In the United Arab Emirates, the e-commerce sector is on the rise. Government acceptance of eCommerce payments on platforms like Dubai Smart City is pushing its particular development direction in relation to both developing and mature economies. Despite the rapid rise in other categories such as quick-service restaurants and transportation, government payments dominate the e - commerce environment.
The thriving mall culture is one of the unique features of the UAE's eCommerce growth. Instead of adopting an adversarial approach as seen in several other countries, conventional brick and mortar stores and malls have become eager adopters of eCommerce payments. The Omni-channel campaign is a more successful way to hit customers' minds. This has been shown by the development of ‘experience centres' by pure-play eCommerce brands such as Amazon internationally, and Souq.com, which was rebranded as Amazon.ae in April 2019, has followed the same path regionally.
Among the Gulf Cooperation Council (GCC) nations, the Emirates has risen to become the global eCommerce pioneer in recent years. The GCC's eCommerce sector was worth $5.3 billion in 2015, according to market research company Frost and Sullivan, and contributed about 0.5 percent to the region's total GDP. The UAE's e-commerce market was valued at $2.5 billion at the time, accounting for about a quarter of the region's total revenues. This rise is expected to accelerate in the coming years, with the GCC's eCommerce market quadrupling by 2020 and the UAE's sector hitting nearly $10 billion.
The Early Days
In the GCC and broader MENA area, the UAE has long been regarded as an early adopter, especially when it comes to local technology trends. The UAE was swift to explore the emerging landscape as the eCommerce revolution started in the mid-2000s, and by 2010, many businesses had entered the market. The UAE's relatively rapid growth was attributed to a variety of reasons, the most important of which was a customer base that quickly grew familiar with the idea of online payments, as well as a number of nearby existing eCommerce sites from which we were able to understand the complexities of their specific group or city.
By 2011, the industry had grown considerably, with fears over using credit cards for online purchases having subsided and overall confidence in eCommerce having reached a tipping point. According to twofour54, by August of that year, 69 percent of survey respondents preferred credit cards to cash, and 75 percent were comfortable purchasing products from local websites.
A strong obligation from government agencies across the UAE, which quickly adopted the trend, was another aspect that contributed to the use of e-commerce. For example, the Dubai Electricity and Water Authority (DEWA) reported a nearly 50% increase in user usage of its portal in 2011.
Current Scenario
Today, the UAE's eCommerce industry has hit new heights due to extensive use of the internet and mobile apps. According to Google research, the UAE has the largest mobile penetration in the world at 73.8 percent, and the country's internet use figures show that 91.9 percent of the population has access to the internet. This research on internet access shows a wide and active community of online shoppers. One out of every three UAE people, according to one of the country's financial institutions, makes at least one online purchase per week, a figure that rises to one out of every two in the country's most populated city, Dubai.
E-Commerce Market Valuation in the UAE
According to the most recent eCommerce statistics, the UAE has a 99 percent internet penetration rate. So, when we talk about eCommerce numbers as a percentage of total internet operators in the region, we're taking into account the whole population. Over the last 30 days, at least 85 percent of the total number of internet users in the UAE have looked for a product online, and 91 percent have accessed an online trade shop. At least 63 percent have made an online order. The overall number of assets is split evenly between smartphone and laptop users.
Driving Factors for UAE’s E-Commerce Market Growth
The rise of eCommerce in the UAE is fueled by a variety of factors.
1.Mobility and Network Infrastructure Growth
The UAE has demonstrated a remarkable willingness to consider smart devices and the internet in general. In terms of mobile usage, the country leads the world. The diffusion of online and smartphone technologies has played a major role in the country's eCommerce expansion.
2.Ease of Doing Business
The United Arab Emirates is one of only a few countries in the world that encourages creativity and startups. The country's many supportive policies, crafted by a liberal government, provide a fertile climate for new and evolving eCommerce industries to prosper and develop. Furthermore, the country has been active in recruiting high-quality talent and labour from around the world at internationally attractive prices.
3.New E-Commerce Investments
The UAE has seen an increase in international interest in eCommerce over the last few years. In the United Arab Emirates, for example, 2017 was a major year for eCommerce. Amazon acquired Souq.com, the country's most well-known eCommerce brand, and Emaar Properties launched Noon, a brand-new $1 billion eCommerce initiative. Other Foreign Direct Investments and new companies in the eCommerce sector have also contributed significantly to the country's eCommerce growth.
