Perhaps one of the most exciting developments in the global e-retail world is the growth pace of the United Arab Emirates’ e-commerce market. In just a few years, the local market size surpassed some of the most developed e-commerce markets. Big players already started investing in, and here’s all you need to know about it.
UAE economy and demographics
- Population: 9.61Mn
- GDP: $428Bn
- GDP/capita: $70,500
- Urbanization: 87%
- Formerly oil-dependent economy, in recent years, managed to diversify its economic base
E-Commerce in the United Arab Emirates
99% of UAE citizens actively use the internet and social media accounts, 93% of them daily. 96% of the total population use smartphones. Accordingly, the country has an 85% e-commerce penetration rate that is expected to hit 92.7% by 2023.
Naturally, these numbers attract the big players, like in Amazon’s acquisition of Souq, the biggest e-commerce company in the MENA region. Souq is both the first entrant and the dominant player of the MENA market. Between 60-75% of the market is fragmented, while this number averages below 50% in most of the other e-commerce markets.
Local consumers are prone to search generic queries rather than brand-specific ones, and 56% of them start their shopping process via search engines, instead of retailers’ websites.
Government efforts to speed up digitalization creates a favorable business environment as Visa’s general manager for MENA says:
We are particularly buoyed by the policies of the government that encourage innovation on a level playing field and through open dialogue. In addition to e-commerce, we are also working with our government partners on growing mobile and contactless payments.
Trends in the online retail market of UAE
While many traditional retailers try to resist digitalization in other parts of the world, a Visa whitepaper states that local retailers pursued a different approach. By adopting an omnichannel strategy, the regional retailers managed to integrate into the e-commerce market.
Influencers have a significant impact on customer behavior. Huda Kattan, for example, managed to convert her YouTube followers into loyal customers. Today, Huda Beauty is sold all over the world.
Ramadan and the White Friday sales are the prominent seasonal shopping events.
Advantages of the local market
While MENA is the fastest growing regional e-commerce market, the UAE is the most advanced market in the region. Sales are expected to average at 23% annual growth until 2023.
The high standard of logistics facilities in Jebel Ali port and Dubai airports gives the country a significant advantage as a global logistics hub. To benefit from the vibrant logistics activity, Alibaba’s Cainiao Network signed an MoU with Emirates Skycargo.
Along with its geographical advantages, the demographics of the country helps too. Even though its population is modest, the citizens’ purchasing power surpasses even Swiss citizens’. People of ages 24-35 who compose 36% of the total population have high disposable incomes like the rest of the population. The incredible internet penetration rate, tech-savviness and high level of average disposable income of this young population, make the local market one of the best destinations for online retailers.
Moreover, the local marketplace offers a unique opportunity for business owners. 78% of UAE customers state that they are comfortable with sharing personal data, especially when they get better deals in turn. Personal data allows retailers to get to know their target market, and thus, offers a huge opportunity, said KPMG officials.
Local market insights
The product assortment is lower than the global average. Enlarging the product range of your business will be a perfect strategy to stand out from the competition.
While the customers don’t hesitate to spend money, they also expect an outstanding customer experience, resulting from their offline experience.
55% of consumers prefer smartphones to shop online. Therefore, it is crucial to provide a perfect customer experience on the mobile platform.
You’ve found the perfect place for investment. But everybody wants a piece of the pie. To be one step ahead from all, remember:
- High-incomes & tech-savvy consumers create a fertile shopping environment
- Consumers are comfortable with sharing useful personal data
- The average product range is low, therefore widening product range will attract customers
- Consumers are accustomed to the superb customer experience of offline stores, and they expect the same from online stores
- More than half of online shopping is via mobile and providing a decent mobile experience is a must