The UAE is the eCommerce leader among Gulf Cooperation Council (GCC) states, where the market jumped by 53% in 2020 with a record of $3.9 billion in eCommerce sales, which constituted 10% of total retail sales. That, in large part, was driven by a COVID digital shift. The Dubai Chamber of Commerce and Industry forecasts eCommerce to generate $8 billion in sales by 2025 as the UAE market has almost 100% of the population with internet and mobile phone access.
In 2017, Amazon.com acquired Souq.com, the largest domestic online merchant, giving the global operator a large share of sales in the UAE. Traditional store-based retailers are rising to the eCommerce challenge by improving the online shopping experience for customers. The product categories that produce the most revenue in online sales in the region are consumer electronics and appliances, media products, computers, fashion accessories, women’s apparel, cosmetics, and perfumes. The most important factors for online shoppers in the UAE were price, customer service, and ease of use. Other major in-country purchases include travel related expenses for cabs, airline tickets, and hotels. Mohamed Alabbar, Chairman of Emaar, launched Noon.com in 2017 as a regional competitor to Amazon. In 2018, Noon announced its partnership with eBay to bring U.S. products to the region.
Traditional brick-and-mortar retailers are pivoting quickly to provide customers with an additional online retail platform to augment their revenues. For instance, Carrefour and Lulu Group, two of the largest retailers in the Middle East, launched online shopping portals in the UAE.
Though much of the dramatic growth in eCommerce was a reaction to COVID-19, consumers report an increased trust purchasing products online, along with the UAE the having the highest smartphone penetration rate in the MENA region. E-government services are migrating to online platforms as well, where they are integrated with online payment platforms to provide residents faster and more effective public services. This includes services such as utility billing, traffic services, licensing, visa issuance, etc. That too has made consumers more comfortable with online transactions. The Dubai Free Zones Council (DFZC) announced new eCommerce regulations for free zones that will enable greater foreign direct investment (FDI) in the eCommerce sector in Dubai. DFZC’s initiative will primarily focus on encouraging the adoption of eCommerce in cooperation with Dubai authorities.
Retailers realize that language and localization are extremely important factors to be considered when entering the UAE e-commerce market. Luxury brands have launched Arabic language sites to attract local customers who have avoided e-shopping due to language barriers. Many online shoppers in the Middle East now use cross-border eCommerce shopping. Online shoppers in the UAE made 58% of their online purchases from overseas vendors due to trust in gateway security, along with reliable and free shipping methods. Products and brand reviews on social media platforms influence e-shopping behavior. E-commerce players can leverage social media to increase sales much in the same way as other foreign markets.
Although eCommerce in the Middle East is potentially highly lucrative, in part because of the region’s young and tech-savvy population, there are barriers that remain in the UAE’s eCommerce market. These include the prevalence of cash on delivery over other electronic payment methods, consumer wariness of the safety of e-commerce system, security concerns, inadequate logistics, a lack of a unified address system which creates challenges for last-mile delivery, and the inability to touch and test products before purchasing them.
The Telecommunications Regulatory Authority (TRA) is the primary regulatory body responsible for regulating electronic transactions and commerce in the UAE.