We heard about oil, what about e-commerce?
Most of us think about oil, impressive buildings, Dubai as a luxury tourist destination and Sharia laws in judicial system when someone talks about United Arab Emirates. The UAE’s oil reserves are the fourth-largest in the world. Also its natural gas reserves are the world’s seventeenth-largest.
United Arab Emirates is a country located in the southeast end of the Arabian Peninsula on the Persian Gulfand it’s bordering with Oman, Saudi Arabia to the south, also sharing sea borders with Qatar and Iran. In 2013, UAE’s total population was 9.2 million. There are 1.4 million of the population who are Emirati citizens and 7.8 million are expatriates.
The country is a federation of seven emirates such as Abu Dhabi, Dubai, Ajman,Fujairah, Ras al Khaimah, Sharjah and Umm al Qawain. Although each state maintains a large degree of independence, a Supreme Council of Rulers made up of the seven emirs, who appoint the prime minister and the cabinet, governs the UAE.
According to Forbes, the UAE has an open economy with a high per capita income and a sizable annual trade surplus. Successful efforts have reduced the portion of GDP based on oil and gas output to 25%. Since the discovery of oil in the UAE more than 30 years ago, the country has undergone a profound transformation from an impoverished region of small desert principalities to a modern state with a high standard of living. UAE is the 28th best country for business.
- GDP (nominal): $389.99 billion
- GDP Growth: 4%
- GDP/Capita: $29,900
- Trade Balance: 13.5%
- Public Debt As % of GDP: 42%
- Inflation: 1.3%
E-commerce Market in UAE
It has been some years that we kept hearing how big is the potential of e-commerce market in the Middle East; mostly because, internet user number is constantly growing. Vikram Shroff, president of the UAE Chapter of the Entrepreneurs Organisation (EO) and director of Regal Group, stated that almost 85% of the UAE’s population now have access to internet and almost every home in Dubai has at least one computer and Wi-Fi connection. Experts had big hopes that Middle East would be the next hub for e-commerce. Payfort, suggested that regional e-commerce sales could touch $15 billion by 2015, up from $9 billion in 2012.
Although online sales in the Middle East account for less than 1% of total retail sales, the e-commerce industry is growing fast. Penetration of e-commerce varies across the different countries of the Middle East region but remains fairly low overall compare to rest of the world.
UAE currently leads the region for online sales, although e-commerce penetration is still low. B2C digital buyers’ number in UAE is 3 million and its market size worth $2.5 billion dollars while the e-commerce market growth had reached to 25% in 2014.
As we said before, internet user number is one of the key measures of e-commerce market analyses. UAE’s internet users’ number is 4.5 million and UAE ranks 64th. Its internet penetration is 85% and internet penetration rank is 20 in the world, according to Ekos Global’s research in 2014.
Payment Methods in UAE
Future of the internet in Middle East is quite clear. Therefore, global retailers and e-commerce businesses hope to bring its potential to light. For example, PayPal launched an Arabic version of its mobile app last year. Numbers prove that PayPal’s investments’ is flourishing the business in UAE.
- PayPal follows card as the fourth preferred method of payment for purchases made on domestic sites at 6%.
- For purchases made on international sites, PayPal is the third most used method of payment at 30%.
- In the UAE, credit cards are the second payment method used for shopping on computers after COD, which is also preferred by online shoppers using smartphones and tablets.
- After COD and credit cards, PayPal is the third predominating method of payment for smartphone users at 27%, it also constitutes 20% of the payment methods chosen by Tablet users.
Consumer Behavior in UAE
- Security is a big concern for all online shoppers. In 40 % of cases Middle East and North Africa (MENA) shoppers listed security as their number one concern with shopping online. This may account for the fact that between 70-80% of all online transactions in the Middle East are Cash on Delivery (COD).
- Online shoppers in the Arab world are more likely to come from the over 35 age group, with 53% of that group saying they bought online occasionally. The 26-35 age group follows closely behind with 52% saying they bought online occasionally. Men are more likely to shop online than women in the Middle East, with 46% of males compared to 32% of females shopping online. This is also explained by the fact that women account for only one third of online population.
- Middle Eastern online shoppers spend the most on travel, with an average of $1521 spent per year. Consumer electronics ($250 annually), computers ($248) and jewellery and watches ($222) are the following categories on which Middle Eastern online shoppers spending the most. In UAE, consumer behaviour doesn’t seem any different from rest of the Middle East. In the UAE·
- Travel has the highest online share at 67%, also the highest average annual online spend at AED 2,024 (USD 551)·
- The purchase of computers comes in the second place with AED 500 (USD 136)·
- Also according to PayPal, higher income earners, both professional and management, show the greatest potential to spend more, especially expats (Asian, Western, etc.), those in their mid-20s to early 30s and those living in Dubai.
Most Visited E-commerce Sites
- Global names such as EBay and Amazon have a visible market presence in UAE. But also, there are many domestic sites which became popular. Souq, Namshi, Sukar and MarkaVIP have remained the most popular. Here is a list most visited e-commerce sites in Middle East in 2013.
- 52% of users shop at Souq.com in 2014. Among local stores shopped at, Souq.com marked the second highest average expenditure of AED 987 (USD 268) per purchase.
- There are also many other e-commerce sites that we should keep an eye on. Such as Aido which is the largest DVD and Blue ray movie store in the Middle East, Crazy Deals where you can find anything, Jadopado which sells electronic goods, Al Shop which has quality products for almost anything, Mumzworld which is one of the largest shopping site for Mother&Baby in the middle East.
Behind oil, retail is the second largest industrial sector in Gulf Cooperation Council (GCC) member states. It also provides a growing job field. E-commerce is giving the rise to new generation of jobs. Other than all these new digital domains, the market also needs financial and accounting expert.
Most online transactions are currently paid for with cash upon delivery. This poses a unique challenge for PayPal and others who do not offer transactions in local currencies.
As the population grows more comfortable with making payments online, Middle East e-commerce will continue to gain size and traction. With governments, global and local businesses all teaming up to improve the online marketplace, investors can rest assured: Middle East e-commerce is a safe bet.