A confluence of factors, propelled by an amicable regulatory environment, is helping UAE emerge as a hub for e-commerce entrants, finds new research.
Crunching the numbers from the region. RedSeer says that the UAE currently powers 30 percent of MENA’s digital economy. Capitalizing on this trend, the country could soon emerge as a corridor to the region’s $1.5 trillion consumer spending.
Digital penetration is one of the factors that makes the UAE an attractive option for the growth of e-commerce. Already 70 percent of the country’s internet users count themselves as users of e-commerce services.
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This number will grow even further with the addition of another two million e-commerce transacting users over the next five to seven years.
Amicable environment
The digital penetration is helped by the emergence of GenZ as a dominant spending force, coupled with the move from products to services.
“High level of digital enabler penetration and online time spent have helped several e-commerce sectors including online retail, travel, and food delivery to scale up rapidly in MENA over the years,” says the report.
According to RedSeer, the main reason behind the UAE’s digital penetration is the government’s desire to become a global leader in tech innovations. Its policies have helped support and build ancillary sectors like digital payments, crypto, AI, cyber security, and others.
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Sandeep Ganediwalla, managing partner, MEA, RedSeer shed more light on the research in an interview with Economy Middle East. “The UAE’s consistent leadership in digital infrastructure, smartphone adoption, supply chains, talent availability, and progressive government policies has created a self-sustaining tech ecosystem,” says Ganediwalla.
Ripe for growth
RedSeer reasons the pro-business policies of the government have turned the spotlight on investors into the country. Thankfully the UAE boasts of one of the most mature venture capital (VC) ecosystems in the region.
For instance, in 2022 the UAE saw funding inflows of $1.2 billion, or 40% of the total MENA funding. And in H1 2023, the inflows in the country have already accounted for 22 percent of MENA’s VC funding.
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The high spending power of the consumers, coupled with the robust infrastructure, and government support, create the right foundation to build effective e-commerce solutions for the region.
“Even with such a dynamic digital environment, numerous sectors in the UAE exhibit substantial untapped potential and strong upside,” finds the report.
Customization is key
In addition to evergreen avenues like online retail, travel, and foodtech, RedSeer identifies several sectors primed for growth. These include emerging avenues such as fintech, healthtech, on-demand services, and smart logistics.
While the region has all the ingredients for innovation to thrive, it does present unique MENA-specific challenges for brands to identify and address.
Ganediwalla suggests that it’s crucial for e-commerce entrants eyeing the MENA region to first understand its unique landscape.
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“MENA differs significantly from both eastern and western markets, with distinct competitive dynamics, unit economics, and consumer preferences. Consequently, a high degree of customization is essential in determining the right approach to consumer and business segments,” explains Ganediwalla.
Brands that can address the regional challenges can share the spoils of the region’s $100 billion e-commerce market, for now. RedSeer forecasts the region’s e-commerce market to grow to over $500 billion by 2030.
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