MENA E-Commerce Market is Booming, it’s Time to Cross-Border!

09/01/2019

The Middle Eastern market is increasingly growing while its e-commerce landscape is booming. In December, Cifnews attended the first CCEE in Dubai to discuss how cross-border e-commerce could connect the world’s biggest e-market with MENA

 

The digital world has revolutionized many aspects of daily life, shortening time and distances in real time. One of the most important elements of this evolution is represented by e-commerce, the first step in the process of internationalization of many companies.

As in the rest of the world, the e-commerce market is also growing in the Middle East and North Africa (MENA) countries where the value of online sales is increasingly growing, especially in the latest years and whose trade volume is expected to reach $ 26 billion by 2020.

Last December, Cifnews partnered with the Cross-border E-commerce Exhibition (CCEE) – PRC’s largest e-commerce event and conference – to bring the event in Dubai. Industry leaders discussed how cross-border e-commerce could connect the world’s biggest e-market, China, with one the most dynamic e-commerce environment around the globe, the Middle-East.

 

MENA E-Commerce Market is Booming - dubai - CCEE - cifnews

© Unsplash. Dubai, UAE. CCEE was hosted by China Homelife Dubai 2018 in December. Around 12,000 visitors joined the exhibition with a forecast in contracts of over $ 75 million for 3 days.

 

GDP numbers in the area are pretty impressive. In fact, the GDP of the Gulf Cooperation Council (GCC) countries reached over $1.5 trillion with Qatar, Kuwait, and the United Arab Emirates (UAE) among the top 50 GDP per capita countries.

Here, China has always been the largest import source, and the proportion of daily consumer goods from China is quite large even if many excellent Chinese brands have not entered the MENA market yet.

While still in its early stages compared to other regions around the world, according to estimates, sales in the MENA region exceeded $ 20 billion in 2018. Narratiive’s MENA e-commerce Report 2018 revealed that 80% of online shoppers have either maintained or increased their e-shopping habit over the last 12 months while 42% of people who have never purchased online believe they will make one in the coming year with consumer electronics and fashion being the second biggest categories after travel.

Among the major consumer countries, there are Saudi Arabia, UAE, Egypt, and Qatar, where Dubai serves as the logistics distribution center. The MENA accounts for a population of 400 million people whose structure is extremely young, with more than 55% of people under 30 years old in Saudi Arabia. Therefore, consumers’ shift to digital and mobile occurred naturally and it is now influencing e-commerce platforms strategies attracting their investments in the region.

 

With a population of 400 million people and a smartphone penetration greater than 65%, the MENA region is going to become a major contributor to the worldwide e-commerce market soon.

 

As a result, smartphone penetration here is greater than 65% and more than two-thirds of the population uses the internet, with penetration in the UAE, Bahrain and Qatar exceeding 90%. Moreover, the proportion of mobile traffic is increasing year by year.

Although Middle East countries have some of the highest levels of per capita income, if compared to other international markets, the MENA region is still an underpenetrated e-commerce area. However, the UAE and Saudi Arabia are the two countries within the region that are highlighting the most substantial growth in the digital commerce sector.

Among the countries of the Gulf, the UAE, with its cosmopolitan population, has one of the highest global internet penetration levels per capita. After years of UAE considered as a shopping sanctuary, it is now becoming a testing ground for brands, which want to expand in the region.

However, as mentioned above, for what concerns the e-commerce market, MENA is still in its early stages compared to the rest of the world. The late development is due to a complicated delivery process and the reliance on the cash on delivery (COD) as the major payment method.

 

MENA E-Commerce Market is Booming - logistics - warehouses - cifnews

© Pixabay. Local logistics companies are building a warehouse network throughout the area in order to address the problem of the slow and complicated delivery process.

 

According to the Dubai-based logistics company, iMile Delivery Services, the Middle East as a whole presents unusual challenges for last mile delivery process such as tracking, speed, costs, missed delivery, and the success rate.

