Assessment of Current Buyer Behavior in Market
E-commerce is rapidly expanding in Bahrain and the MoICT expects online commercial activity in the Middle East and North Africa region to exceed $28 billion by 2022. Computer-literacy rates are high and businesses recognize the commercial value of the internet. Bahrain’s large youth demographics and extensive internet penetration rate above 98 percent have led to higher online shopping rates than in other GCC member states. Widespread smart phone and tablet usage has made social media applications such as WhatsApp, YouTube, Facebook, and Instagram popular platforms for advertising retail, delivery, and other commercial services.
Local eCommerce Sales Rules & Regulations
Bahrain’s National E-Government Strategy 2020 falls in line with the government’s previous strategic plans, focusing on advancing the living standards of Bahraini nationals, and reducing public sector expenditures by expanding online government services. The GOB has moved rapidly towards a digital economy and has recently passed a number of regulations to boost the country’s e-commerce domain. The Electronic Communications and Transactions Law and the Personal Data Protection Law, both enacted in 2018, updated Bahrain’s legal framework to protect personal data and electronic records and govern their use for completing transactions in a digital marketplace. Under these laws, electronic signatures are generally considered valid and binding but Bahraini authorities have yet to register any accredited certification service providers. Therefore, documents signed electronically will not automatically benefit from the presumption of authenticity and cannot be considered legally equivalent to handwritten signatures unless contractual parties to a transaction expressly consent to use and accept electronic signatures and electronic records.
Bahrain’s Information and eGovernment Authority (IGA) enhances the services provided by the government to citizens, foreigners, and investors and the government’s digital strategy focuses on eight pillars: increased participation and engagement; increased partnerships and private sector ICT readiness; improved national e-literacy and government IT skills; heightened protection of information and user rights; a higher-performing, collaborative, integrated, and efficient government; comprehensive and effectively managed quality service; enhanced e-government channels and user experience with increased service uptake; and greater innovation and entrepreneurship.
After the start of the COVID-19 pandemic, MoICT established a number of virtual marketplaces and internet shopping platforms to support the growth and development of owner-operated micro-businesses engaged in online sales activities, such as trading, merchandising, and retail. In early 2021, the Bahraini government enacted new legislation to regulate the e-commerce sector by requiring businesses with an online sales presence to apply for and receive an approved commercial registration. MoICT permits 100 percent foreign ownership of businesses that conduct online sales activities in Bahrain.
Local eCommerce Business Service Provider Ecosystem
The ICT sector constitutes a major pillar of Bahrain’s economy and is one of the core sectors the Bahrain EDB has focused on developing, both to attract FDI and to expand local employment. Recent years have seen a significant expansion in the ICT landscape, as well as a push towards cutting-edge technologies, including FinTech.
Groceries and other homemade food items have been the leading product category purchased online, and shoppers are increasingly beginning to purchase physical products via the internet as well, particularly apparel, beauty products, electronics, computers, and home appliances. Online food delivery services are also growing in popularity and present promising market opportunities.
The Bahraini government has launched several initiatives to grow Bahrain’s e-commerce domain. Start Up Bahrain (www.startupbahrain.com) provides an electronic ecosystem to nurture innovative digital startups while www.mall.bh allowed small and medium sized enterprises to transition their sales position from traditional brick and mortar locations to an online portal during the coronavirus pandemic. In a push to use these technological openings, MoICT operates an electronic governance program and a directorate for electronic commerce to promote e-commerce services. Local banks offer electronic banking, and many utility companies now accept electronic transactions for bill payments.
However, there are obstacles to the growth of online businesses in Bahrain, among them are the low adoption rates of online retail by local businesses, the predominance of cash on delivery payments, and low consumer acceptance of online shopping, compared to international benchmarks. Local merchants have largely kept their products off of online platforms, so Bahrain-based customers often purchase goods online from other GCC member states or other markets. Cross-border internet shopping is common and the main products purchased online are electronics, clothes, beauty products and jewelry, including watches. International websites such as Souq.com, Amazon and eBay are among the most popular shopping destinations for online consumers in Bahrain and across the GCC.
The BENEFIT Company (Bahrain’s Electronic Network for Financial Transactions) is the national gateway which handles payments or electronic money transfers in Bahrain and is the backbone of the country’s financial services industry. It is licensed by the Central Bank of Bahrain as a provider of ancillary services to the financial sector. Services include managing the national ATM switch system and switching local debit card transactions at the point of sale, as well as operating Bahrain’s credit reference bureau, internet banking shared platform, direct debit, payments gateway, check clearinghouse, and dispute management systems.
By the mid-2000s and due to the increased demand for online payment facilities in Bahrain, the BENEFIT Company and ACI Worldwide created a national payments gateway that enabled members to process online transactions made with all locally issued debit cards, as well as VISA, MasterCard, Amex and JCB credit cards.