E-Commerce in the UAE

Author

Abdullah Abdelkafi

Date

22 Feb 2021

Read time

4 Minutes

Payments

With the 2nd largest e-commerce market in the Gulf Cooperation council, e-commerce uptake in the UAE has been swift in 2020.

However, this emerging market was something to witness long before covid-19 with government-backed digital adoption schemes having been introduced in the years prior.

Now, in the wake of the global pandemic, with a 300% increase in the demand for e-commerce services within the UAE seen within the five months of 2020 alone, the UAE has demonstrated the increasing opportunity for e-commerce merchants.

With 99% of the UAE’s population online, it was simply a matter of time before the digital adoption of commerce took over. In fact, e-commerce within the UAE is estimated to grow by 78% between 2018 and 2023, with e-commerce sales growing year-on-year at a rate of 23% between 2018 and 2022.

With this defined trajectory of growth, which industry stands to profit the most from the rise of e-commerce in the UAE?

Businesses:

Untraditionally, the UAE’s digital swing in commerce has so far proven most beneficial to government services. This is unsurprising given the level of government backing to the adoption of digitalisation within the UAE and the popular mall culture that resides within the UAE itself.

Whilst the evolution of omnichannel experiences has helped push mall and retail culture into e-commerce environments, a study conducted by Visa (2020) revealed that the leading markets for online sales (accounting for 78% of online spend between March 2019 and February 2020) were:

• Government or Educational Services

• Grocery and Food Services

• Retail

• Clothing and Apparel

• Fast Food Services

• Telecom or Utility Services

• Airlines

• Accommodation Services

• Professional Services

• Fuel

How Shoppers Are Checking Out Online:

With 74% of e-commerce transactions within the UAE being made by an increasingly trusting generation of shoppers aged 31 and under (60% in Dubai) the preference to pay with cash on delivery for online purchases is changing at pace in light of Covid-19 and the aforementioned digital security initiatives.

Prior to Covid-19, data suggested that 58% of e-commerce purchases were being fulfilled by cash on delivery, but as mentioned – other factors relating to trust and security online, enabled this preference.

With average order values totalling to be the highest in the world at $332 per order on average vs $73 on average in Europe, it is arguably the pandemic – rather than any initiative – that has forced the hand and swifter adoption of alternative payment methods.

As of March 2020, 6 in 10 buyers prefer online payments to cash, with 61% of consumers using card and digital wallets more often with the increasing rise in online shopping that by 2023, is set to account for 28.2% of card payment transactions. This is a revision of what was estimated to be just 19.9% prior to the Covid-19 pandemic in 2020.

The use of debit card has increased by 7% between March 2019 and February 2020; compared to the same period in the year before, thanks to a higher degree of trust in secured payment flows that utilise tokenisation and the convenience of one-click checkouts that are utilised further by digital wallets such as Apple Pay and Google Pay – encompassing security, speed and convenience in a digital wallet solution. To add, 58% of UAE buyers abandoned their shopping carts due to friction in the authentication process online (2020).

Cross-Border Shopping:

49% of UAE shoppers shopped across borders with just a small minority of the population (12%) choosing to purchase products or services domestically on an exclusive basis. This is unsurprising given the large ex-pat population within the UAE.

Commerce Channels:

When considering taking e-commerce payments within the UAE, taking time to consider how UAE residents are shopping can shape how the customer journey is formed, and how a payment flow is executed with regard to payment methods and target audiences.

The UAE benefits from having 98.98% of its population utilising social media – witnessing a usage increase of 6.3% between 2019 and 2020.

With penetration rates highest across Facebook (79%) and Instagram (68%), the opportunity to utilise social commerce is prime within the UAE market – regardless of industry.

Add to that, the increasing preference for digital wallets and convenient payments, the main ways in which UAE’s social media users access their social feeds is via smart phone, with 9.7 million doing so daily – a 10.6% growth between 2019 and 2020.

With social media primed to populate e-commerce transactions within the UAE, 55% of customers worldwide make purchases via their phone after seeing a product or purchase on social media. In addition, 95% of UAE consumers used their phones to make a purchase within the last year – compared to just 78% at desktop.

Merchant Services in the UAE:

The UAE presents itself as a unique example wherein the right payments provider can help businesses scale omnichannel services that cater to what is still a divided hub of traditional and digitised payment options.

Whilst e-commerce payments are undoubtedly on the rise, the ability to cater to customer choice seems more poignant than ever within the UAE’s payment landscape as consumer tastes continue to adapt and evolve.

Providing secure checkout flows, and a fulfilment of services, seems to come hand in hand with trusted big-name entities capable of providing secure authentication processes in online payments, and integrated EPOS management that can cater to omnichannel services at the point of sale.

To learn more about e-commerce in the UAE contact us today on 0330 122 6418.

Sources:

[Source 1](https://www.Statista.com)

[Source 2](https://gowlingwlg.com/en/insights-resources/articles/2020/e-commerce-in-the-uae-part-one/)

[Source 3](https://gulfnews.com/business/banking/uae-ecommerce-sector-to-grow-as-digital-payments-boom-1.75152029)

[Source 4](https://imapro.in/agency/online-shopping-websites-in-uae-everything-you-want-to-know-about-e-commerce/)

[Source 5](https://ae.visamiddleeast.com/en_AE/about-visa/newsroom/press-releases/prl-19052019.html)

[Source 6](https://www.tahawultech.com/industry/technology/contactless-payments-in-uae-rise-by-78-report/)

[Source 7](https://www.socialbakers.com/blog/uae-social-media-insights)

[Source 8](https://www.globalmediainsight.com/blog/uae-social-media-statistics/)

[Source 9](https://www.wordbank.com/uk/blog/social-media-in-uae/)

[Source 10](https://ae.visamiddleeast.com/dam/VCOM/regional/cemea/unitedarabemirates/media-kits/documents/visa_uae_ecommerce_landscape_2020_ppinion_paper_vf.pdf)