With e-commerce customers looking for convenient hassle-free delivery, the competition among different marketplaces encourages players to improve their offerings as opposed to several years ago, when the lack of options often made the entire online purchase complicated and slow.

For what concerns COD, instead, despite in the UAE credit cards are widespread, in many other countries a low credit card usage and a general distrust of online ecosystems has allowed for 70% of e-commerce transactions to be COD while online payment is not yet popular or fully developed. Nevertheless, many buyers now use the CashU, a prepaid card that allows them to buy online even without a bank account.

Among the leading international players in the MENA area, Alibaba, Amazon, and Ebay are preferred for the latest fashion opportunities as well as for any other foreign products. However, the domestic landscape also hosts many popular local e-commerce sites.

The largest e-commerce platform in the Arab world is Souq. Founded in 2005 by Ronaldo Mouchawar and Samih Toukan, the Dubai-based English-Arabic language platform started as an auction site and transformed into a marketplace in 2011.

 

E-commerce penetration in the GCC is below the other developed regions but it is starting to catch up indicating enormous growth potential.

 

Souq is certainly the region’s biggest tech success story with over 15% market share, thus, representing the Middle East’s first Unicorn. With over 75 million visits per month from 12 million unique visitors, Souq offers more than 2.3 million products across 31 categories hosting more than 17,000 merchants in the marketplace.

In 2017, Amazon acquired the company marking its move into the Middle East. Nowadays the team has grown from five employees to more than 3,000 while the platform gets 1.5 million visits a day.

Mumzworld, instead, is the largest online shopping site for what concerns a specific niche, that of mothers, babies, and children. Launched in 2011 by Mona Ataya with just four employees and 15,000 products, today it counts 130 employees and 250,000 products listed on its English and Arabic websites.

As said by the company, which attended last CCEE in Dubai, the market for baby and children products in the Arab world is underpinned by a young population and some of the highest birth rates in the world making the GCC a $ 10 billion market.

In addition to the marketplace, Mumzworld also offers a supportive community and empowering contents representing a unique player in the Middle Eastern digital commerce landscape.

 

MENA E-Commerce Market is Booming - noon - cifnews

© Mubasher.info. Founded in 2017, the other important UAE full-service e-commerce platform, Noon, has picked up fast in last one year to gain over 3% market share.

 

The e-commerce environment in MENA countries is thus fostered by competition, which is helping the market to reach its full potential. Moreover, in addition to leading digital commerce players investing in product offerings, logistics, and payment, local governments are also stimulating the adoption of a more digital lifestyle.

In 2017, for example, the Dubai government announced the launch of the Dubai CommerCity, the 2.1 million square feet area that will be entirely dedicated to e-commerce in the Gulf. Governments, in fact, recognized online shopping as a huge opportunity for the economy and led incentives such as the Saudi Vision 2030, which is fostering private economic growth creating a region made of major consumer countries as well as great distribution centers.

Therefore, although the MENA region still faces some delivery challenges, opportunities for both international and local players in the area are significant. This is due to the young adult population that is keen to make purchases online thanks to the ease of convenience, especially for what concerns Millennials, where social media penetration is extremely high.

As said by the Dubai marketplace Awok during the CCEE, top reasons for cross-border shopping are many such as better sales, a better demographic of customers and the overseas expansion possibility.

Even if the online culture in the MENA area was essentially at ground zero back in 2006, local emerging companies are now benefitting from the late development. In fact, platforms like Souq, whose 60% of revenue comes from mobile, do not have to redesign their business for the mobile era as they were already designed to work with smartphones.

The MENA e-commerce sector has thus bloomed over the last few years thanks to increased internet usage and a wider presence of e-commerce and logistics companies in the area creating the environment for enormous growth potential.

After the World Bank’s economic forecast for the MENA region showed that the overall economic growth will be positive in the next five years, expectations on the digital commerce growth are even higher.

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