop primary products are locally made, despite of the intention to expand the business into other Middle Eastern countries. Consequently, the products of the company are limited to those locally made.
Opportunities
Opportunities comprise of those external elements, which a business can exploit to its own advantage (Chermack and Kasshanna 385). The opportunities of Souk Gift Shop and especially the e-gift shop storefront are revealed through the opportunities in the Kuwait market. A major opportunity for the business is the huge presence of internet in Kuwait, coupled with the more important aspect of ecommerce penetration in the country. According to Ipsos, internet penetration in the UAE currently stands at 64%. In addition, 19% of the internet users do their shopping online (9).
Ipsos further reveals that 49% of the Kuwaiti population has access to smartphones (21). Consequently, venturing into the ecommerce platform is a major opportunity for Souk Gift Shop, considering that a major portion of consumers is already using such platforms. The membership of Kuwait in the GCC presents an expansion opportunity for Souk Gift Shop. The business has the opportunity of expanding products and services offering to the GCC nations, without any trade restrictions or barriers.
Threats
Threats refer to the external elements in the business environment, which have the potential of causing trouble for the organisation or project (Chermack and Kasshanna 385). The major threat for Souk Gift Shop in the Kuwait business environment is competition. The gift, souvenirs, and novelty industry has numerous competitors in Kuwait. The competitors include small enterprises by individuals selling souvenirs, to firmly established businesses. Examples of Souk Gifts Shop major competitors include Antique Souq, Sadu House, Q8Flowers and The Scientific Center Kuwait.
Gifts Shops such as Antique Souq and The Scientific Center Kuwait have already established themselves in ecommerce. Consequently, their ecommerce presence poses a great challenge for Souk e-gifts shop storefront, since they are competing for the same customers. Kuwait political environment also presents a threat to Souk Gifts Shop, since unrests and demonstrations therein sometimes tend to disrupt normal business. Such political unrests and conflicts between religious groups sometimes end up in violence, disrupting businesses entirely.
Souk Gifts E-Shop Storefront: Products, Services, and Business Model
Products and Services
Kuwait, similar to other Middle Eastern countries is endowed with a rich cultural background. In addition, the culture of giving gifts is practiced like many other regions of the world. The diverse populations’ form various regions of the world residing in Kuwait also make the custom of giving gifts and souvenirs more pronounced. Souk e-gifts shop storefront will seek to offer a wide range of gifts not only to the residents of Kuwait, but also tourists from other regions of the world. Consequently, souvenirs and collectible items will constitute a major collection of products offered through the ecommerce platform.
Majority of the souvenirs offered will be include those developed by the local Bedouins such as cloaks, fabrics, bags, cushions and tents. In addition, pottery, jewellery, scarves, pearls, delicately woven scarves, and wooden objects will be offered. In addition to these souvenirs, Souk’s e-shop will offer contemporary souvenirs from Kuwait and abroad. Such souvenirs will include postcards, key chains, refrigerator magnets, books, and posters, t-shirts, among others. The local souvenirs indicate the wealth and culture of the Kuwaiti society.
Souk’s e-shop storefront will also offer the popular gifts of greetings cards. Greeting cards will be subdivided into the categories of everyday and seasonal cards. Examples of the everyday greetings cards will include birthdays, anniversaries, sympathy, friendship, and get well cards. Among the popular seasonal greeting cards the ecommerce platform will offer include mother’s and father’s day cards, and valentine’s day cards. Other popular seasonal cards offered will include religious ceremonies cards such as Ramadhan and Christmas cards among others.
Business Model
As defined earlier, ecommerce is the usage internet and the web, in transacting businesses (Turban et al. 21). More generally, ecommerce focuses on digitally enabled commercial transactions, carried out amongst organisations and individuals. Digitally enabled transactions means that all the transactions carried out in ecommerce are mediated by digital technology. For the greater part, these transactions should be carried over the internet, through the web.
Commercial transactions on the other hand imply exchange of value such as money, across individuals or organizations boundaries, for products and services. Consequently, without the exchange of value then it follows that there would be no commerce. Souk Gifts e-Shop considers all these aspects of ecommerce. There are several models of ecommerce from which Souk Gifts e-Shop can be based. Turban et al. are of the view that there are different types of ecommerce platforms (28). They include business-to-consumer (B2C), business-to-business (B2B), and consumer-to-consumer [C2C] (Turban et al. 26). Other ecommerce models include peer-to-peer (P2P) and Mobile commerce [M-commerce] (Turban et al. 28).
