Dubai CommerCity evaluates regional e-commerce landscape

Dubai CommerCity – the joint project between the Dubai Airport Freezone Authority (DAFZA) and wasl Asset Management Group – has released the MENASA e-commerce landscape report. The report assists global companies and start-ups in evaluating the opportunities within the regional e-commerce market and highlights the high growth in the MENASA (Middle East, North Africa and South Asia) region.

The report estimates that there was $51 billion of e-commerce sales across MENASA in 2017. While this accounts for only 3% of the global e-commerce sales, the region’s e-commerce sector is growing aggressively at 24.6% CAGR growth through to 2020. This is faster than any region in the world, as the global projected growth during the same period is at 20.6% with a declining growth trajectory.

South Asia represents the biggest market in size. GCC represents the fastest growing and highest spending market in the region. India stands out as the biggest, most mature e-commerce market with $39 billion in estimated e-commerce sales in 2017. The UAE represents the biggest spending per online shoppers at $1,648 with the third highest growth projected through 2020 at 29.6%.

The report has identified seven key growth drivers that include – huge latent demand; high internet/ mobile adoption; a young/ internet savvy population; high social media usage; cross-border e-commerce; entrepreneurship and growing government support.

Overall retail sales – offline and online – across MENASA represent 12% of overall global retail sales, while e-commerce penetration within global activity is only 3%. This represents a big opportunity for the region to step up to reach e-commerce activity at global levels. This opportunity is further reflected by the fact that in 2017, an estimated 16% of MENASA internet users, approximately 115 million people, were online shoppers.  This is a big gap compared to 40% of global internet users who are e-shoppers.   This is despite the fact that mobile internet usage in parts of the region is amongst the highest in the world (96% in the UAE, 88% Saudi Arabia).

The report highlights five key challenges that can be attributed to limited e-commerce penetration when compared to the rest of the world. These include a lack of consumer awareness, limited payment solutions / behaviour, logistic challenges, customs duties and taxation and limited product coverage. Given the key issues that are limiting the growth of e-commerce across MENASA, the report identified six government and industry level strategic considerations to address. These include e-commerce policies enhancement around customs duties, taxation and consumer protection, addressing consumer awareness, consumer trust building, local economy protection, dedicated e-commerce zone and engagement with financial institutions.

The report also showcases Dubai Commercity’s position as a global hub for e-commerce. It sheds light on the strategic importance of the UAE and Dubai in promoting e-commerce in the region and in facilitating operations, as well as the vital role of free zones in this sector. In order to meet the expected growth within the e-commerce sector in the region, Dubai CommerCity is being developed in Dubai’s Umm Ramool area, which represents 2.1-million sqft at a cost of AED2.7 billion.

DAFZA had recently announced increasing the investment value in Dubai CommerCity by 18.5%, to around AED 3.2 billion, as it is based on a unique operating system combined with the attractive investment benefits provided within the free zone.