Describes what a company needs to know to take advantage of e-commerce in the local market and covers prominent B2B websites.
The UAE is the eCommerce leader among Gulf Cooperation Council (GCC) states and grew by 50% in 2018 and the market is forecast to be worth $27.1 billion by 2022. The UAE Ministry of Economy (MoE) estimates that e-commerce constitutes 10% of total sales in the UAE, and that 90% of the UAE population has internet or mobile phone access, which has played an active role in enabling the growth of eCommerce in the region.
Amazon.com acquired Souq.com, the largest domestic online merchant, giving the global operator a large share of sales in the UAE. Traditional store-based retailers are rising to the eCommerce challenge by improving the online shopping experience for their customers. The product categories that produce the most revenue in online sales in the region are consumer electronics, computers, fashion accessories, women’s apparel, cosmetics and perfumes. The most important factors for online shoppers in the UAE were price, customer service, and ease of use. Other major in-country purchases include travel related expenses for cabs, airline tickets, and hotels. Mohamed Alabbar, Chairman of Emaar, launched Noon.com in 2017 as a regional competitor to Amazon. In 2018, Noon announced its partnership with eBay to bring U.S. products to the region.
According to Forbes Middle East, online sales in the Middle East account for only 2% of overall retail sales, showing the huge untapped potential for eCommerce players. Traditional brick-and-mortar retailers are now focusing on providing their customers with an additional online retail platform to augment their revenues. For instance, Carrefour and Lulu Group, two of the largest retailers in the Middle East, launched online shopping portals in the UAE.
Growth in eCommerce is also being driven by increased trust in online commerce. E-government services are migrating to online platforms, where they are integrated with online payment platforms to provide citizens and residents faster and more effective public services. This includes services such as utility billing, traffic services, licensing, visa issuance, etc. The Dubai Free Zones Council (DFZC) announced new eCommerce regulations for free zones that will enable greater foreign direct investment (FDI) in the eCommerce sector in Dubai. DFZC’s initiative will primarily focus on encouraging the adoption of eCommerce in cooperation with Dubai authorities. Joint teams and workshops will support adoption and generate proposals. It will also examine mechanisms for adopting blockchain technology to enhance transparency and speed up the completion and automation of procedures.
Retailers realize that language and localization are extremely important factors to be considered when entering the UAE e-commerce market. Luxury brands have launched Arabic language sites to attract local customers who have avoided e-shopping due to language barriers. Many online shoppers in the Middle East now use cross-border eCommerce shopping. Online shoppers in the UAE made 58% of their online purchases from overseas vendors due to the gateway security, along with reliable and free shipping methods. Products and brand reviews on social media platforms influence e-shopping behavior. E-commerce players can leverage social media to increase sales.
Although eCommerce in the Middle East is potentially highly lucrative, in part because of the region’s young and tech-savvy population, there are barriers that remain in the UAE’s eCommerce market. These include the prevalence of cash on delivery over other electronic payment methods, consumer wariness of the safety of e-commerce system, security concerns, inadequate logistics, a lack of a unified address system which creates challenges for last-mile delivery, and the inability to touch and test products before purchasing them.
The Telecommunications Regulatory Authority (TRA) is the primary regulatory body responsible for regulating electronic transactions and commerce in the UAE.
In addition, Intellectual Property Rights and ownership are key considerations for the eCommerce market. Please contact our Intellectual Property Rights Attaché (Peter.Mehravari@trade.gov) for IPR information.