E-Commerce: The future for retail businesses in the UAE

E-commerce is transforming the UAE’s retail scene. The country’s young, tech-savvy population are increasingly turning to their digital devices for their shopping needs and businesses are having to evolve to meet these demands and capitalise on this trend.

The UAE’s e-commerce market is now one of the fastest growing in the world. With e-commerce spend in 2022 expected to show an increase of 22.32% on the previous year and online sales on track to reach $8 billion by 2025.

Reports suggest that 96% of UAE consumers now shop online, preferring the convenience and flexibility that it offers over traditional bricks and mortar retail. With this fundamental shift in shopping habits, it is becoming increasingly important for businesses to adapt and innovate to capture this market segment and thrive in the digital age.

Primary drivers of UAE’s e-commerce growth

The growth of e-commerce and changing shopping habits in the UAE can be attributed primarily to the following factors:

The Covid-19 effect

E-commerce and the digital economy boomed during the global pandemic. As social distancing and quarantining measures forced us to find new ways to shop, retailers began to embrace these changes and transition to e-commerce platforms to sustain their businesses.

Now, it’s clear to see that the behavioural shifts that Covid-19 brought about have become the new normal, as 67% of consumers report that they shop differently now than before the pandemic.

High internet usage and smartphone penetration

A major factor in the growth of e-commerce in the UAE is high internet usage and the increasing number of people that primarily access the internet via mobile phone. 99.01% of the total UAE population are internet users and 58.1% of internet consumption is via mobile devices. This high number of active mobile phone users is believed to be a significant factor in the rising popularity of online shopping.

Fast adoption of digital payment solutions

UAE consumers are among the most digitally aware in the world and are increasingly adopting a wide range of new digital payment methods.

Use of digital cards, biometric payments, BNPL (Buy Now Pay Later) and open banking solutions is on the rise and these new technologies are now becoming the norm.

Mastercard’s payment index 2022 recently found that 88% of people in the UAE have used at least one emerging payment method in the last year and this acceptance of new technology and willingness to make payments in ever more diverse ways is helping to fuel the growth in the Emirates e-commerce activity.

UAE’s culture of innovation and modernisation

Few countries acknowledge and embrace innovation and technology quite as much as the UAE. It recognises that the digital revolution can play a major part in its future success and economic diversification and the country’s policy making reflects that.

Several key initiatives such as visa reforms, the regulation of virtual assets, open banking and government funding for tech companies have all encouraged the growth of e-commerce and helped the tech ecosystem flourish.

What type of e-commerce businesses are most profitable?

The potential for e-commerce in the UAE and the infrastructure to support it is growing all the time.

There are a huge range of business sectors that could benefit from exploiting the growth in e-commerce. However, purely by numbers, fashion accounts for the largest segment of e-commerce revenue in the UAE at 38%. It is followed by electronics and media with 20%, then furniture and appliances with 15%, toys and hobbies with 14% and finally food and personal care make up the remaining 12%.

Where to set up an e-commerce business in the UAE

Choosing the best jurisdiction for your e-commerce business is an important decision that will impact who your company can trade with, operational costs and tax obligations.

Setting up a business on the mainland will allow you to trade freely anywhere in the UAE or overseas and offers your business the most flexibility with regards to availability of business activities, visa acquisition and trading scope. However, the set-up costs are more expensive than in the UAE’s free zones and it may be that a free zone setup suits your business better.

Many free zones such as Dubai Multi-Commodities Centre (DMCC), Dubai Internet City (DIC), Sharjah Media City (SHAMS) and Ras Al Khaimah Economic Zone have responded to the unprecedented growth of the e-commerce industry by offering competitive business licensing packages and/or large discounts.

Free zones also offer other benefits such as access to funding, a supportive ecosystem and bespoke facilities.

How can I incorporate e-commerce services in my existing business?

Nowadays, there are a variety of tools on the market to help companies build an ecommerce experience into their current business model. Companies such as WooCommerce, Shopify, Shopify Plus, BigCommerce, Magento, Squarespace, and Wix all offer customisable packages that can easily be integrated into existing business operations.

Final Thoughts

Setting up an e-commerce business or incorporating e-commerce and increased digitisation into your current business model is an investment for the future. It will improve the credibility and profile of your company and help you attract a younger, more tech-aware audience and ultimately increase company revenue.

How can PRO Partner Group help?

PRO Partner Group has an experienced team with a wealth of experience in company incorporation in the UAE and direct contact with key government departments. We can advise you on the best business licence, corporate structure and jurisdiction for your e-commerce business and help you deal with all regulatory and legal requirements.

If you need assistance with setting up an e-commerce business in Dubai or for any other onshore or offshore company setup, restructuring, local partner or PRO support matter in Abu Dhabi, Dubai, the wider UAE, Oman, Qatar or KSA, then please do get in touch with us on +971 (0)4 456 1761 for Dubai or +971 (0)2 448 5120 for Abu Dhabi, email us at info@propartnergroup.com or complete the contact form below and we will be delighted to assist you.