Millennials are driving a $5.3B e-commerce market in MENA
According to Visa, 76 percent of UAE and 58 percent of Saudi Arabia millennials shop online. (Pexels)
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The e-commerce market in the Gulf Cooperation Council (GCC) countries is expected to grow to $20 billion (Dh73.4 billion) by 2020 from $5.3 billion in 2015, as online shopping grows in the region, according to a report by global consultancy AT Kearney.
In its ‘Getting in on the GCC e-commerce Game’ report, AT Kearney stated that e-commerce contributes about 0.4 per cent to the region’s gross domestic product (GDP). In addition, 34 per cent of major GCC retailers have an e-commerce presence.
E-commerce payments using Visa cards in the GCC amounted to $2.5 billion in 2015, up 24 per cent over 2014, according to Visa’s ‘Understanding the millennial mindset and what it means for payments in the GCC’ report. The growth rate is expected to be similar this year, Kriti Makker, manager of Visa Performance Solutions for Central Europe, the Middle East and Africa at Visa, told reporters in Dubai on Tuesday.
Last year, the e-commerce markets in the UAE and Saudi Arabia grew by 28 per cent and 37 per cent respectively, as per Visa’s report. The actual figures, however, were not given.
The UAE accounts for around 40 per cent of e-commerce transactions with Visa cards in the GCC, Makker said. The UAE and Saudi Arabia together represent nearly 75 per cent of total e-commerce transactions in the region, she added.
Online shopping is popular among millennials in the GCC, with 76 per cent of UAE and 58 per cent of Saudi Arabia millennials shopping online, according to Visa’s report.
They spend mostly on electronics, clothing, travel and food when shopping online. UAE respondents said that they have spent an average of $404 on electronics on their last visit, $130 on clothing, $585 on leisure travel, $699 on business travel and $59 on takeaway food.
“Millennials feel that online shopping empowers them, giving them a sense of exclusivity, and offering them access to aspirational products from prestigious brands,” Visa stated in its report.
However, there are challenges facing e-commerce growth in the GCC, including consumers’ concerns over data security and a lack of eCommerce offerings from retailers, AT Kearney said in its report.
Consumers in the region remain hesitant about paying online, with 60 per cent of online orders still paid in cash on delivery. This is a concern for retailers because cash on delivery is expensive for them, as they bear transaction and cash transportation risks, It also negatively impacts cash flow, according to the report.
Also, some e-commerce sites in the region don’t have an easy checkout process, which negatively impacts users’ experience.
“If you have to enter your card and billing details, it’s a clunky experience, and you’re not sure if it’s safe to enter your card details,” Makker said.
While the region’s e-commerce market is underpenetrated compared to global markets, there is robust potential for growth, given the high levels of disposable income and internet and smartphone penetration, AT Kearney’s report stated.
By Sarah Algethami
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