The GCC’s e-commerce market is ready to launch, but it can only really develop if payment and behavioural obstacles can be cleared.
E-commerce may be reaching a tipping point in the UAE. With the upcoming launch of Noon. com, the region is poised for an e-commerce breakthrough. Based in Riyadh, Noon.com is backed by Saudi Arabia’s Public Investment Fund and Mohamed Alabbar, the chairman of Emaar Properties, one of the UAE’s leading real-estate companies, known for various large- scale projects such as Burj Khalifa, the tallest building in the world.
The $1 billion e-commerce site is set to launch in January 2017 with 20 million products, a dedicated logistics centre in Dubai South (an economic free zone formerly known as Dubai World Central supporting activities including aviation, commercial, exhibition, humanitarian, residential and others), a dedicated payment portal, and same-day delivery planned for shoppers throughout the Middle East.
Mr. Alabbar claims the site will be “game-changing.” For Dubai- based online retailer Souq.com FZ, years of laying the groundwork for e-commerce have led to discussions with US online retail giant Amazon. for the purchase of the site. Though these developments show that the e-commerce sector is ready for exciting growth, fundamental problems could still impede progress.
Online shopping still has a way to go in the Middle East. 33% of Internet users in the MENA region prefer online shopping, with the UAE and Saudi Arabia leading the market. Dubai residents make up 46% of online shoppers in the UAE according to Awok.com, whilst Network International found that 34% of UAE residents have made an online purchase between one and five times a week, with 5% making a purchase more than five times a week as of Q2 2015. Sam Whitcombe, Vice President of Spiral Click Web Technologies, a leading web development and design agency based in Dubai, feels bullish about the potential of e-commerce in the region in 2017. “We have seen an increase in enquiries from small e-commerce websites to massive online marketplaces, from tech entrepreneurs to the largest retail brands who are all now getting in on the action by opening their online stores to complement their bricks and mortar retail shops.”
Millennials are expected to fuel the e-commerce boom. With high disposable income compared to global peers, UAE-based millennials make up 51% of the current market, which is expected to expand to $10 billion by 2018, being half that only last year. With only 15% of regional businesses having an online presence, and Internet sales accounting for 3.9% of total sales in 2015, the launch of Noon.com and Amazon’s potential purchase of Souq.com mark a new age for online sales in the Middle East. Mr. Alabbar stated, “We are turning the e-commerce environment in the region upside down,” with Noon. com bringing “nothing less than a quantum leap in retail in the region, and the world.”
However, fundamental problems exist that could affect e-commerce’s growth throughout the region. GCC- based online payment gateway providers have developed but customers are still wary following poor experiences, as reported in a study by Visa. Customers also express concern over security, particularly regarding their card information. Additionally, with the highest number of shops per capita in the world, UAE consumers are accustomed to the “touch and feel” factor when making purchases. Many customers also still prefer cash payment, which can be difficult to arrange through an online portal.
Yet despite these barriers, Souq. com recently sold 1 million products during its four-day White Friday sale in late November. The GCC’s e-commerce market is ready to launch, but it can only really develop if payment and behavioural obstacles can be cleared.