4. Pre-existing Strong Retail and Business Setups
Businesses in the UAE benefit from a variety of well-organized and modern infrastructural and technological implementations that make exchange, purchases, and transfers more effective. The fundamentals on which today's technology-driven businesses have found their incredible growth are cutting-edge logistics, networking, and trading establishments.
The UAE's E-Commerce Market: Strengths, Opportunities, and Challenges
Due to demographic trends, UAE users are optimistic, willing, and early adopters of technologies. The Emirates, like the other GCC economies, has a high proportion of young people, which can be due to demographic changes as well as diverging fertility and population growth rates. The UAE has 34% of the world's young population (aged 25 and under), with a median age of 25.
Digital-native millennials (born between 1981 and 1996) and Gen Z make up the UAE's youthful demographic (born between 1997 and 2012). Since the internet revolution, millennials evolved into Ecommerce for daily purchases, which led to different sites launching online sales for promotions. Gen Z was born and raised in a world where technology was present at any turn, whether it was through social media for continuous communication and near-instant fixes, or through quick access to goods from across the world. These digital natives search out simple shopping opportunities and are the driving force behind eCommerce worldwide. Infrastructure benefits are also available to UAE consumers. With 19,826,224 mobile cellular subscribers in 2017, or 210.9 subscriptions per 100 people, mobile usage is high. In 2015, 94.82 percent of the population used the internet. When it comes to spending time on the internet and social media on every device, UAE residents rate in the top ten internationally, averaging seven hours and 54 minutes a day.
Government Initiatives to Support the Future of E-Commerce
Government policies to encourage creativity, entrepreneurship, and a cashless economy in order to facilitate financial inclusion and greater openness have given eCommerce in the UAE a major boost.
E-Governance Initiatives
Local governments are migrating paper-based information services such as passports/visa issuance, vehicle licencing, energy billing/payments, and logistics monitoring to the online portal, where they are merged with standardised or universal online payment systems, as part of the broadcasted e-governance initiatives. These sites are likely to act as the framework for online shopping services, providing consumers with a risk-free experience. The e-commerce sector is projected to expand in the future as a result of government-led digitisation initiatives.
The development of an e-commerce hub
In 2014, the UAE government established Matajircom, a duty-free ecommerce portal, as a way to collaborate with local and international businesses. Its mission is to create Dubai as a global e-commerce marketplace by bridging the gap between local and international markets.
Digital Acceptance and Transformation
A digital transition has occurred as a result of a combination of factors including the use of mobile devices, local authority digitisation programmes, and the population's willingness to embrace emerging technologies. According to Accenture's technology forecast, the Outcome Market, Internet of Me, Platform Revolution, and Intelligent Enterprise are among the innovations that will reshape the region into a digital economy.
Dubai CommerCe city is officially launched.
Dubai CommerCe city, the region's first eCommerce free zone, was established in 2017 as a joint venture between the Dubai Airport Free Zone Authority (DAFZA) and the Wasl Asset Management Group.Its mission is to promote Dubai as a leading international eCommerce forum, as well as to help economic diversification and smart transformation strategies in the eCommerce market.
Trends in E-Commerce in the UAE
The new developments and shifts in the e-commerce industry in the United Arab Emirates should be expected. Any of them are categorised as under-utilized.
Shift in the Direction of Localization
When it comes to accessing international markets, retailers have realised that language and localization are critical considerations. Burberry, H&M, and Dolce and Gabbana are among the premium brands that have launched Arabic-language websites targeted at the UAE's experimental customers, with content-based promotion in Arabic as well. These programmes would draw more urban shoppers who have previously shied away from e-commerce.
Effect of Social Media
Product/brand ratings on social media sites affect e-shopping behaviour. Currently, 93 million people were involved on social media, accounting for 63.3 percent of the region's internet users. Qatar and the United Arab Emirates lead the country in terms of social media penetration, with a peak of 73 percent year on year, well above the global average of 21%. Social networking networks like Twitter, Facebook, and Instagram are important in shaping purchase decisions. Sales are boosted by positive brand/product ratings. E-commerce firms will alter this network to maximise revenue.
E-Commerce Across Borders
A large number of Middle Eastern online shoppers have started to consider cross-border brands. In 2016, online shoppers in the UAE purchased 58 percent of their goods from foreign sellers. Many buyers have been influenced to buy goods from outside the region due to recent developments in gateway security, as well as reliable and free delivery methods.
