MidEast e-commerce market shows signs of growth, but challenges remain

Vic Bageria, CEO and CVO of Xpandretail powered by Savant, talks e-commerce in the Middle East

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MidEast e-commerce market shows signs of growth, but challenges remain Vic Bageria, CEO and CVO of Xpandretail powered by Savant.
By  Vic Bageria Published  September 22, 2017

Retailers based in the Middle East may have been slow to react to the worldwide e-commerce intrusion but are presently accelerating endeavours to contend in the digital market, which could end up with regional brands ruling the market.

The year 2017 has been considered by many as the coming of age year for e-commerce in UAE. It all started last November when Emaar unveiled Noon- a $1bn e-commerce venture which offered more than 20 million items for sale, it launched in January of this year. The e-commerce giant- Amazon, acquired Souq.com which is the Middle East's largest e-commerce venture in March, for fee estimated to be around $580m.

E-commerce in UAE is expected to grow at a compound annual growth rate for 25% per year up to 2020, reckoning that the market could be worth $10bn next year. It's a fact that web based business is getting popular in the UAE and all through the GCC, with the retail sector perceiving a firm movement from brick and mortar to online shopping. Shopping on the web has made great progress from being just another trend- it has ended being a favoured medium of purchasing for a rising number of consumers in the region.

E-commerce in UAE is growing at a rate of 20% annually, with 80% of the population being internet users, and of this 15% shop online and 10% do so on their mobile devices; with the smartphone penetration in UAE being a whopping 70%, it is no surprise that in the last 12 months alone 60% of the shoppers made at least one purchase online.

As one of the countries with the most noteworthy cell phone penetration, the UAE has additionally observed quick and significant development in the section of mobile trade or m-commerce also. Eminently, based on the density figures of both on the web and mobile shopping, the UAE is a long way ahead. As indicated by PayPal reports, in the UAE, mobile shopping compensates for 25% of general web based spending, while this remains at 22% in China and 20% in Turkey.

Though the e-commerce industry in UAE is going to be a promising business especially for small and medium scale enterprises, despite of the well-established infrastructure and business environment, SME's and e-commerce start-ups are facing a lot of challenges and barriers to run a new e-commerce business or transform one from an offline business to an online one. Data demonstrates that the internet users in the Middle East panic from fraud and aren't happy with online payments. Furthermore 46% of the clients have guaranteed that they feel some sort of a hindrance to use e-commerce and don't trust the payment options. The payment options are another explanation behind this barrier.

Another issue facing e-commerce in the Arab region is the over-reliance on cash-on delivery. The reason why the dependence on cash-on-delivery is so high is the communal lack of trust of the customer to use their credit or debit card on the internet to make payments. The security matters as alleged by e-commerce customers signify a high risk and a main obstacle to the progress and start-ups of e-commerce. Some of the greatest difficulties that start-ups and SMEs must face is to do with the high cost of various logistical items, for example, shipping and importing items, the vast majority of which are produced abroad, logistic services, customs, and taxes.

Other issues that face start-ups are identified with governmental legislations. For instance, in UAE, to start an online company, a permit is required from the Department of Economic Development (DED) or the free zone authority. Additionally, setting up a physical office is required as all UAE-based organisations must have a physical office space in the nation to be viewed as legitimate. This includes a great deal of overhead cost to any individual or entity to dispatch an online business

As the e-commerce sector develops, numerous new players will enter the market and some old players will clear out. That is an integral part of each industry's life cycle. New organisations will present new demand and good competition, which is perfect for a developing industry in a dynamic nation like the UAE.

The value of web based business has surged over the world and the UAE is among the undisputed pioneers in the portion. Web based business in the nation is relied upon to be super trend for organisations and will develop further, given the thickness of network in the nation.

We know this, yet it's energising to see the first genuine success stories of regional and global brands that are paving the way for others. More significantly, they are empowering and assembling trust in web based shopping in the Middle East and changing over web clients to online customers.

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