At present, e-commerce in the Middle East shows a rapid development momentum. According to a recent report jointly released by Dubai Southern E-commerce District and global market research agency Euromonitor International, the e-commerce market size in the Middle East in 2023 will be 106.5 billion UAE dirhams ($1 about 3.67 UAE dirhams), an increase of 11.8%. It is expected to maintain a compound annual growth rate of 11.6% over the next five years, growing to AED 183.6 billion by 2028.
The industry has great potential for development
According to the report, there are five significant trends in the current development of the e-commerce economy in the Middle East, including the increasing popularity of online and offline omni-channel retail, more diversified electronic payment means, smart phones have become the mainstream of online shopping, the membership system of e-commerce platforms and the issuance of discount coupons are becoming more common, and the efficiency of logistics distribution has been greatly improved.
The report points out that more than half of the population in the Middle East is under the age of 30, which provides a solid foundation for the accelerated development of the e-commerce economy. In 2023, the region’s e-commerce sector attracted around $4 billion in investment and 580 deals. Among them, Saudi Arabia, the United Arab Emirates and Egypt are the main investment destinations.
Industry insiders believe that the accelerated development of e-commerce in the Middle East is due to multiple factors, including the popularity of high-speed Internet, strong policy support, and continuous improvement of logistics infrastructure. At present, in addition to a few giants, most e-commerce platforms in the Middle East are not large, and regional countries are making efforts in various ways to promote the further development and growth of small and medium-sized e-commerce platforms.
Ahmed Hezaha, the relevant head of the international consulting agency Deloitte, said that consumer habits, retail formats and economic patterns in the Middle East are accelerating the transformation, driving the explosive growth of the e-commerce economy. The regional e-commerce economy has great potential for development and innovation, and will play a key role in digital transformation, reshaping the Middle East’s trade, retail, and start-up landscape.
Many countries have introduced supporting policies
The e-commerce economy accounted for only 3.6% of total retail sales in the Middle East, of which Saudi Arabia and the UAE accounted for 11.4% and 7.3%, respectively, which is still far behind the global average of 21.9%. This also means that there is huge space for the rise of regional e-commerce economy. In the process of digital economic transformation, Middle Eastern countries have taken the promotion of e-commerce economic growth as a key direction.
Saudi Arabia’s “Vision 2030″ proposes a “National transformation plan”, which will develop e-commerce as an important way to diversify the economy. In 2019, the kingdom passed an e-commerce law and established an E-commerce Committee, launching 39 action initiatives to regulate and support e-commerce. In 2021, the Saudi Central Bank approved the first insurance service for e-commerce deliveries. In 2022, the Saudi Ministry of Commerce issued more than 30,000 e-commerce operating licenses.
The UAE developed the Digital Government Strategy 2025 to continuously improve connectivity and digital infrastructure, and launched the Unified Government Digital Platform as the government’s preferred platform for the delivery of all public information and services. In 2017, the UAE launched Dubai Business City, the first e-commerce free trade zone in the Middle East. In 2019, the UAE established the Dubai South E-commerce District; In December 2023, the UAE government approved the Federal Decree on Conducting Business Activities through Modern Technological Means (E-commerce), a new e-commerce law aimed at stimulating the growth of the e-commerce economy through the development of advanced technologies and smart infrastructure.
In 2017, the Egyptian government launched the Egyptian National E-commerce Strategy in cooperation with international organizations such as UNCTAD and the World Bank to set a framework and route for the development of e-commerce in the country. In 2020, the Egyptian government launched the “Digital Egypt” program to promote the digital transformation of the government and promote the development of digital services such as e-commerce, telemedicine and digital education. In the World Bank’s 2022 Digital Government ranking, Egypt rose from “Category B” to the most upscale “Category A”, and the global ranking of the Government Artificial Intelligence Application Index rose from 111th in 2019 to 65th in 2022.
With the encouragement of multiple policy support, a considerable proportion of regional start-up investment has entered the e-commerce field. The UAE has seen a number of large-scale mergers and acquisitions in the e-commerce sector in recent years, such as Amazon’s acquisition of local e-commerce platform Suk for $580 million, Uber’s acquisition of car-hailing platform Karem for $3.1 billion, and a German multinational food and grocery delivery giant’s acquisition of an online grocery buying and delivery platform in the UAE for $360 million. In 2022, Egypt received $736 million in start-up investment, 20% of which went into e-commerce and retail.
Cooperation with China is getting better and better
In recent years, China and Middle East countries have strengthened policy communication, industrial docking and technological cooperation, and the Silk Road e-commerce has become a new highlight of the high-quality Belt and Road cooperation between the two sides. As early as 2015, China’s cross-border e-commerce brand Xiyin has entered the Middle East market, relying on the large-scale “small single fast reverse” model and the advantages in information and technology, the market scale has expanded rapidly.
Jingdong signed a cooperation agreement with Arab local e-commerce platform Namshi in 2021 in a “light cooperation” way, including the sale of some Chinese brands on the Namshi platform, and the Namshi platform to provide support for Jingdong’s local logistics, warehousing, marketing and content creation. Aliexpress, a subsidiary of Alibaba Group, and Cainiao International Express have upgraded cross-border logistics services in the Middle East, and TikTok, which has 27 million users in the Middle East, has also begun to explore e-commerce business there.
In January 2022, Polar Rabbit Express launched its express network operation in the UAE and Saudi Arabia. In just over two years, the polar rabbit terminal distribution has achieved the entire territory of Saudi Arabia, and set a record of more than 100,000 deliveries in a single day, which has led to the improvement of local logistics efficiency. In May this year, Polar Rabbit Express announced that the tens of millions of dollars of capital increase for Polar Rabbit Saudi Arabia by Easy Capital and the Middle East consortium has been successfully completed, and the funds will be used to further upgrade the company’s localization strategy in the Middle East. Li Jinji, founder and managing partner of Yi Da Capital, said that the development potential of e-commerce in the Middle East is huge, Chinese goods are widely popular, and the high-quality scientific and technological solutions provided by Chinese enterprises will help the region further improve the level of infrastructure and logistics operation efficiency, and close the cooperation between the two sides in the e-commerce industry.
Wang Xiaoyu, an associate researcher at the Institute of International Studies of Fudan University, said that China’s e-commerce platforms, social e-commerce models and logistics enterprises have injected impetus into the development of e-commerce in the Middle East, and Chinese fintech companies are also welcome to promote mobile payment and e-wallet solutions in the Middle East. In the future, China and the Middle East will have broader prospects for cooperation in the fields of “social media +”, digital payment, smart logistics, women’s consumer goods and other e-commerce, which will help China and the Middle East countries build a more balanced economic and trade pattern of mutual benefit.
Article source: People’s Daily
Post time: Jun-25-2024