In ecommerce, UAE’s big retail groups are slowly gaining market share

We have all witnessed the steep rise in GCC’s digital economy spread. Many digital-only brands have prospered and consumers have been spoilt for choice. The Gulf is not unique in that sense as most other regions too have witnessed similar levels of disruptive adoption of online channels.

However, the market structure of the digital economy in the GCC is different. To Illustrate this, take the example of online retail. Let’s start with a quick question – ‘What would the combined market share be for the largest two online retailers in the GCC?’. Most of you are already thinking of Amazon and noon, the two most popular online retailer in the GCC. I have asked this question to CEOs, senior government officials, and others. But this cannot be further from the truth.

Our estimates on the market share of the top two players is around 30 per cent – that’s more than a 100 per cent variance on the collective impression of consumers’ understanding of the online market structure of GCC. (We do the market structure exercise at a granular sub-category level for each country in GCC.)

What explains this high variance between perception and reality? There are a few explanations:

What will change

The cross-border trade is declining on the back of stronger local supply and regulation. The anchor effect seen in other markets is a perception issue that will slowly get resolved as understanding of the region improves. The third dimension – conglomerates - is a structural nuance of our region. GCC conglomerates are financially strong, understand retail business and have actively learnt from other markets to chart their own digital journeys.

These conglomerates have historically focused on profitable growth, which is what the current investor landscape values. So, although, conglomerates have been more risk averse in taking large digital bets, the investor enthusiasm could tilt the scale and make them more aggressive in pursuing the digital market. The fact that these conglomerates can be 25-30 per cent more efficient at capital deployment compared to the digital natives further strengthens the case.

In summary, they key takeaways:

The GCC digital market is very fragmented and there is still room for growth for incumbents to gain share.

Conglomerates are the hidden gems and can witness fast-paced growth in the current economic climate.

The understanding of digital market is relatively limited – high quality data-based decision making can help unlock the market faster.