Saudi Arabia, UAE, Egypt lead boom in Arab world online shopping

The e-commerce market in the region was worth $22 billion by the end of 2020, boosted by online shoppers from Saudi Arabia, Egypt and the UAE.

The three countries form 80 percent of the region’s overall e-commerce market, according to the study, which was launched at a virtual event on Wednesday.

In Saudi Arabia, the market volume is expected to reach $8.2 billion by 2024, and although the UAE currently has the largest market size, the Kingdom “is growing at a faster rate.”

“The UAE’s digital economy prior to COVID-19 contributed 4.3 percent to the country’s gross domestic product (GDP). In addition, the e-commerce industry in the country is set to reach $62.8 billion by 2023, according to the Dubai Future Foundation,” the report said.

Although it was natural for these three countries – which are the Middle East’s major population centers – to have a bigger share of the region’s e-commerce pie, the growth was also attributed to massive infrastructure improvements in recent years, increased investments, as well as growing state support to regulate online shopping.

Around $665 million was invested in e-commerce in 2016 to 2019, which the report noted is almost 20 percent of the total amount of investments in startups in that period.

Government regulators also saw the potential of the market as early as 2017, when Dubai Airport Freezone Authority, inaugurated the $870-million “Commercity” project – a free trade zone dedicated entirely to e-commerce.

In 2019, Saudi Arabia passed an e-commerce law which was aimed to protect consumers from fraudulent transactions – a bid to increase consumer confidence and stimulate the market.

These efforts contributed to the fast growth of the e-commerce industry in the region, the report noted, and this year, it is expected to grow by another 35 percent to reach a gross value of $30 billion.

The pandemic also accelerated the upward trajectory of e-commerce, not just in the region, but globally.

Leading global e-commerce platform Amazon.com recorded $88.9 billion in revenue during the second quarter of 2020 – a 40 percent year-on-year increase in net sales.

Major retail conglomerates, including Emaar Malls and Majid Al Futtaim, invested heavily in their digital infrastructures to capitalize on this paradigm shift – partnering with tech companies to launch their own virtual shopping platforms.

Saudi Arabia, along with the UAE and Egypt, had the highest market penetration, the report said.

“In the UAE and Saudi Arabia, the online retail market was estimated at $7.5 billion pre-lockdown. By the end of March 2020, it grew to $11 billion in those two countries alone,” it added.

The pandemic has encouraged big e-commerce groups to re-evaluate their regional supply chains.

The greater appreciation for e-commerce, coupled with the market challenges created by the pandemic, had big e-tailers in the region invest in localizing supply chains.

“Global companies will re-evaluate their supply chain and will aim to have multiple fulfillment centers around the world,” said Iyad Kamal, former chief operating officer at Aramex, which reported domestic business growth of 31 percent as customers grew their use of e-commerce, particularly in the UAE, Kuwait, and Saudi Arabia.

As the region reels from the lasting impact of COVID-19, opportunities in the e-commerce sector become more apparent.