The Future of E-commerce in the UAE

by Zaara 20, Jan 2022

The Future of E-commerce in the UAE

The e-Commerce pioneer among the GCC states is the United Arab Emirates. In the year 2017, global B2CE eCommerce spending was up to $3.8 trillion. The private sector is not the sole catalyst of Emirates' growth in the e-commerce industry. E-government initiatives have been an essential element in building trust in online e-commerce. In recent years, the process of implementing paper-based service providers such as utility billing/payments, traffic services, visas, licences, etc. is migrating to online channels to provide citizens and residents with public services more quickly and more efficiently.

UAE E-Commerce Sector

The e-commerce sector in the UAE is on an upward trajectory. Compared with both emerging and mature economies, this specific growth strategy is driven by the government's adoption of eCommerce payments on Dubai Smart City platforms. Despite rapid growth in other categories, such as fast service transport and restaurants, government payments lead the eCommerce landscape by far.

 

The year 2019 is hailed as the internet shopping year in the UAE. Today's customers can get their hands on a wide range of consumer goods and services, all available through a click, tap or swipe, as the local and foreign eCommerce market, gathers momentum. The nation has done it all when it comes to e-commerce business ventures. In 2019, the UAE estimate for eCommerce transactions was $16 billion, with an annual increase of 23 per cent between 2018 and 2022.

Factors for the Development of E-Commerce Industry in the UAE

1. Rising Digital Penetration

E-commerce development comes as the future of the Emirates becomes digital. According to Visa's report, mobile penetration is now at a world-record high of 210.9%. When it comes to spending time on the Internet, even the UAE residents are among the top 10 globally. Such interpretations have contributed to high digital penetration.

2. Widening Use of Portable Wallets

The benchmark for mobile payment is the deep penetration of cell phones, which has been a fact in the Emirates for years. Citizens today can pay at supermarkets, hotels, department stores, gas stations, taxis, cinemas and many more outlets with a quick tap of their smartwatch or smartphone.

3. The Government's Policies

The government's pro-eCommerce measures have been instrumental in developing the country's digital transformation and eradicating many of the obstacles to becoming a cashless society. Digital commerce and cashless payments are recognised in UAE Vision 2021 as top government priorities.

4. Cashless Going

At first glance, with 75 percent of all transactions still made using currency, the Emirates appears to be a long way off, but the nation has already laid firm foundations for going fully digital. It ranks among the regional economies that are moving away from money most quickly.

5. Growing Prospects for Digital Shopping

UAE has seen domestic and global growth on the virtual merchant side, including several online startups with world-class in-app and mobile shopping experiences.

Issues in the E-Commerce Industry

1. Overloaded Logistics

The enormous trade barriers in the region serve as a block to transport goods through logistics and online retailers. Due to high tariff rates, shifting legislation and unpredictable currency exchange rates, these fences impact small e-commerce players.

2. Mode of Payment and Issues with Shipment

There is no credit card distribution in the Emirates. According to an A.T. Kearney analysis, buyers made 60-70 per cent of their e-commerce purchases via cash on delivery because of the absence of confidence in online payment systems and internet fraud.

3. Incidence of VAT

The introduction of VAT in the UAE has also made the eCommerce sector a challenging factor. On the consumer front, the tax will be applicable not only on products but also on services, as most online transactions are dispatched from outside the country. As the country's tax structure is fresh on the corporate front, corporations must have successful VAT enforcement systems resulting in higher costs.

 

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