The UAE and Saudi Arabia lead the eCommerce growth in the Middle East. In 2020, these two countries contributed to 75% of the eCommerce sales in the region
According to a report titled, ‘eCommerce Sector in the UAE 2020 insights’, the UAE eCommerce sector emerged as the fastest-growing economic segment in the Middle East in terms of value sales, supported by rising digital connectivity, infrastructure and substantial growth in consumer electronics, apparel, and footwear.
The report was launched by EZDubai, a dedicated eCommerce zone in Dubai South, in partnership with Euromonitor International — the world’s leading provider for global business intelligence, market analysis and consumer insights — and Jones Lang LaSalle (JLL), a professional services firm that specialises in real estate and investment management.
The findings examined the dynamic changes in the eCommerce market and presented a regional overview of the sector, evaluating its growth and future opportunities, taking trends as well as key major growth drivers into consideration, including COVID-led digital transformation and technological advancements that are set to reshape the industry moving forward.
In his comments, Mohsen Ahmad, CEO of the Logistics District – Dubai South, said: “eCommerce continues to be an upward trend in the UAE, and this is a great opportunity for logistics players to expand their operations and capture the untapped potential of cross-border e-commerce.
“The sector played a major role in boosting Dubai’s economy and that of the UAE, consolidating the emirate’s position as a regional hub for eCommerce by attracting leading movers and creating a sustainable ecosystem for a number of corporations.”
He added: “The transition to online payment and the transformation of technological capabilities into quicker, safer and personalised experiences are among the key trends affecting regional eCommerce. EZDubai holds an important role as the first operational eCommerce zone in the region; and we are pleased to share the latest developments of this sector with our industry players.”
The findings revealed that the eCommerce growth in the Middle East is mainly driven by the UAE and Saudi Arabia (accounting for 75% of total eCommerce sales in 2020) due to the high purchasing power, expanded usage of social media, and smartphone penetration rates compared to other regional countries.
According to the report, store-based retailing is expected to grow by a CAGR of 1% over the 2019-2024 period, while eCommerce is forecast to grow by a CAGR of 19% over the same period. Apart from the impact of COVID-19, online penetration in the Middle East is forecast to double to 6% by 2024, compared to 3% in 2019.
Hussein Doughan, General Manager of Euromonitor International in Dubai, said: “The digital revolution has been rewiring retail for years, leading to new business models, commerce ecosystems and channels for reaching and engaging consumers. The COVID-19 pandemic accelerated this transition, as eCommerce became the default option for many homebound consumers.”
Euromonitor International projects that half of the absolute value growth for the global retail sector over the 2020-2025 period will be digital. That equates to USD1.4 trillion in absolute value growth as more goods are sold online. To put that projected eCommerce growth in context, that would be roughly the size of the total value of products sold across all retail channels just five years ago.
He added: “The eCommerce sector in the UAE and broader Middle East region is poised for growth. Euromonitor International’s Digital Connectivity Index, measuring a country’s digital landscape over time, reveals that the UAE is outpacing its emerging market counterparts on the index given its well-developed eCommerce infrastructure, coupled with its tech-savvy population.”
In line with its continuous effort to present insightful facts about the impact of eCommerce on the retail logistics sector, JLL found that since the outbreak of COVID-19, eCommerce penetration doubled, increasing from 3% in 2019 to 5% in 2020 across the region.
Retailers with established eCommerce and digital platforms performed significantly better than brick-and mortar outlets, which faced pressure during the lockdown periods.
Also, it was reported that the region benefited from a solid and well-established infrastructure. According to the World Bank’s Logistics Performance Index (LPI) 2018, the UAE ranked 11th globally and the first regionally in terms of the efficiency of its customs, strong infrastructure, quality of logistics services, tracking and tracing. This has supported the country’s position as a leading logistics and e-commerce hub.
Thierry Delvaux, CEO of JLL MEA and Turkey, said: “The global real estate market continues to be impacted by technology and behaviour because of COVID-19, which has undeniably accelerated the pace of digitalisation. This is particularly evident in the retail sector where consumers are shopping online at a much greater frequency than ever before.
“As a result, retailers have been forced to reimagine themselves to adapt to the changing needs of a society that is now more dependent on e-commerce. We are pleased to have been able to collaborate with EZDubai and Euromonitor to share insights on the trends driving the retail logistics market and look forward to supporting entities in the region tap into the transformative growth potential of this sector.”
EZDubai, was designed to attract leading eCommerce companies and create a benchmark with its infrastructure. The eCommerce zone, that was launched in January 2019 by HH Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, aims to promote the emirate’s position as a hub for regional eCommerce.