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UAE set to lead GCC’s e-commerce markets next year

At least one in three consumers across MENA bought retail products online in 2022. (WAM)
  • From 2020 to 2022, there was an expected additional six percent annual market growth in ecommerce due to Covid-19, a latest report by Statista points out
  • E-commerce in the MENA region is fast catching up with global powerhouses such as China, with many online retailers scaling up their services to avoid Covid-induced disruptions

Riyadh, Saudi Arabia – The UAE will likely remain the top e-commerce market in the Gulf Cooperation Council (GCC) in 2023, but Saudi Arabia represents the largest potential growth over the medium and long term, Thomas Mathew, Vice President, Investment Strategy and Research at Kamco Invest, told TRENDS.

“E-commerce sales via marketplaces will continue to grow in double-digit percentages in 2023, driven by a higher proportion of cross-border shopping, and ongoing increase in the adoption of credit cards, and logistics services such as Aramex’s Shop & Ship, MyUS and DHL’s Easy Shop,” he stated.

Thomas Mathew

Last mile logistics players solutioning for D2C brands that seek end-to-end customer experience are forecast to witness higher scale going forward, said Mathew.

The market size of the e-commerce industry in the GCC region was slated to grow from $24 billion in 2020 to reach $50 billion by 2025 after the adjustments for the effect of the Covid-19 pandemic on e-commerce, Statista said in a recent report.

From 2020 to 2022, there was an expected additional six percent annual market growth due to Covid-19, the report pointed out.

E-commerce in the MENA region is fast catching up with global powerhouses such as China, with many online retailers scaling up their services to avoid Covid-induced disruptions, according to an EZDubai report.

The total e-commerce market size in the region is likely to reach $49 billion in 2025, surging from $31.7 billion last year.

Another report by Checkout.com said that MENA is home to some mammoth retail conglomerates, many of which have been around for decades and now oversee global franchises.

With the advent of numerous aggressive global retail marketplaces, the retail sector is arguably one which has been forced to digitize earliest in the region.

Nevertheless, the pandemic did mark a serious tipping point for consumer adoption and was the galvanizing force that sent smaller local retailers and exclusive luxury brands online too.

At least one in three consumers across MENA bought retail products online in the past year, with 46 percent of all consumers shopping for fashion and clothing online.

Moreover, at least one in five consumers across MENA are now purchasing retail products online more frequently than last year, with 33 percent of all consumer shopping more frequently for fashion and clothing online, the report noted.

“Policymakers in MENA are alert to the opportunity and their initiatives are making a material difference,” Paul Carey, Executive Vice President of Cards and Payments, Al-Futtaim Group, wrote in the Checkout’s MENA digital economy report.

“Governments and regulators in the region are patently dedicated to providing an optimal environment for us to build a robust digital economy. The UAE’s Digital Government Strategy 2025, Saudi’s Vision 2030 and Egypt’s Vision 2030 all set their agenda and targets for a digital economy,” he stated.

Asked about the possible challenges facing the sector, Mathew said the challenges witnessed in 2022 were more structural, which are expected to continue in 2023, with increased competition and low entry barriers for e-commerce fulfillment providers.

“This should impact incumbents and venture capital-backed new entrants as they engage in price competition for a largely commoditized service offering.” 

Mathew said e-commerce continues to capture market share from revenues of brick-and-mortar stores, but these remain for consumer staples and more homogenous products.

“For luxury and high-end lifestyle, in-store visits remain the preferred choice; however, virtual tours of product offerings from high-end brands now represent a growing trend.”

According to Kamco’s senior executive, high telecom and Internet penetration and higher consumer spending habits remain the biggest drivers.

“Further a strong preference for digital, social media engagement and influencer-driven market preferences further pushes e-commerce in the region.”

On the possible new trends next year, Mathew said video shopping with multifarious customer touchpoints still is nascent but should emerge further in 2023.

Customers and retailers continue to warm up to the Buy Now Pay Later (BNPL) schemes, and now BNPL merchants and platforms offer services free of interest for purchasing high-value items as payment optionality continues to evolve, he stated.

Half of the consumers in Saudi Arabia and UAE used BNPL options in 2022, with 67 percent across MENA indicating they may use it next year, according to a Checkout.com report.

Further, 55 percent of 18–35-year-olds in UAE and Saudi Arabia would like to be able to pay for goods and services in crypto or stablecoins in the next 12 months, it added. “Willingness is there for crypto users to utilize it as a form of payment, but whether e-commerce platforms include them will depend on the further evolution of regulation for various customer-merchant crypto transactions, and of course, stability in cryptocurrency markets,” Mathew concluded.