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The Evolution of Ecommerce in The UAE

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Ecommerce

The Evolution of Ecommerce in The UAE

Over the past decade, the UAE has risen to become an ecommerce leader among the Gulf Cooperation Council (GCC) countries. According to market research firm Frost & Sullivan, in 2015 the GCC’s ecommerce industry was worth $5.3 billion and contributed approximately 0.5% to the region’s overall GDP. At that time, the UAE’s ecommerce sector was valued at $2.5 billion, making up nearly half of the region’s overall sales. In the coming years, this trend is expected to continue with the GCC’s ecommerce industry quadrupling by 2020 and the UAE’s industry reaching nearly $10 billion.

Looking at those figures, it can be easy to forget that the country wasn’t always an ecommerce power house. In fact, just 10 years ago the landscape looked very different across the country. This week, in celebration of the UAE’s 47th National Day, we’re taking a brief look at how the country’s booming ecommerce industry got to where it is, and what the future holds for the Middle East’s ecommerce leader.

The Early Days

The United Arab Emirates has long been regarded as an early adopter in the GCC and broader MENA region, particularly when it comes to regional technology trends. At the start of the ecommerce boom in the mid 2000’s, the UAE was quick to begin to exploring the new landscape and by 2010 a number of companies had entered the marketplace. The relatively quick growth came thanks to a few factors but the major advantage the UAE had was a consumer base that quickly became comfortable with the concept of online payments and a number of locally developed ecommerce sites that were able to identify the nuances of their particular community or city.

During this time the rise of sites such as dubizzle, souq.com, emiratesavenue.com and jadopado, all provided excellent examples of the growing interest in ecommerce across the country.

 

 

By 2011 the marketplace had matured considerably with concerns about using credit cards for online transactions and general trust in ecommerce reaching a tipping point. According to twofour54, by August of that year 69% of survey respondents were more comfortable using credit cards than cash and 75% were confident when purchasing goods from local websites.

 

 

Another factor contributing to the use of e-commerce was a strong commitment from government entities across the UAE who quickly embraced the trend. Dubai Electricity and Water Authority (DEWA) for example reported almost 50% growth in the use of its portal by consumers during 2011.

 

 

Modern Ecommerce in The Country

Today, robust internet and mobile penetration across the UAE has continued to push the country’s ecommerce industry to new heights. Recent research conducted by Google has shown that the UAE leads global smartphone penetration at 73.8 percent and the country’s internet usage statistics show that 91.9 percent of the population has internet access.

 

 

This extraordinary level of internet access has translated into a highly active population of online shoppers. According to one of the UAE’s financial institutions, 1 out of 3 UAE residents make at least one online purchase each week,a figure that jumps to 1 out of 2 when looking at the country’s most populous city Dubai.

 

 

The product categories that produce the most revenue in online sales in the region are consumer electronics, computers, and jewelry (including watches).  Online shopping for clothing also has begun to gain in popularity.

As mentioned earlier, growth in the ecommerce industry is not solely driven by the private sector and the country’s e-governments incentives continue to be a driving force in building trust among consumers. Across the region, we see the migration of what were traditionally offline services such as visa services, traffic services, and utility services to online platforms integrated with online payments that provide citizens and residents faster and more effective public services.

Future Growth

In 2016, the Arab Federation of ecommerce which represents 14 governments across the broader MENA region (including the UAE) was established to develop the region’s ecommerce sector.  This year, the federation released a five-year strategy focused on growing the region’s ecommerce sector from $20 billion in 2017 to over $200 billion by the early 2020’s.

 

 

With possible changes to the regulatory framework such as easier free zone company setup and more favorable import and export tariffs, the UAE is well positioned to take advantage of the new and more cost-effective avenues to distribute goods and continue to lead the region.

As local governments continue to update policies and invest in innovation in the space, the ecommerce industry will continue to expand. With the UAE firmly at the forefront of that growth, the future of ecommerce looks brighter than ever on the countries 47th birthday.

What has the growth of ecommerce meant for you over the past years? Has your employer or company benefited from the growth? Be sure to let us know in the comments below and follow us on Twitter for the latest business updates.

Sources

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Dalia El Gammal

Marketing Specialist PAYFORT

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