The most popular type of ecommerce is Business-to-Consumer (B2C) ecommerce. B2C ecommerce refers to the form of business, which directly to the individual consumers (Turban et al. 33). Under this type of ecommerce, businesses seek to establish direct contact with the consumers or customers. Under B2C ecommerce, there are various models namely online retailers, portals, transaction brokers, content providers, service providers, market creators, and community providers (Turban et al. 40). Souk e-shop will be based upon B2C ecommerce, under the online retailers model.
Souk e-shop will generally focus on the delivery of the business products, depending on their selection through the online platform. The customers will interact with company’s website, whereby they will to see the entire products catalogue. Consequently, the customers will have the alternative of selecting the product or service that they wish to purchase as a gift or souvenir. The e-Shop storefront will also provide the consumers with alternative of requesting customised products such as e-greeting cards, or the traditional cards.
Upon selection of the product, Souk’s ecommerce platform will provide the customers with the alterative of shipping to the purchaser, or the intended recipient. Following this operation, the e-Shop storefront would prompt the customers on the payment transaction. Depending on the gift selected, Souk Gifts Shop guarantees delivery of the product within 72 hours from purchase, irrespective of the customers’ location in Kuwait. For products requiring customisation however, the organisation will have to set other delivery deadlines with the customers.
Dealing with Porter’s Competitive Forces
The competitiveness in the Kuwait gifts, souvenirs, and novelty industry intense. The industry apparently has numerous gifts shops. In addition, some of these shops boast e-shops through ecommerce platforms, a factor which makes competing with them more challenging for Souk Gifts Shop. Porter, advanced five forces which determine the intensity of competition in a given market, and hence the effectiveness of investing in the same (3). The five forces included threats of new entrants, threat of substitutes, and the bargaining power of buyers. The other forces included the bargaining power of suppliers, and the intensity of competitive rivalry (Porter 3).
Although all these forces are very influential in the Kuwait gifts, souvenirs, and novelty industry, some are more intense in relation to Souk’s intended e-shop project. One of these major forces affecting the Souk’s gifts e-shop includes intensity of competitive rivalry. The others include the bargaining power of buyers, and threat of new entrants. The intensity of competition in the Kuwait market is apparent from the number of gift shops operating in the country. In addition, some of these competitors already have ecommerce functions which Souk Gifts Shop lacks. The buyers bargaining power in the Kuwait gifts, souvenirs and novelty industry is due to their concentration in one region.
Souk Gifts Shop can contend with the intense competition through innovation, whereby the business will keep on developing better products than competitors. The strategy will also help counter the threat of buyers bargaining power. The bargaining power of buyers would be countered through this strategy, since they will gain value for the products they purchase based on quality.
The competition intensity and rivalry will also be addressed through a strategy of increased marketing campaign, especially through advertising. Although the strategy will be costly to the business, the expenses are worthwhile in order to raise market share. The threat of buyers bargaining power will also be addressed through increasing the diversity of products offered by the business, and scaling down prices.
Lowering product prices will be based on the intention of raising trade levels, especially through the e-shop platform. Threat of new entrants on the other hand will be addressed through the strategy establishing customer loyalty to Souk brand. Further product differentiation will also address the threat of new entrants. According to Ipsos, one of the major deterrents of ecommerce transactions in the Middle Eastern countries is insecurity in relation to online payment methods (par. 3). Souk e-shop will incorporate a very reliable and superior payment channel, in the ecommerce model adopted. Security features of the online ecommerce platform will draw more customers to the business, hence giving the business a major competitive advantage.
The Ecommerce Website
The ecommerce website is the backbone, or the determinant of how successful Souk e-gifts shop will be. The website is essentially the platform upon which the ecommerce operations will be based. In addition, the design and implementation of the website will influence the response of the customers to the initiative in a very major manner.
Figure below provides a functional decomposition diagram, illustrating the functionalities of the website:
The decomposition diagram shows how the functions will be decomposed from the top-down, in the ecommerce website hence revealing the structure of the system. The functional decomposition structure breaks down the system step by step from the main function, the interim levels, to the elementary level functions.
