UAE residents spend more for online shopping deals than at POS

UAE residents currently spend more when they do their supermarket shopping online as compared to when they make their purchases at an outlet, according to a study by Network International.

The payments company reported on Sunday that the overall average transaction value (ATV) of an ecommerce basket among UAE residents in 2020 was 40 per cent greater than that of point of sale (POS) transactions at supermarkets. “The increase can be attributed to a shift in consumer behaviour following Covid-19 lockdown restrictions with safety concerns and convenience, pro,” said the study.

Online shopping trend has been on the upswing in the UAE since the outbreak of Covid-19 and the subsequent lockdown. The World Economic Forum has estimated the UAE’s 2020 e-commerce market at $27.2 billion with similar growth across the region.

The maximal difference between ecommerce and in-store transaction values was recorded in November with online ATV at Dh279, more than double that of POS at Dh138. In contrast, average ecommerce basket value at the early stages of the outbreak in March at Dh294 stood 45.6 per cent higher than POS at Dh202.

Network International study said the rise in ecommerce ATV was accompanied by a 93 per cent surge in overall online supermarket spending volume in March 2020 during the lockdown period, and further increased post lockdown as residents preferred to remain cautious and stay at home to avoid contracting the virus.

The increase in spend dipped to 85 per cent in April as frustrated residents complained about facing weeks-long delays in deliveries while retailers struggled to tackle the logistical challenges of the unprecedented demand for deliveries as online orders soared, before jumping upward to 114 per cent in May and on to 280 per cent and 152 per cent in November and December respectively.

The growth was aided by the accelerated adoption of e-grocery start-up platforms and mobile applications as well as the rapid pivot made by food delivery and ride hailing apps to include groceries and other essentials as part of their offering, said the Network study.

On the other hand, POS spending volume among the UAE residents consistently declined, from 32 per cent in March to 10 per cent in May, further falling into negative territory, at 6.0 per cent in June and 12per cent in December respectively, signalling the increased dependence on digital and contactless commerce, and a likely permanent shift in customer behaviour. Contactless spending volumes also climbed since lockdown, up by 53per cent in March and increasing further to 64 per cent in December while regular transactions were down by 54 per cent in the last month of the year.

Nandan Mer, group CEO of Network International, said the past year has fundamentally transformed one of our biggest weekly chores driving a significant portion of the population to do their supermarket shopping online. “Looking ahead, it’s clear that an increasing number of consumers may continue to shop from the comfort and safety of their homes, appreciating the convenience that ecommerce and contactless transactions can bring them.”

As the global pandemic continues to spur e-commerce, a Mastercard study has revealed the rapid growth of online shopping, with nearly three out of four (73 per cent) UAE consumers shopping more online than they did before the pandemic.

According to another report, in the wider Middle East, North Africa, and South Asia region, the UAE represents the biggest annual spend per online shopper at $1,648. The UAE continues to maintain a healthy lead in average transaction size compared to both mature and emerging e-commerce markets. The average transaction value in the UAE was $122 in 2019-20, compared to $76 in mature markets, and $22 in emerging markets.

“The digital payments ecosystem in the UAE and wider Mena region was already experiencing strong growth, but the pandemic has helped accelerate the pace of change and progress,” said Marcello Baricordi, Visa’s general manager for Mena.

— issacjohn@khaleejtimes.com

Issac John

Editorial Director of Khaleej Times, is a well-connected Indian journalist and an economic and financial commentator. He has been in the UAE's mainstream journalism for 35 years, including 23 years with Khaleej Times. A post-graduate in English and graduate in economics, he has won over two dozen awards. Acclaimed for his authentic and insightful analysis of global and regional businesses and economic trends, he is respected for his astute understanding of the local business scene.