What does the e-commerce investment scene look like in the GCC?
In the last few years, the internet became a huge part of our daily lives. Starting an e-commerce business or investing in it has never been as convenient as now.
What does the e-commerce investment scene look like in the Gulf Cooperation Council (GCC) countries?
The e-commerce market in the GCC is growing significantly and is expected to reach higher levels of growth during the upcoming years. Various factors drive such expansion such as the development of the logistics sectors, higher internet connectivity and mobile penetration, increased youth population, higher levels of disposable income, and developed infrastructure. The United Nations Conference on Trade and Development listed the United Arab Emirates (UAE), Saudi Arabia, and Qatar among the top 10 developing economies in its 2019 Business-to-Consumer E-Commerce Index.
In 2017, Amazon acquired “Souq.com”, a local e-commerce store in the UAE for USD 579 million. This acquisition largely contributed to the development of the e-commerce industry in the UAE.
The UAE has the fastest growing e-commerce market in the GCC region. According to “Visa”’s research, mobile phone penetration in the UAE is now at a world-record high of 210.9% which also explains the high use of mobile wallets.
Recently, the Emirate of Dubai spent over USD 735 million to establish “Dubai CommerCity”, a 2.1 million-square-foot e-commerce free zone located near the Dubai International Airport and exclusively dedicated to e-commerce businesses. The UAE government is constantly creating initiatives to transform the country into a smart country and a cashless society. All these reasons contribute to the proliferation of e-commerce businesses in the UAE.
With the modernization of the Saudi rules and regulations, the development of the entertainment industry, and the creation of gyms and fitness centers for women, Saudi Arabia is witnessing an important financial economic growth, which is positively impacting the e-commerce market. Many other factors are contributing to the growth of the e-commerce market as well, such as the wealthy population of the Kingdom and the high internet penetration and mobile usage.
The leading products in terms of purchased items in Saudi Arabia are related to fashion, with a size of USD 1.91 billion in sales, followed by electronics (USD 1.85 billion).
The Saudi “Vision 2020” is a strategy that aims to reduce Saudi Arabia’s dependence on oil and to diversify its economy. The main purpose of this strategy was to expand the role of e-commerce to 80% of the retail sector by 2020, by developing an advanced retail sector and helping small and medium-sized enterprises, including e-commerce businesses, market and export their products and services.
Through this strategy, the Saudi Arabian General Investment Authority signed a USD 300 million investment deal with ForDeal, a Chinese online shopping platform, and established in 2019 a memorandum of understanding with Jollychic, a Chinese online retailer.
Despite the progress, the e-commerce market in Saudi Arabia is still facing a big challenge: the preference for cash on delivery payment option. As a matter of fact, 64% of online shoppers in Saudi Arabia prefer to pay cash on delivery, which is not ideal for e-commerce businesses. The Saudi government is planning to boost the rate of non-cash transactions to 70% by 2030.
The Ministry of Transport and Communications in Qatar is actively working on developing the e-commerce industry in the country. A new e-commerce and transaction law entered into force in 2010 and an e-commerce roadmap was released as a result in 2015.
The Qatari government created several initiatives including “Theqa”, an e-commerce portal that certifies whether an e-commerce website is approved by the government. Qatar’s state-run postal system (Q-Post) created on the other hand “Connected”, an international shipping service providing access to the United States, Europe, and Singapore.
Progressing and Way Forward:
The rest of the GCC countries such as Oman, Bahrain, and Kuwait, are slowly catching with the e-commerce development in the region. After the Covid-19 pandemic, the reluctance of many Arab customers to shop online has almost disappeared. Retailers in the GCC should benefit from the momentum to build solid e-commerce platforms, and connect to their customers through personalized and developed technologies that would ensure their growth and sustainability.