Digitally, yours

The proliferation of e-commerce has drastically changed the global retail market

Amid slowing economic activity around the globe in the wake of Covid-19, one sector that defied the odds to post unprecedented gains has been e-commerce. The industry has witnessed a surge and burgeoning digital transformation.

The need for brands to undergo a digital revolution proved to be essential in order to stay afloat during the Covid-19 pandemic. As lockdowns became the new norm, and people found themselves stuck at home, businesses and consumers increasingly went online, offering and purchasing more goods and services respectively, raising e-commerce’s share of global retail trade from 14 per cent in 2019 to about 17 per cent in 2020.

Shedding light on the e-commerce boom, Alyssa Mariano, Co-founder and CEO of Bazaara, said, “The UAE saw an approximately 20 per cent increase in the number of e-commerce shops and sales. Because Bazaara launched during the pandemic, we were well-positioned to accommodate rapidly changing consumer preferences. We recognised that it is essential to always be agile to adapt and adhere to ever-changing regulations while meeting consumer needs.”

Alyssa Mariano, Co-founder and CEO of Bazaara

Talking about the strategies employed by her brand to meet new demands, Mariano commented, “Our main strategy is ensuring we are aligned with key tech trends, endeavouring to always anticipate those in the future. Another key strategy we believe helps to meet new demands is ensuring that the customer experience is completely seamless. With e-commerce penetration increasing rapidly after Covid-19, we see this as an essential priority as a new business to keeping our competitive edge.”

Local impetus

The UAE retail e-commerce market reached a record $3.9 billion in 2020, a 53 per cent year-over-year increase driven by the Covid-19-led digital shift, while e-commerce accounted for 8 per cent share of the retail market during the same year, new analysis from Dubai Chamber of Commerce and Industry has revealed.

One of the drivers of this growth has been the high prevalence of smartphones in the UAE. The country has the highest smartphone penetration rate in the MENA region that has influenced the growth of mobile commerce (or m-commerce). The share of m-commerce in the UAE e-commerce market increased from 29 per cent in 2015 to 42 per cent in 2020. Moreover, in 2020, UAE’s m-commerce retail market value reached $1.6 billion, 56 per cent higher than the previous year. The retail m-commerce market of the UAE is projected to reach $3.9 billion by 2025.

The UAE, and Dubai in particular, remain a hub for e-commerce growth in the MENA region. Changing consumer habits during Covid-19 has accelerated the growth of digital shopping. According to data from the UAE National Economic Register, the UAE e-commerce sector issued the highest number of licenses of 196 in May 2020.

Many companies had a significant investment in online sales activity during the pandemic and managed to grow or keep their businesses stable using omnichannel methods.

New shopping experience

The Covid-19 crisis forced an expansion of e-commerce towards new firms, customers and types of products. It provided buyers with easy access to a significant variety of products from the convenience and safety of their homes. Firms have quickly adapted to the situation and mitigated shortfall crisis by operating in spite of contact restrictions and other confinement measures.

There has also been a new dynamism in the e-commerce landscape, which has expanded the ambit of e-commerce, including through new firms, consumer segments, and products.

Alain Bejjani, CEO at Majid Al Futtaim – Holding

Talking about the positive outlook for the UAE consumer retail market in Majid Al Futtaim’s inaugural ‘State of the UAE Retail Economy’ report, Alain Bejjani, CEO at Majid Al Futtaim – Holding, said: “In 2020, we experienced a rapid shift from established consumer patterns to the need for emerging innovation, like e-commerce, to meet customers' changing needs. The report findings come at a time when the nation’s dedicated vaccination programme is offering a real sense of hope and confidence, following an undeniably tough year for everyone. Today, we see a renewed sense of optimism that retail in the UAE will effectively recover, and our inaugural ‘State of the UAE Retail Economy’ report underlines this. With comprehensive data-driven insights, our report findings will empower our stakeholders to make clearly-informed business or policy-related decisions which, over time, will contribute to the wider UAE economy. I am confident that the promising signs we’ve seen from the first few months of 2021 will continue to drive a positive outlook on economic recovery as we continue to adapt to a post-Covid-19 world.”

A trend that’s here to stay

The positive changes in the e-commerce landscape will likely be of a long-term nature, in light of the possibility of new waves of the pandemic changing consumer purchasing habits, learning costs and the incentive for firms to capitalise on investments in new sales channels.

As per the UAE e-commerce landscape report, with many consumers and merchants experiencing the convenience of e-commerce for the first time during the lockdown, the shift to shopping online is expected to hold long-term as consumer confidence in digital payments surge across the MENA region.

Experts have forecasted that government policies, entrepreneurship and changing consumer behaviour will continue driving e-commerce growth and digital payments adoption.

Talking about the gains posted by Bazaara during this period, Mariano revealed, “We witnessed exponential growth since launching in Q4 of 2020. While building a product, hiring a team and launching during a pandemic was challenging, to say the least, we have also been able to see some opportunity, including the pandemic leading to a boom in online sales in the region. We have seen rapid growth in our month-on-month (MoM) numbers, including an average of 100 per cent MoM order growth, 30 per cent MoM new listing growth with over 13,000 live listings, and 40 per cent MoM new user growth with over 8,000 registered users.

A leading app service in the UAE, Careem released its trends for the first half of 2021, compiled across all its services, products and business areas.

With the global customer landscape drastically changing as a result of the pandemic, Careem successfully accelerated the launch of a wide range of new services on its app earlier in the year to ensure it could continue to meet its company promise of making everyday life simple.

The company saw a spike in the usage of delivery services for groceries, document deliveries between colleagues and office supplies. Some of the top items were related to working from home: laptops, chargers, documents and work bags. A close second was sentimental items such as chocolates, flowers or home-cooked food sent between family and friends.

Middle East growth story

The region’s e-commerce sector stood at $22 billion by the end of 2020, boosted by online shoppers from Saudi Arabia, Egypt and the UAE.

The three countries form 80 per cent of the region’s overall e-commerce market, according to the study. In the UAE, the uptake was primarily driven by a 21 per cent jump in the number of online shops as the world witnessed an exponential boom in retail e-commerce. The market size of the e-commerce industry in the UAE is expected to grow exponentially.

According to a joint study by Dubai Economy and Visa, the online trend is expected to continue, with e-commerce payments estimated to account for 28.2 per cent of the total UAE card payment transactions value. As per estimates, the e-commerce industry in the country is set to reach $62.8 billion by 2023.

A recent Mastercard study revealed that nearly three out of four UAE consumers (73 per cent) are now shopping online, a big jump from pre-pandemic figures, with FMCG (fast-moving consumer goods), healthcare, apparel and banking occupying the largest piece of the pie. Social media too played a key role in engaging consumers online as 72 per cent and 56 per cent of respondents discovered new sellers through Facebook and Instagram respectively, the survey confirmed.

•Reduced returns. When buying in-store the potential for returns is often reduced versus online purchases as consumers can try before they buy.