Dubai: So, how much will you be spending online this year?
By the looks of it, more UAE shoppers are getting into the online habit, whether it be for an everyday grocery purchase or treating themselves to a Chanel handbag. The numbers say so, because at the end of last year, ecommerce sales in the UAE were running at $5 billion. Not just that, by the time 2025 comes around, the country’s shoppers will have transacted $8 billion worth of purchases. (In other words, more groceries and more Chanel merchandise will go from a ‘fulfilment centre’ into the hands of the shopper in the UAE.)
That’s according to some number crunching done by EZDubai, a free zone at Dubai South that was set up exclusively to handle ecommerce-focussed tenants, and the consultancy Euromonitor International.
“More consumers in the UAE made online purchases across all categories during 2021 compared to 2020, with an average 75 per cent of respondents typically purchasing online,” said the report, which provides a balanced forecast on the growth chances for ecommerce in the UAE and wider Middle East.
The UAE and Qatar are in the strongest position regionally on ecommerce, with internet penetration above 90%. Both have successfully implemented fiber access in homes and have the highest active mobile-broadband subscriptions in the region.
It means that a sizeable number of UAE shoppers who made their first digital shopping during the COVID-19-scarred 2020 stuck with online even as the pandemic subsided. They got their first look of buying online, liked what they saw and the experience, and stuck with it in the months thereafter.
According to Mohsen Ahmad, CEO of the Logistics District - Dubai South, “The growth of e-commerce that is witnessed in the UAE and the MENA region encourages us to work harder and closer with our e-commerce players in order to boost the sector, so that the emirate’s e-commerce market becomes a global powerhouse.
Placing an order overseas
One piece of data the report highlights is on the percentage of ecommerce deals being placed with portals outside of the UAE and shipped into the country. According to these forecasts, overseas portals made up 26 per cent of the orders placed by UAE ecommerce shoppers and that the figure will rise to 32 per cent in 2025.
Should that sound an alarm for UAE-based ecommerce vendors, who all these years had been strenuously trying to get shoppers to buy local? According to EZDubai report, the main reasons for UAE consumers choosing a portal outside of the UAE is because:
- They can access a wider range of products or be able to search for lower prices or higher quality products not offered locally.
- The UAE also has affordable shipping costs for consumers looking to purchase outside the region.
No need for alarm bells
Sandeep Ganediwalla, regional Partner at RedSeer Consulting, says the higher share for overseas shopping portals need not get local ecommerce vendors into a tizzy. “As recently as 2017, overseas portals made up 40-50 per cent of the UAE’s overall ecommerce sales,” he said. “The number is down to about 25 per cent based on our estimates, and that means the noons and the amazon.aes in the UAE were successful in winning shoppers who might have earlier bought from outside.
So, if by 2025, even if non-UAE sales make up 30-35 per cent, it shouldn’t be seen as a threat. The UAE ecommerce market has grown exponentially since 2017 and more since 2020 – the 30-32% level should be seen in that context.
“However many online options are made available domestically to shoppers in any market, a percentage will still buy from overseas. Especially in a market such as the UAE with its expat population, many would be shipping in through their Amazon accounts in their home country.”
Rush is over
The year of the pandemic outbreak – 2020 - led to a rush of new shopping and service-oriented portals being launched. Many of them targeted instant grocery deliveries as shoppers remained indoors, and they were portals those getting into the food delivery order business. In addition, each new virtual F&B restaurant launched during the pandemic phase through a cloud kitchen meant its own portal presence.
Last year showed a slowdown in such launches – but there were two other trends that helped with the ecommerce growth. One was the Buy Now Pay Later platforms, which offered easy credit terms to finance consumer purchases. The other was the rise in demand for secondhand goods.
At the current pace and growing consumer preference for online retail, the region will see e-commerce grow at over $18 billion in absolute value terms over 2021-2025 reaching over $49 billion in 2025.
Marie-Hélène Stavelot is the founder – and CEO - of Reluxable, a shopping site that trades in pre-owned goods. She agrees that there will be some consumers in the UAE and elsewhere who would baulk at buying used merchandise – but there is also a growing band of users willing to give this a try.
There is definitely a wider consumer acceptance of preloved goods, and the increasing number of shops selling secondhand products is proof of that. Some stigmas surrounding preloved items’ consumption are hard to shake off.
“Still, we live in a day and time where we are aware of the fashion industry’s impact on the planet. Buying secondhand is one of the ways we can make a better change – therefore, it’s quite democratized.”
Will 2022 throw up any new trends of its own? Interestingly, this year will see a handful of pure-play online retailers getting into physical retail. The Apparel Group’s 6thStreet.com is one such brand making that addition, as are a couple of eyewear retailers, eyewa and Lenskart. Will more online portals feel like doing the same? Keep an eye out.
All that matters is how fast can the UAE’s retail space – online and off- - grow in the coming months. Retailers and shoppers will get a chance as early as next month with the start of Ramadan and then the Eid holidays…
