The rise of e-commerce markets worldwide, its adoption accelerated by the pandemic and other factors, has led to the opening of new lucrative opportunities for businesses to tap into. While China is often referred to as the future of e-commerce, other markets are gradually jumping on the same profitable path – one of such is the fast-growing e-commerce region of the United Arab Emirates (UAE).
The UAE is the most advanced e-commerce market in the Middle East with a growth rate of 10.4% based on figures by Statista. Revenue in the e-commerce market is projected to reach US$17.21 billion by 2025.
So, what exactly makes the UAE stand out?
How has e-commerce changed life in the UAE after the pandemic?
Amid the lockdowns and social distancing restrictions of the COVID-19 pandemic, shopping at brick-and-mortar stores took a back seat. The UAE National Economic Register revealed that the country increased the number of e-commerce licences to retail businesses in May 2020, the largest till date at 196. A further 943 licences were awarded to new businesses set up in Dubai and other parts of the UAE within the first three months of 2020.
This pandemic-led digital shift surely created more opportunities for existing businesses to shift their operations online. From an international business standpoint, it made it clear that overseas entrepreneurs can tap into UAE’s increased e-commerce adoption and expand their horizons globally.
E-commerce in Dubai witnessed a 53% year-over-year increase in 2020, with a record US$3.9 billion in retail e-commerce revenue. Moreover, United Nations Conference on Trade and Development (UNCTAD) figures show that COVID-19 boosted e-commerce sales in UAE in 2020 with the number of internet users who shopped online more than doubled from 27% in 2019 to 63% in 2020.
Reasons why Indian businesses need to look toward UAE
It’s clear that digital commerce in the UAE is set to reach greater heights, which means Indian businesses can leverage the market for future growth opportunities when it comes to internet shopping. Moreover, UAE is considered a shopping hub of the world for products, including electronics, fashion accessories, apparel, and lifestyle products. Together, these factors contribute to making UAE a lucrative e-commerce market for businesses to venture into.
What makes e-commerce significant in the UAE, however, stems from a few notable trends observed in the economic climate.
1. UAE is effective at handling adversities and adapting to changes.
The COVID-19 pandemic served as the major factor that spurred future e-commerce trends. Companies and the government adopted strategies to keep businesses running amid the chaos and economic hardships. This led to innovative ideas that served as the foundation for a much larger and stronger e-commerce market.
For instance, a virtual store of Dubai Mall was launched at noon.com where all mall retailers could sell their products online. This offered convenience and flexibility to the consumers in a way never experienced before.
2. There is strong government support for e-commerce initiatives.
The UAE government encourages and facilitates e-commerce businesses to operate smoothly. The local laws and regulations are favourable for business holders and operators, aiding in the growth of this sector. Moreover, the government also supports startups and businesses through various initiatives and incentives. For instance, the Dubai CommerCity (DCC) was set up as a free zone to help global and regional businesses establish themselves not just within the Middle East, but also in the North African region - MENA. Part of this includes:
- Fast and automated registering and licensing of businesses before and after set up
- E-commerce platform that is already in and configured to business operations
- Smart customer relation management tools to boost service experience
- Access to web developers, marketing services, payment gateways hubs and other service providers to develop the ecommerce ecosystem
- Access to networking events, marketing management and talent acquisition tools and platforms for added business support
- 0% corporate or income tax
- 100% foreign company ownership
- 100% flow of capital and profits back to home country
This makes doing business in the UAE smooth, systematic and hassle-free, and incredibly cost-effective.
3. The local population has sped up internet adoption.
The increasing internet usage and smartphone penetration are other driving factors shaping the future of internet commerce in the UAE. According to statistics by The World Bank, UAE had a 100% internet penetration in 2020, a number not reported in other regions before.
4. There is an availability of e-payment platforms.
Another factor driving the growth of the UAE e-commerce industry is the introduction of e-payment platforms. The government is facilitating the digitisation of transactions to create a cashless economy. Platforms such as PayFort and PayTabs provide users with a seamless experience of online payments, which is characteristic of the future of digital commerce globally.
5. Technological advancements remain a pursuit.
UAE’s digital economy is booming with the adoption of advanced technologies and cutting-edge solutions by companies and businesses in various sectors. One of these is the adoption of blockchain technology, which the government plans to replace 50% of its transactions with thanks to The Emirates Blockchain Strategy 2021. Bring in The Dubai Blockchain Strategy that helped Dubai be the first city fully-powered by blockchain by 2020, and you can see how much importance the UAE places on technological advancements. And that’s not all. In 2020, the country teamed up with US technology company Cisco to support digital transformation efforts, which includes implementation, skills development and security enhancement.
With more information and tools at their disposal, companies and businesses can make informed decisions to their advantage.
6. UAE-India Comprehensive Economic Partnership Agreement (CEPA) brings incredible benefits to Indian businesses.
The CEPA introduces significant changes in customs duties and procedures. Under this agreement, numerous Indian goods like petrochemicals, textiles, jewellery, and others will experience reduced or eliminated tariffs, boosting their competitiveness in the UAE market. For instance, Indian businesses can now ship jewellery tariff-free to the UAE, while certain products, such as vegetable oil, will see gradual tariff reductions over five years.
Additionally, CEPA enhances customs procedures efficiency. It includes provisions for advance customs rulings, which ensures better clarity on import requirements, leading to smoother operations for Indian businesses. The agreement also encourages the adoption of global customs management practices and information exchange to reduce trade costs and bureaucracy. Consequently, companies can avoid expensive delays and improve customer satisfaction. Overall, CEPA's measures facilitate trade between India and the UAE, creating greater market access and cost savings for businesses.
How the UAE market looks for Indians
UAE has the largest number of Indian immigrants. In fact, 30% of the startup community in Dubai comprises Indians. The UAE government also offers great incentives for entrepreneurs including convenient import and export regulations, a waiver on income tax and “golden visas”. Through these “golden visas”, foreigners can set up any business with 100% ownership. So what does this mean:
- Indians in the UAE remain a significant target market: Local businesses can extend the reach of their e-commerce stores within UAE by targeting Indians looking for products from their homeland.
- Indian businesses can find opportunities within Middle Eastern markets: Having a business set up in the UAE means entrepreneurs can market Indian products to the local population and those in the North African region.
Whether you’re exporting goods to your UAE customers or importing goods into the region to support your newly established business in the UAE, partnering with a trusted logistics carrier to deliver your shipments can go a long way in ensuring smooth operations.
DHL Express offers a number of logistics solutions and services tailored to client's needs. Sign up for a DHL Express account today to find more information about how we can help you deliver your shipments to the UAE.
