Growth in e-commerce comes as digital becomes the future in the UAE
2019 is hailed as the year for online shopping in the UAE. As the e-commerce market gains momentum regionally and globally, customers today can get their hands on a vast range of consumer goods and services, all available via a tap, click or swipe.
The UAE is making rapid strides as the fastest growing e-commerce market in the Middle East and North Africa (MENA), according to a joint study by Dubai Economy and global payments technology company Visa, which ranks first in Forbes list of ‘World’s Best Regarded Companies’.
With the world becoming more connected and consumers’ trust on online shopping evolving, we believe that consumer spend via online retail platforms will see significant growth in the coming years.
E-commerce transactions in the UAE are forecast to total $16 billion (Dh59 billion) in 2019 and grow 23 per cent annually between 2018 and 2022.
“By growing the e-commerce sector in the UAE, we are by extension helping to drive economic growth and extend the benefits of digital payments to residents and businesses in the country,” says Shahebaz Khan, Visa’s General Manager for the UAE.
Here are the top 10 reasons why the country is a powerhouse for e-commerce in the region, according to Visa’s UAE eCommerce Landscape report:
1. High digital penetration
Growth in e-commerce comes as digital becomes the future in the UAE. Mobile phone penetration is now at a world-record high of 210.9 per cent, according to Visa’s research. UAE residents also are among the top 10 globally when it comes to spending time on the internet and social media, averaging seven hours and 54 minutes daily. “With the world becoming more connected and consumers’ trust on online shopping evolving, we believe that consumer spend via online retail platforms will see significant growth in the coming years,” says Khan.
2. Digital natives
The UAE’s population comprises nearly 30 per cent of digital-native millennials (born between 1981 and 1996) and a growing Gen Z (born between 1997 and 2012). These digital natives are always connected and seek on-demand, near-instant solutions. Their desire for fast and convenient shopping experiences is expected to accelerate the uptake of online shopping.
3. Rising use of mobile wallets
A deep penetration of smartphones is the baseline for mobile wallet adoption, and this has been a reality for years in UAE, says the Visa report. The use of mobile wallets in the UAE has increased with global giants such as Google Pay, Samsung Pay and Apple Pay entering the fray along with local players like Etisalat Wallet and Beam Wallet, as well as local banks. With a simple tap of their smartphone or smartwatch, residents can today pay at supermarkets, hotels, department stores, petrol stations, taxis, cinemas and many more outlets.
4. Government intent
Proactive government policies have been crucial in building a digital culture in the UAE and eliminating many of the barriers to becoming a cashless society. Digital commerce and cashless payments were identified as top government priorities in UAE Vision 2021. The government has implemented a number of initiatives to support it, such as the wage protection system. Moreover, a digital, lean, connected “paperless, cashless government, driven by cutting-edge, disruptive technologies, defining the government of the future now,” is part of the Smart Dubai 2021 initiative.
5. Trust in digital payments
As per a recent Visa-DED security survey that examined consumer perception of digital payments and online shopping, 66 per cent of respondents said they trust online shopping and 70 per cent trust online payments. “The possibilities for merchants, financial institutions and consumers are enormous, and it is vital, therefore, that we continue to build consumers’ trust and improve the infrastructure of online payments so that consumers can benefit from more seamless, rewarding and secure shopping experiences,” says Khan.
6. Average spend per transaction
The UAE shopper is among the top spenders online. In the wider Middle East, North Africa and South Asia (MENASA) region, the UAE represents the biggest annual spend per online shopper at $1,648, with growth projected through 2020 at 29.6 per cent. This is supported by Visa transaction data, which shows that the UAE continues to maintain a healthy lead in average transaction size compared to both emerging and mature e-commerce markets. The transaction size in the UAE averages $144 in 2018-19, compared to $79 in mature markets and $26 in emerging markets.
7. Going cashless
At first glance, the UAE looks to be a long way off with 75 per cent of all transactions still made using cash, but the country has already laid down strong foundations to go digital. The UAE ranks foremost among regional economies most rapidly moving away from cash. Card payments continue to grow in the UAE, recorded at 70 per cent in 2018, compared to 68 per cent in 2017, according to Visa’s report. During the same period, cash-on-delivery dropped to 15 per cent in 2018 from 22 per cent in 2017.
8. Improved logistics
Logistics can be a game-changer for any e-commerce business. Luckily, the UAE is a focal point for distribution, and its low logistics costs and superb infrastructure make it an ideal place for e-commerce to thrive. It enjoys an advantage as a major global trans-shipment hub with the port of Jebel Ali and Dubai International Airport (the sixth busiest cargo airport in the world) providing a high standard of logistics, according to the Visa report.
9. Increased security
Striking a balance between frictionless customer experience and strong security is another important aspect. Banks and payment providers in the UAE such as Visa are working to enhance card security for online transactions, adding an additional layer of security to the process. Online retailers can partner with payment processors to adopt protocols such as Verified by Visa, which works by sending the shopper a one-time-password to ensure payments are made by the rightful owner of the Visa account.
10. Growing digital shopping opportunities
On the digital merchant side, we have seen growth both domestically and internationally, including a number of digital startups with world-class shopping experiences for in-app and mobile. At the same time, we have also seen traditional retailers across all sectors go digital and global brands have opened delivery services to the UAE, making it easier for consumers to order and receive goods seamlessly.
— Global payments technology Visa works to enable consumers, businesses, issuers and governments