Guide to start an E-commerce business in UAE

The global online business is snowballing, and the Middle East and the UAE, in particular, have substantial unopened e-commerce potential. The E-Commerce sector in the UAE is still in the stage of development here, and it is the best time to occupy your niche in the UAE’s online market.

As the world is getting ready for the upsurge of E-commerce businesses, UAE is not far behind in becoming 100% active in e-commerce. In the last three years, 72% of the users in the UAE have moved to the online format and made their first online purchase. The region is known for its high internet penetration, and literacy rate, the e-commerce in UAE is set to achieve a market of AED 40 Billion

UAE E-Commerce Sector – An Overview

The Ecommerce industry in the UAE is on an upward trajectory. Its unique growth plan, compared to both emerging and mature economies, is led by the government adoption of eCommerce payments on platforms such as Dubai Smart City. Government payments lead the eCommerce landscape by far, despite exponential growth in other categories such as quick service transportation and restaurants.

As the eCommerce market gains momentum locally and internationally, customers today can get their hands on a huge range of consumer goods and services, all available via a click, tap or swipe. The country has done it all regarding initiatives in the E-commerce sector. In the year 2019, the forecasted eCommerce transactions in the UAE were $16 billion, with a growth of 23% annually between 2018 and 2022.

Procedure to Start an Online Business in the UAE

There are many factors that must be considered before setting up your eCommerce business in the UAE. Right from choosing the jurisdiction to office space, among many.

1. Choose a Jurisdiction

The first decision to be made is choosing the right jurisdiction. There are advantages and disadvantages to choosing either UAE Mainland or UAE free zones. Most people prefer online business company registration through free zones. Here are the free zones that have a dedicated license with e-commerce activity:

• UAQ free trade zone
• RAKEZ
• IFZA
• Ajman free zone
• DMCC
• DTEC
• Ajman Media City free zone
• Fujairah Creative City
• SHAMS

There is, however, one significant disadvantage to this type of business setup, in that a Free Zone company is not allowed to trade outside of that Free Zone. It must appoint a local distributor to provide products or services on-shore.

2. Decide on a Trade Name

Establishing a trading name that people will remember is essential regardless of the nature of your business. Still, it is arguably even more critical for e-commerce businesses that do not have a physical presence in the UAE. Once you have decided on a trading name, using this as your domain name will make your business easier to find online.

3. Obtain the License

To set up your eCommerce business in the UAE, you will have to obtain an eCommerce license from the Department of Economic Development of the Emirates of your choice. The nature of your business activities will determine the license type, and if you choose to set up in a Free Zone, the license will be provided by the relevant free zone authority.

4. Office Space Option

If you decide to trade solely online, leasing an office might not have even crossed your mind. However, it is not possible to register a business without it. Wherever you choose to establish your business, it is essential to check the minimum office space requirements. For example, in Abu Dhabi, this is 14sqm, and in Dubai, the minimum requirement for office space is 200sqft. It is vital to consider that the size of your office directly dictates the number of visas accessible under your license, possibly limiting your number of employees.

5. Website Development

As websites are a gateway to the online world, websites are mandatory to set up an online business. Developing an interactive platform that enables dynamic interaction between producers and consumers is the platform's primary goal. The purpose is to engage the two ends in a long-term value chain and high transactional processes. The following steps need to be taken when establishing your web presence:

6. Online Payment Gateway

If you are marketing anything online, whether tangible products or intangible services, you will need to set up a secure online payment gateway to receive safe debit cards, credit card, and PayPal payments through your website. While this is a significant expense for any new e-commerce business, getting this wrong will harm your business's success. With an increasing number of suppliers and online payment options in the Emirates, it is essential to take the time to research this and consider how these will suit your business and your budget.

7. Import/Export Requirements

Suppose you are importing products from outside the UAE and selling them online to the UAE market. In that case, the business has to be registered with the relevant emirate’s ports and customs authority and receive an importer’s code. A customs duty (often 5%) applies to goods being imported.

What about the Future of E-Commerce?

The key catalyst for the healthy development of the regional e-commerce market would be a shift in the cultural outlook. Can e-commerce act as a substitute for the traditional shopping experience? Or will the in-store and digital commerce networks complement each other and develop? It would be fascinating to see what strategies significant players position to overcome cultural barriers. But one thing is for sure, e-commerce in the UAE is here to stay and grow.

Businesses increasingly need to increase their online footprint to get users' attention. As UAE gears its free zones and aligns it to the digital demands, Commitbiz Business Setup Consultants provides you with in-depth detail on setting up an E-commerce business in UAE.

Contact us today to know more about E-Commerce business in the UAE.