UAE e-commerce platforms succeed amidst high demand

RetailME Bureau

E-commerce companies in the UAE have succeeded in fulfilling orders despite challenges of high demand due to COVID-19 outbreak and disruption of supply chain globally, indicates the Dubai Chamber of Commerce and Industry. In fact, the e-commerce companies have managed to achieve benefits beyond the domestic market to include neighbouring markets as well.

Dubai Chamber’s analysis, based on data from Euromonitor International, attributes success of the e-commerce platforms to government support, presence of modern infrastructure and a strong logistical sector.

Also read: Consumers turning towards online amidst COVID-19

Constant availability of essential goods

The analysis reviewed percentage of goods that were not in stock in 38 major economies around the world, monitoring the levels of inventory for the major e-commerce platforms.

As of January 21, 2020, essential items out of stock in the UAE was 3.4% that came down to 1.8% on April 21, 2020. As such, the UAE ranked sixth globally in terms of product availability, surpassing many developed economies.

The UAE’s pivotal position in the global trade map, its large storage capacity and its extensive logistical networks contributed, coupled with government support ensured continuous flow of essential goods before and during the pandemic.

The benefits of the UAE’s strong logistics and warehousing sector extend beyond the domestic market to neighbouring markets. For example, Saudi Arabia, which has a similar low rate of 2.2%, given that the Kingdom is the top regional trading partner for the UAE.

According to the availability schedule of products in the UAE, stocks of low-life products – such as fresh food – are always refilled with a rate of products not available in stock at zero or close to zero for basic materials such as eggs, poultry, starchy roots and vegetables. On the other hand, items with a long shelf life may sometimes experience slightly higher rates of daily stock-outs. That’s because, during a pandemic, consumers tend to buy and store items that fall under home care and canned food categories.

Rapid growth of e-commerce

According to a Dubai Economy report, the emirate’s e-commerce sector has been growing rapidly in response to technological advances driven by internet access and digital payments. Private sector investments and enabling government initiatives have also played a key role in promoting e-commerce in the emirate.

Established retailers are approaching the challenge of e-commerce in different ways. Many are launching their own online e-commerce platforms to expand the choice of products for customers, while providing a sales platform for local businesses. Amazon.ae is offering customers in Dubai access to over millions of products from the region and globally; payments can be made in card or cash in the local currency.

Other examples include online marketplace noon.com that quickly brought retailers from The Dubai Mall online amidst the COVID-19 pandemic to ensure consumers can still shop from The Dubai Mall, but virtually. Online fashion retailer Namshi partnered with e-Bay to offer greater access to consumers. Mumzworld.com reported an increase of over 800% in demand, driven by online demand during COVID-19.

Overall, the UAE is leading the region in e-commerce growth. Online sales growth is predicted to be the most rapid, with an estimated market size of online sales of $12.3 billion in 2019 up from $5.0 billion in 2015. The sector is set to grow by 23% per annum up to 2022, according to a joint report by Dubai Economy and Visa and Dubai Economy. The UAE Ministry of Economy had estimated that e-commerce accounted for 10% of sales in the country in 2018.

Now, with the COVID-19 outbreak, the growth of e-commerce in the UAE has been accelerated. Case in point: During the first week of April 2020, the Telecommunications Regulatory Authority (TRA) in the UAE has confirmed that the list of applications to launch online stores in the country had reached 51.

E-commerce facilitating logistics

The growth of e-commerce is changing the nature of the logistics industry worldwide with the development of storage and fulfilment centres that deliver economies of scale. Another positive impact of e-commerce is how it is driving the development of wholesale and logistics segments of the sector through the evolution of supply chains.

E-commerce logistics consist of delivery to a fulfilment centre, warehousing and packing and finally the last-mile – delivery to the customer. This logistics market will increase in size as online purchases rise to expand output, with the potential to create jobs and investment in the wholesale and retail sector. E

-commerce will also have an impact on transport, storage and real estate sectors. Dubai, with its excellent air and sea transport connections and existing role within global supply chains, has a real opportunity to act as a facilitation centre for e-commerce within the GCC countries and the entire MENA region.

Road ahead

Retailers in Dubai, as in the rest of the world, will adapt to the challenge of building a robust online presence in various ways, states Dubai Economy. The immediate strategic response has been for many large retailers to set up their own online shopping and delivery services.

There will be emulation of the strategy that stores in other parts of the world, such Swedish furnishing retailer IKEA, which is turning its out-of-town centres into facilitation warehouses and opening city centre stores to persuade consumers to visit, see the items, and then go online to purchase them. Many retailers are concentrating on providing convenience and experiential unique elements to continue to attract footfall into their physical stores.

The positive growth opportunity from e-commerce arises from the ability of stores located in geographically concentrated prime shopping locations – such as New York, London, Paris, Singapore and Dubai – to enhance the shopping experience, while benefiting from efficiency gains by separating the act of browsing and purchasing from delivery.

 

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