The Exciting Growth of E-commerce Industry in UAE

E-commerce Industry in the UAE

The E-commerce industry in the UAE is experiencing rapid growth in recent years and has been the most dynamic among the MENA countries. The country is the e-commerce leader in the GCC region and the Government’s adoption of payment on platforms like Dubai Smart City has contributed to the growth of the industry.

UAE has a very efficient logistics infrastructure that helps the e-commerce industry. UAE, being a global transhipment hub with Dubai Airport and Jebel Ali port, provides world-class logistics infrastructure. To further strengthen the logistics infrastructure an MOU was signed by UAE with Caine network, Alibaba’s logistics, and Emirates sky cargo, in turn, helps in the growth of the E-commerce market. The total E-commerce market in the UAE expects to generate revenue of $20 billion by the end of 2020. The growth of the e-commerce market in the UAE is driven by factors such as high internet penetration rate, adoption of e-services, and smartphone usage close to 81.5%

Reasons for Rapid E-commerce growth.

• High Digital penetration:

  Development in E-commerce business comes as digital turns into the future of the business in UAE. The UAE occupants likewise are among the top 10 globally with regards to investing time on social media and the internet, averaging to 8 hours daily.

• Digital Natives:

  The UAE’s populace includes about 30 percent of Millennials who are digital natives and a growing number of Gen Z. These digital natives are constantly connected and look out for on-request, instant arrangements. Their desire for quick and convenient shopping experiences can accelerate the growth of online shopping.

• Increased usage of digital wallets:

  The introduction of mobile wallets such as Apple Pay, Samsung Pay, and Google Pay along with local players such as Beam wallet and Etisalat wallet has increased their usage. People can pay at department stores, hotels, cinemas, supermarkets, etc. by taping their smartphones or smartwatches.

• Government Intent:

  Building a digital culture in the UAE was influenced by the government’s proactive policies and taking out a lot of barriers to turn society into a cashless society. Cashless payments and E-commerce businesses are recognized as the top government priorities for the UAE Vision 2021. As a part of the initiative, the Government has implemented the wage protection system.

• Improved logistics:

  Logistics is considered one of the main drivers of E-commerce growth. The UAE is a focal point for distribution, excellent logistic infrastructure, and low logistics cost which makes it a perfect place for E-commerce to grow.

• Increased Security:

  Banks and payment provider in the UAE, for example, Visa is attempting to upgrade card security for online payment, including an extra layer of security to the process. Online retailers can collaborate with payment processors to embrace protocols. Verified by Visa, for example, works by sending the customer a one-time-secret phrase to guarantee payments that are made by the legitimate owner of the Visa account.

Growth Statistics – E-commerce in UAE

The UAE appreciates numerous favourable advantages that make it perfect for E-commerce growth. Its buyer demographics comprises of a digital-savvy youngster populace, with high usage of social media. These individuals are more likely to spend time on the internet than their cohort globally. E-commerce organizations, regardless of whether they are cross-border merchants, or local retailers take advantage of digital penetration, disposable income, and high demand that is favourable for the sector.

The E-commerce market has generated over $16 billion of revenue in 2019. The market expects to grow at an annual rate of 23% to reach a revenue of$27 billion by 2022. The UAE is considered one of the most desirable E-commerce markets in MENA that has a penetration rate of 4.2% as compared to the total retail. Continuous innovation, startup growth, government policies, financial account penetration, and developed infrastructures make the UAE the top driver of E-commerce growth in the GCC and MENA region.

Funding in the UAE’s E-commerce Industry Startups

Ever since the launch of the Innovator fund accelerator by the Ministry of economy in the UAE, the amount of funding and number of investors have increased rapidly. In the MENA region, the UAE remains as the top country which attracts the maximum investors. The UAE startups garner over 70% of the total funding and 30% of deals in the region.

Dubai launched its E-commerce strategy in late 2019 to establish Dubai as the logistic hub where E-commerce expects to contribute 12 billion AED by 2023. The strategy also aims at attracting more investments into the E-commerce sector to reach 24 Billion AED by 2020 by eliminating the e-commerce activities cost by 20%, which include transportation cost, VAT, storage cost etc.

Latest Trends in E-commerce in UAE

• Shift towards localization:

  The overseas retailers has understood that localization and language are important factors to stay relevant in the region. Luxury brands such as D&G, Blueberry etc has launched Arabic language sites along with content marketing also in Arabic as well to attract more local customers

• Cross border E-commerce:

  Improvement in the gateway security along with free shipping and reliable methods have made buyers purchase products from an overseas vendor. In 2016, 58% of online sales was from vendors outside the region.

• Technological Advancements:

  Technology trends expect to launch in compliance with the UAE regulations. This includes the use of Big data analytics, Artificial intelligence, and chatbots to interact with customers. The drones for deliveries are also in experimental phases.

• Digitization in food delivery: Digital evolutions have caused changes to many categories like online food delivery services. Majority of the business generated by restaurants are nowadays from online services. Zomato, MakeMyMeal, UberEATS are getting most of their sales from online channels.

SWOT Analysis of the Industry

• STRENGTH
  • The UAE provides a world-class transshipment hub with Dubai International airport & Jebel Al port with world-class logistics infrastructure.
  • Mobile penetration is high. 99% of people used the internet in 2018.
  • Ease of doing business and low cost – The local laws and regulations and low cost of logistics and transportation makes the UAE an ideal place for E-commerce players to start a business
• WEAKNESS
  • Clogged logistics- The trade barrier in the MENA is high and acts as a blockage for online retailers and logistics to ship products. New players in E-commerce are most affected by these barriers due to high tariff, changing exchange rate, and changing regulations
  • Payment system and delivery- The lack of trust in online payment and low credit card penetration has played a barrier in the UAE. The UAE also does not have a postal code system which affects the last-mile delivery
  • Impact of VAT: Most of the goods are imported from foreign countries. As a result, the buyers have to bear the cost of the goods as well as for the services.
• OPPORTUNITY
  • Growing VC funding: More and more venture capitalists are investing in E-commerce start-ups.
  • Improving the infrastructure for logistics also attracts investors and multinational companies to expand their business.
  • The low barrier for entry into the E-commerce industry also attracts the entrepreneur to start a business in the field. More than 366 E-commerce start-ups exist in the UAE.
• THREAT
  • The competition from international and local players are high in the E-commerce industry as the entry barrier is low. s
  • Security: The rapid increase in E-commerce in the UAE has exposed millions of people to shopping scams. As a result, the customer’s financial details were compromised.

Ecommerce is ready to go mainstream in UAE with the right support from the Government and Private players making it the right time to enter the market. The Royal Alliance Business group is a team of widely experienced business consultants in UAE providing solutions to business aspirants seeking opportunities to kick start Ecommerce company in the UAE. Contact us at Toll Free Number 800724249 or +971 52 384 442. Write to: info@ragroup.ae to know how we can support you.