Pandemic accelerates demand
As Bill Gates pointed out, the advance in technology is marked by how it becomes a part of daily life without being noticed. In the case of e-commerce, Covid-19 is a catalyst and accelerator. It tipped online shopping to near ubiquitous everyday behaviour in many urban segments around the world. In the GCC, AT Kearney predicts e-commerce to double to $50 billion between 2020 and 2025, an annual growth of 16 per cent per annum; a third of the growth, or five per cent per annum, is incremental from the pandemic.
E-commerce has been growing rapidly in the GCC, especially in the UAE. High internet penetration, well-developed infrastructure, a young 'digital native' population and government intent are a few region-specific growth drivers, in addition to global factors like improved online security and new payment formats.
The pandemic has brought about a qualitative change in consumer attitudes and behaviour. For example, the growth in hitherto more brick-and-mortar categories like grocery, food and fashion, or the growth in card, digital wallet, or non-COD payments - an old regional bottleneck that is now finally easing up.
Thrivers and strivers
The e-commerce business ecosystem is rapidly evolving across large, pure-play marketplaces, omnichannel e-stores, specialist niche e-tailers, delivery aggregators and nascent direct to consumer (D2C) plays from big manufacturers. Start-ups continue to mushroom despite the economic slowdown, and e-commerce still attracts investors' attention, with the right ones also attracting their funding. Regional governments have actively supported the sector through a host of enablers and incentives.
However, the thriving overall scene does not imply that it is easy for the average individual business. Challenges abound; it is a rapidly crowding space dominated by one or two giants with deep pockets. Ranged against thin initial margins are the operating costs of fulfilment, marketing, etc., driven by ever-inflating customer expectations. Technical and systems health requires adequate CapEx and working capital flows. Strategic and operational excellence are, therefore, imperative but hard to sustain. Then there are the often-daunting challenges of setting up, legal and tax. For instance, the choice of right licence and appropriate legal structure; or VAT compliance with its multiple procedures; or the complexity of international tax for cross-border operations (for any non-locally bound e-business). They apply to all businesses but given its newness and the pressure of rapid change in technology, consumer behaviour and regulatory environment alike, the challenges are heightened for e-commerce.
Help is at hand
At MBG Corporate Services, we have launched a specialised offering e-commerce Integrated Compliance (ECIC) with legal, tax, risk advisory, audit and technology solutions for all relevant businesses. Some of the services include advice on legal structure, advice and support on tax compliance and risk mitigation under both domestic and international tax laws, comprehensive risk advisory and strategic counsel across the entire operational value chain, in-country value improvement, automation and technology advisory.
Contact MBG Corporate Services on firstname.lastname@example.orgÂ or WhatsApp +971-52-6406240
To know more, visitÂ www.mbgcorp.com/ae
Naresh Manchanda is partner at MBG driving key verticals and managing the foreign enterprise group.
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