The ever accelerating growth of the Internet on a global basis and its enabling of a new high-speed, low-energy, almost free infrastructure of borderless, global, instant, online everything, is seeing impacts on society and economies globally.
Connected nations around the world increasingly use advanced technology to live, work, socialise, be informed and entertained using online services via a wide range of devices such as PCs, Smartphones, Tablets, Smart TVs and even Google Glass and Apple iWatch in the near future.
Nowhere is the impact of this continued evolution being felt more than in the eCommerce Retailing Sector.
And what about eCommerce in the Middle East?
Online shopping in the Middle East is rapidly evolving and has grown by 1500% over the last decade. With a dynamic young population and with one of the highest global per capita internet penetration levels the online spending potential is quickly emerging as one of the highest in the world.
We highlight the word potential as that’s exactly what it is. The potential has been there for a while now and many of us living in the region have seen the headlines suggesting that the online shopping revolution is at our doorstep, but what excites us are the first true success stories quietly emerging from that mist of opportunity.
Is the potential finally being realized?
In 2012, $3.2 billion was spent by online shoppers in the GCC alone. Combined with an eagerness to spend, and a desire from regional consumers to embrace ‘newness’, now is the perfect time to realize the potential of the Middle East Shopper.
PayPal has relatively recently joined the party and they recently released some statistics based on their research in the region:
- There are 110 million internet users in the Middle East and North Africa, of which 30 million are shopping online already. PayPal estimates a total population of 350 million.
- Spending online in the Middle East and North Africa was $9 billion in 2012 and is forecast to grow to $15 billion by 2015, of which $3 billion will be spent on mobile, up from the $500 million spent today.
- Travel tickets are currently the biggest spend for online shoppers in the Middle East, with an average of $1,521 spent each year, followed by $250 on consumer electronics.
- About 10% of purchases in the Middle East are made on a tablet or mobile, and 90% at a PC or laptop.
- Trade between online shoppers in the Middle East and businesses based in the region makes up only 10% of total spend. The rest is consumers buying from outside the Middle East and delivering to the region.
- About 80% of online purchases in the Middle East are made with cash on delivery. Credit and debit cards make up 15% and PayPal the remainder.
- Souq.com, Cobone.com and Sukar.com are the three biggest, locally-based e-commerce sites in the Middle East based on consumers’ average annual spend.
The United Arab Emirates is the largest e-commerce market in the Middle East, with consumers spending $2.9 billion online last year.
Internet users versus online shoppers
It is widely known that the adaptation and penetration of the Internet in the Middle East is very high, significantly higher than the global average and not far behind US and European regions.
In contrast to this, regional businesses’ adoption of online shopping has historically been rather low. From the stats presented by PayPal and other research conducted in the region, one can clearly identify the need for more local businesses to embrace eCommerce more seriously. Currently there is a real lack of professionally executed online shopping sites that will instil confidence in the online user and convert them into online shoppers. Businesses need to invest more into their digital channels in order to take part and bear the fruit of this eCommerce evolution which is finally happening in this region.
With this evolution, businesses should not forget mobile. Mobile commerce has even more potential in the Middle East due to the high smartphone and tablet penetration, with mobile often the most common mode of connection to the internet. M-Commerce accounted for 10% of all B2C E-Commerce in the region in 2012, but it is expected to at least double by 2015.
UAE leads in online sales
eCommerce is growing in the UAE at a rate of over 20% annually! Over 80% of the population are Internet users, and of this number over 15% shop online and around 10% do so on their mobile devices. Consumer electronics and appliances was the largest product category by B2C E-Commerce sales in UAE in 2012, excluding travel and tickets.
B2C eCommerce is also burgeoning in Saudi Arabia. Currently, sales are largely restricted to clothing, electronics, appliances and travel bookings and a growth of 40% is expected between 2012 and 2015.
eGovernment and eCommerce
It’s very important to highlight that this growth in eCommerce is not solely driven by the private sector. An important factor in building trust in online commerce over the last few years has come from eGovernment initiatives. Across the region, you see the integration of traditional offline services such as Visa services, Traffic services, Utilities services and many more onto online platforms integrated with online payments to provide citizens and residents faster and more effective public services online.
In addition to moving services online, the UAE government has even taken the bold step of setting upthe world’s first purpose-built duty free eCommerce hub ‘Matajircom’. With its founding partners, Aramex, Cupola, CWT-SML Logistics, du, Dubai Trade, ENBD, MasterCard, Mohebi Logistics, Shop Go, UPS, Economic Zones World (EZW) and Dubai Customs, there is a clear drive from the government to work closely with regional and international companies to encourage the growth of eCommerce, aiming to bring local, national and international markets closer together with Dubai aiming to become a key player for years to come.
The future of eCommerce in the Middle East is bright. We all know this, but it’s exciting to see the first real success stories of local and international brands that are paving the way for others to follow. More importantly, they are encouraging and building trust in online shopping in the Middle East and converting internet users to online shoppers.
We can already see the eagerness to harness the power of online commerce with our own clients. Examples of this include Abu Dhabi Film Festival that has developed a fully responsive website with ability to purchase movie tickets from your desktop or mobile. The solution integrates with a bespoke film & ticketing management system that ensures ticket availability is always synchronised across all points of sale.
Another client, AdventureHQ, has opted for a build of a completely customized eCommerce engine to suit their specific requirements, while for GCAS (Gulf Centre for Aviation Studies) we extended the website to enable booking and paying for training courses online.
Integrations with various online payment gateways are also becoming a more common feature across our projects. The most popular payment gateways are: Network International (CyberSource), PayPal as well as solutions from Mashreq Bank (MiGS) and National Bank of Abu Dhabi.