As indicated in the functional diagram, the ecommerce website acting as the e-shop storefront for Souk Gifts Shop will address the various aspects of transactions with customers. Basically, the website will be the major link between the customers, the business, and the products, as well as other stakeholders such as the financial transactions processing company used.
The ecommerce website functions will be divided into two major functional interfaces as indicated in figure 1. The functions will include the customer services, and the administrator services. The administrator services are website maintenance activities managed by Souk Gifts Shop system administrators. The main function here will be updating inventory and ensuring the system operates without any problems.
The customer services constitute the various transactions the undertaken by those purchasing the products. Such activities will include selecting products for purchase and assigning them to the shopping cart, and submitting shipping details. To enhance differentiation and hence more competitiveness through the ecommerce platform, Souk Gifts Shop will incorporate marketing automation in the system. Marketing automation involves incorporates marketing functions into the ecommerce system. Differentiation will be furthered through social media integration with the ecommerce system.
Mobile and Tablet compatibility of Souk’s e-shop will facilitate accessibility of the storefront in multiple platforms, and hence greater customer reach. Ipsos (par.6) indicates that smartphones penetration in the total Kuwaiti population is at 49%. The figure indicates almost half of the population having smartphones, hence these present a tremendous opportunity for the business.
Figures 2 and 3 show snapshots of Souk Gifts Shop e-shop storefront:
Financial Plan
Development and implementation of Souk Gifts Shop e-shop storefront will be funded through two rounds of venture capital worth $1.07 million from the business owners. Revenues generated from other avenues or aspects of the business are not included in financing the project.
Since the project of developing and implementing Souk Gifts Shop e-shop storefront will be undertaken over duration of three, the budget will be as follows:
- Fixed technology costs will account for a major proportion of the venture expenses. The costs will represent a percentage of the expenses allocated to for all internets related and fixed computer developments. Hence, $300 000 will be allocated development of proprietary software, $100 000 for website design, and $95 000 for systems integration.
- Fixed corporate costs will represent a percentage of the expenses allocated, and they will be associated with charges related to offices. The development of the e-shop will necessitate establishment of new offices for the system administrators.
Consequently, $60 000, will be allocated to development of the initial online sales force, hiring, and training. In addition, $80 000 will be allocated to office setup, for instance purchasing or leasing other necessary computer equipments and infrastructure.
- Advertising expenses will represent a percentage of all the expenses allocated to marketing media. The business will need to advertise its online presence through the various media channels such as television, newspapers, and billboards. Consequently, $100 000 will be allocated to advertising.
- Research and development will constitute a percentage of the cost of the project. The e-shop administrators, in conjunction with the sales and marketing team will be tasked with development and integration of innovative ideas and products in the online platform.
Research and design will be assigned $120 000. The money will also be used in the testing, and fine tuning of the programs and computer systems.
- Sales and marketing will also be assigned a given percentage of the project costs. The department will have to set up a sub-section concerned with the ecommerce marketing function. The department will hence be allocated $95 000, for establishment of the subsection, and associated costs of running the same.
- General and administrative costs will include expenses associated with operation and running of the e-shop. Consequently, these costs will be allocated $120 000.
Conclusion
The advent of ecommerce has generated a lot of opportunities in business. The choice of Souk Gifts Shop to develop the e-shop storefront is an informed one. The conveniences offered therein are a major attraction for customers, hence a major opportunity for the business.
The penetration of internet and ecommerce in Kuwait also provides the business with an ideal environment for the venture. Despite of the high costs associated, and the tremendous efforts required, the project is worthwhile under the present Kuwait business market environment.
Works Cited
Chermack, Thomas and Bernadette Kasshanna. “The Use of and Misuse of SWOT Analysis and Implications for HRD Professionals.” Human Resource Development International 10.4 (2007): 383-399. Print.
European Travel Commission, Ecommerce Insights. 2014. Web.
Ipsos, Mena Internet Usage & Consumption Habits. 2013. Web.
Porter, Michael, How Competitive Forces Shape Strategy. 1997. PDF file. Web.
Shanthi, Venkatesh. “E-Procurement Using E-Markets for Construction Projects – An Empirical Study on Kuwait.” Annamalai International Journal of Business Studies & Research 4.1 (2012): 24-40. Print.
Turban, Efraim, Jae Lee, David King, Ting Liang, and Deborrah Turban. Electronic Commerce 2010. 6th ed. 2009. New York: Pearson Education. Print.