Dubai takes a major leap as an e-commerce hub

Dubai might be home to some of the biggest and successful malls in the world, but it is aware that the future of retail commerce rests in the virtual world. The recent announcement of a Dh2.7 billion e-commerce free zone is arguably a step to make Dubai a regional leader in this sphere. Global e-commerce has been expanding at an average rate of 20 per cent annually over the past decade. The trend is picking pace in the GCC, too, as the e-commerce market is forecast to quadruple by 2020, generating up to $20 billion in revenues from $5.3 billion in 2015. So far, under-developed digital payment systems, poor logistics and preference for cash transactions were largely to blame for sluggish growth in the region.

Digital sales account for just two per cent of the retail market in the region compared with up to 10-12 per cent of online sales in more developed markets. It is likely to change fast. Banks and retailers in the GCC, and particularly in the UAE, are adopting virtual payment methods, and upgrading to secure platforms that inspire confidence in consumers to go online and shop. Deepening penetration of smartphones in the UAE is also enabling this transition. It is reflective in the success of ventures such as souq.com, which has emerged as a regional titan, and many more projects are gearing up to replicate its success. Noon, backed by big investors, could be another player to watch out for.

Global e-commerce industry is aware of the potential of the region. Amazon has already opened office for its web services in Dubai and Bahrain, which indicates the growing importance players accord to the UAE. Dubai has always been ahead of the curve. Several well-planned free zones have played a key role in attracting multinationals to its shores and elevating the status of Dubai as a launch pad for the region. With well-established ports, aviation industry and logistical support, the new free zone will allow Dubai to take a leap forward and emerge as the preferred address for e-commerce companies, too.