The UAE retail e-commerce market reached a record $3.9 billion in 2020, a 53% year-over-year increase driven by the Covid-19-led digital shift, while e-commerce accounted for 8% share of the retail market during the same year, new analysis from Dubai Chamber of Commerce and Industry has revealed.
The study, based on recent data from Euromonitor, projected the value of the market to grow by a compound annual growth rate (CAGR) to reach $8 billion by 2025, a growth trend supported by several key factors such as high-income potential, high Internet penetration rate (99%), developed transport logistics network, modern digital payment systems, growing tech-savvy youth population, and strong government support.
Growth drivers
The UAE has the highest Smartphone penetration rate in the MENA region. That has influenced the growth of mobile-commerce (or m-commerce). The share of m-commerce in the UAE e-commerce market increased from 29% in 2015 to 42% in 2020. Moreover, in 2020, UAE retail m-commerce retail market value reached $1.6 billion, 56% higher than the previous year. The retail m-commerce market of UAE is projected to reach USD 3.9 billion by 2025, and grow with a CAGR of 18.9% between 2020 and 2025.
Many companies made a significant investment in online sales activity during the pandemic and managed to grow or keep their businesses stable using omni-channel methods.
Market challenges
Despite some growth opportunities, there are some challenges in the e-commerce market, such as cash
on delivery. However, during the pandemic the share of this payment method was significantly reduced, due to hygienic measures and development of contactless payments.
Moreover, some online retailers faced financial pressure due high costs. Apart from picking, packing and delivery cost, one of the biggest costs is high returns of products. Experts have found that people return 15% to 40% of what they buy online, compared to 5% to 10% for in-store shopping. However, with the improvements of online product details, customer support and visualisation, product returns are expected to decrease.
E-commerce activity
E-commerce has been predominant during the COVID-19 outbreak, and many retailers have put much effort into building, improving, and promoting their online shops. Several small retailers in UAE that did not manage online stores before the shutdown, developed temporary solutions to sell their products online, for instance, posting their products on Amazon or social media and provided pick-up or delivery services. Companies that were selling high-demand products, e.g. food and computers, increased their share in UAE’s e-commerce market during the pandemic.
E-commerce trends expected to gain momentum with consumers include quicker, safer, more intuitive and personalised experiences, voice-activated shopping, contextual and social commerce, virtual instant reordering, and product subscriptions combined with conveniences such as same-day delivery and competitive pricing. These will draw more consumers to choose Ecommerce over traditional face-to-face (F2F) channels.
6 | BIZPRENEUR MIDDLE EAST July 2021
Value Of UAE Retail E-Commerce Market Hits Record $3.9 Billion
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