Dubai about to change e-commerce game
E-commerce is fundamental in building a network of retailers that have an international reach.
Dubai - Newly-introduced strategy to send strong signal that emirate is a global force to be reckoned with in retail
The recently-launched Dubai E-commerce Strategy will send out a strong message to foreign investors that Dubai has strengthened its position as a global hub for e-commerce, while helping regional players overcome many of the challenges that they are currently facing, industry experts said.
Launched by Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, Crown Prince of Dubai and Chairman of the Dubai Executive Council, the Dubai E-commerce Strategy was prepared by the Dubai Free Zones Council, in partnership with the Dubai Chamber of Commerce and Industry, Dubai Customs and Dubai Economy. The strategy aims to cement Dubai as global logistics hub for the region - where the e-commerce market is set to reach Dh12 billion of local GDP by 2023 - through a number of stimulative initiatives.
"Today, Dubai is a platform for major global e-commerce firms, thanks to the conducive business environment and flexibility of investment, in addition to the integration between the government and private sector, as well as its logistics and strategic location that facilitates international trade," said Sheikh Hamdan.
"The UAE in general and Dubai in particular top the list of the fastest-growing electronic markets in the Middle East and North Africa region, thanks to the smart government initiatives and programmes that adopted digital transformation, as part of the directives of His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai."
In addition to attracting more foreign direct investments into the e-commerce sector, the new strategy aims to increase the market share of Dubai-based firms to reach Dh24 billion by 2022. This will be done by slashing the business cost of e-commerce activities by 20 per cent, as well as reviewing the cost of storage, custom fees, value added tax, and transportation. It also aims to reduce the paperwork required for customs clearance, as well as the fees imposed while passing through free zone gates.
Gary Thatcher, CEO and co-founder of The Retail Summit, noted that the news of the new e-commerce strategy should come as no surprise.
"This is the way that the retail landscape is naturally shifting; e-commerce is fundamental in building a network of retailers that have an international reach," he said.
"The announcement also signals a more impactful change, one that is affecting the retail industry globally. There is a huge importance on the reciprocal relationship of retailers, not only how consumers interact with brands. Engaging with hyper-connected consumers and adapting to the change brought on by the convergence of technology and retail will be paramount in determining if a brand stays relevant. Those who don't run the risk of becoming extinct."
Research by Euromonitor International found that retail sales across Kuwait, Oman, Saudi Arabia, and the UAE are projected to increase by more than $24 billion over the next five years, with the UAE expected to lead this trend with an estimated growth rate of 16 per cent. The research indicated that the retail industry in the UAE is currently worth $55 billion and is forecast to steadily rise to $63.8 billion by 2023. Store-based retailing will continue to dominate, accounting for $52.7 billion of the overall market in the UAE; however, non-store retailing, which includes online shopping, direct selling, mobile Internet, social media and home shopping, will grow by 78 per cent from 2018 to 2023.
A recent study by the World Economic Forum, found that the value of the e-commerce sector in the UAE is expected to reach $27.2 billion by 2020, double what it was in 2016. Reports by Mashreq found that e-commerce spending in the UAE increased by 48 per cent in 2018 compared to 2017.
Make payments easier, smarter for convenience
Retailers across the UAE need to ensure that they are making it easier for consumers to shop and pay for their purchases online, industry experts said.
Fatima Sene B, CEO of Bovory Fashion, noted that the e-commerce sector in the country has been witnessing a steady growth over the years, but challenges still remained, especially when it came to payment methods.
"We have to improve smart payments for big e-commerce projects in the UAE," she said. "We need more flexibility in connections with electronic banking worldwide. Different currency options must also be included in UAE e-commerce."
Alexx Ekubo, Nollywood actor and businessman, also spoke about the new Dubai E-commerce strategy and how it is an example of forward thinking innovation by the Dubai Executive Council.
"We can see an upward growth in the e-commerce sector and with the recent launch of the new strategies, it is about to be astronomical," he said. "The challenges I foresee will be the actual implementation of the policies approved; for instance, the reduction of the fees imposed on goods passing through the free zone. If that is actually done, it will increase business, and Dubai will be well on its way to becoming the number one business capital of the world."
He also pointed out that technology and e-commerce is an inseparable duo. "Electronic commerce borders on technologies such as mobile commerce, electronic funds transfer, Internet marketing, online transactions processing, electronic data interchange, and an automated data collection system. Modern electronic commerce typically uses the World Wide Web at one point or the other."
Technology transforming UAE e-commerce sector
Technology has played a pivotal role in the growth of the UAE's e-commerce sector, and will continue to aid in the growth of the sector over the next few years, said Nabeel Hussain, CEO of NSHN Exhibition Organising.
"The role of e-commerce trade in the UAE is increasing with time. We see new e-commerce websites beginning to take over the Internet one after the other, which also plays a crucial role in increasing healthy market competition," he said.
"The UAE has the fastest growing e-commerce industry in the Middle East and North Africa region and comes fourth among the developing countries. This certifies that the UAE is steadily becoming a huge force in the e-commerce industry and many large-scale e-commerce companies internationally would look forward to opening their own data centres in the UAE."
He also stated that retailers have already been seeing changes in major technologies that have impacted the sector. "Social commerce is one technological advancement which has a major impact on buying decisions. Artificial intelligence is also taking over the way companies interact with their customers... So yes, it would be safe to say that technology's role in the e-commerce industry is of the utmost importance."
All's alive and well: Outlook for UAE e-retail bright
E-commerce is "alive and well" in the UAE today, said David Macadam, CEO of the Middle East Council of Shopping Centres and Retail (MECSC+Retail).
"With mobile phone penetration and digital usage at some of the highest levels in the world, the UAE is an early adopter of technology. The young demographic profile of the population and tech savvy status of the UAE make e-commerce a natural fit in the country," he said.
According Dubai Chamber of Commerce and Industry data, Dubai's retail sector is projected to record a compound annual growth rate of 5.2 per cent over the 2018-23 period, supported by strong international visitor spend, robust demand fuelled by a high frequency of mega-sales and shopping festivals and growing e-commerce activity. The emirate's retail sector generated an estimated Dh142 billion in sales during 2018, a growth rate of 6.8 per cent. Store-based retailing dominated sales, accounting for 95 per cent, while e-commerce continues to grow rapidly, with a 19 per cent year-on-year growth and Dh5.5 billion sales.
"The outlook for the e-commerce industry globally is universally upbeat, bright, and positive; online purchases regionally and globally continue to increase 20 per cent or more annually, depending on the region," Macadam said.
"As business practices become easier to conduct and reliable online, the e-commerce business will grow exponentially. The UAE compares favorably with many countries in the e-commerce business, especially in the online retail business. The number of businesses using online trading platforms will continue to grow. Ease of use, on time personalised delivery, and price competitiveness make online purchases a proven lifestyle in the UAE."