Technology Advancement
Despite the fact that the Middle East e-commerce sector is still underdeveloped, technological developments that affect the global e-commerce market are likely to be enforced in conjunction with local regulations. Artificial intelligence (AI), chatbots, and Big Data for customer communications, wearables and smart devices for purchases, same-day shipping, and the use of drones for delivery are among the trends.
Food Delivery Digitization
Due to technical advances, the online food distribution service market in the area is developing. Also cafeterias that have been in operation for a long time today rely on online platforms for a large portion of their revenue. Deliveroo, UberEats, and online platforms like MakeMyMeal all generate the bulk of their revenue via the internet.
PROCEDURE TO START AN ECOMMERCE BUSINESS
There has never been a better time in the UAE to start a company. Follow these measures to start an eCommerce company in the United Arab Emirates.
1. Licensing
The first move is to obtain a valid driver's licence. The licence is required to validate the registration of an eCommerce company. The licence is issued by the UAE's Department of Economic Department. There are three different categories of licences to choose from. They're -
INDUSTRIAL LICENSE
PROFESSIONAL LICENSE
COMMERCIAL LICENSE
There are a few other things to consider during the licencing stage, such as choosing a legal structure, finding an appropriate venue, and registering a business name.
2. Office Location
It is needed to provide an office space for business setup in Dubai, UAE once you have obtained an eCommerce licence. In Dubai, a minimum office space allowance is 22 square feet. Employees and contractors also relax in the company's office room while applying for visas. Dubai is said to have the most new and sophisticated office infrastructure, as well as additional amenities. For a variety of causes, businesspeople will need the assistance of local supporters for their organisational setup, whether it is an e-commerce business or anything else. According to UAE law, international investors are not permitted to purchase property for their offices or businesses. In this respect, it would be helpful if you could find a reputable and trustworthy local supporter.
3. Website development
Any business has a website, and an eCommerce business's website is its selling point. You must also have a website that is appealing, catchy, and easy to use. To begin, you must first register a domain name for your business or organisation. It's important to remember that both the domain and the organisation must have a specific name. Customers can remember and look for the name if it is simple and easy to remember.
4. Online Payment
Since e-commerce entails purchasing goods through the internet, it is desirable to make payments via the internet as well. Despite the fact that many companies allow cash on request, which is often favoured by some consumers. However, it's still a good idea to offer the clients a few options on how they want to pay: on the spot or online. It is required to have an online payment form available on the website, as well as a few other choices such as payment with a debit card, master card, PayPal, online bank transfer, and so on.
5. Trading of Products
Getting inventory on hand is important since a consumer can need it at any moment. It is the most effective way to form a relationship with a customer by providing prompt and accurate service. A businessperson can select from a variety of items to sell. A trade licence is given to the firm based on the stock form and market operation.
6. Advertisement and marketing
This is also one of the most important things to take until the company is up and running. Search engines are the most common source of new website users in this scenario. It's never a bad thing to dedicate any time and money to search engine optimization. Similarly, there are many options to advertise online; you must consider "who will be viewing this medium." And who will be my target audience?” The key thing to note here is to concentrate on future buyers who are involved in your goods.
BENEFITS
These benefits are available to you if you file your eCommerce company in the UAE:
Emirates offers a variety of areas such as the coastline, free zone, and offshore.
When it comes to technological setup, the UAE leaves no stone unturned. Your organisation will be able to work on a multinational scale.
The business creation process is quick and transparent leading to less government hassles.
Since the UAE does not charge any taxes from company owners, non-payment of personal tax is one of the most appealing features of corporate professionals.
If you're looking to grow your company, the UAE's location proves to be advantageous. It becomes simple for company owners to join neighbouring countries and do business.
CONCLUSION
The eCommerce industry in the United Arab Emirates is an important part of the overall retail industry. Logistics, mature ports, and locations like Dubai that serve as global trading hubs with cutting-edge technology are all favourable conditions for eCommerce. On the other hand, eCommerce that depends on home delivery has been plagued by a lack of comprehensive postal code coverage, which has had a negative effect on the last few months.
A change in the cultural mindset will be a crucial driver for the steady development of the local e-commerce industry. Is it possible for e-commerce to take the place of traditional shopping? Or can both in-store and online shopping networks complement each other in order to grow?
It would be interesting to see what tactics the big players use to knock down cultural barriers. But one thing is certain: e-commerce in the UAE is here to stay and will continue to expand.
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