The Future of Ecommerce in the MENA Region
Are you thinking about launching an e-commerce business in the MENA Region? Digitizing your current brick & mortar enterprise? Or perhaps you are simply interested to know what the future holds for these prosperous countries in terms of online sales.
Whatever reason you have for wanting to find out about the future of e-commerce in the MENA region, you should know that it is more than a little exciting.
From the rise of the omnichannel retail experience to the buying power of Millennials and Generation Z to the increasing number of innovations in automation, keep reading to find out everything you need to know about what the future holds for the Middle East and North Africa in terms of e-commerce.
MEM is the Fastest & easiest way to launch your E-commerce website. 0% commission. Advanced Control Panel. Mobile App & more. Book your free Demo now!
Table of contents
- The History of Ecommerce in the Mena Region
- Ecommerce sales in the MENA region
- Ecommerce sales in the United Arab Emirates
- Ecommerce sales in Saudi Arabia
- Ecommerce sales in Qatar
- Ecommerce sales in Kuwait
- Ecommerce sales in Lebanon
- What is the Future of Ecommerce in the Mena Region
The History of Ecommerce in the Mena Region
Before you look into the future, it is always a good idea to delve into the past to see how this has affected the present. In terms of e-commerce, the Mena region has always had a complicated relationship with online sales, predominantly due to a lack of street addresses and a deep-rooted preference for face-to-face interactions.
Furthermore, these cultures have always traditionally preferred to use cash payments rather than credit cards or online payment systems, which has further contributed to the relatively slow uptake of e-commerce compared to other areas of the world.
That being said, this has recently all begun to change due to the acquisition of Souq.com by Amazon in 2017, which has seen been rebranded as Amazon.ae. Not to mention the emergence of new platforms such as Noon and the growth of mobile wallets in the Gulf, which both played a pivotal role in changing perceptions of e-commerce within this region.
Today, Middle Eastern consumers are some of the most connected in the world, spending over 8 hours a day online and boasting the highest smartphone penetration rate globally at 83%.
However, there is still a long way to go when it comes to businesses, big global brands aside, embracing e-commerce solutions in this region of the world.
E-commerce Sales in the Mena Region
To better understand e-commerce in the Mena Region, let’s take a closer look at the value of e-commerce sales in some of its most influential countries.
E-commerce sales in the United Arab Emirates
Revenue in the e-commerce market in the United Arab Emirates is expected to reach $7,456 million in 2021, with a projected annual growth rate (CARG 2021-2025) of 10.30%, resulting in a projected market volume of $11,034 million by 2025.
This country’s largest e-commerce market lies in the fashion industry, with a projected market volume of $2.221 million in 2021.
The average revenue per user is expected to amount to $1,075,81, with user penetration expected to hit 66.1% by 2025.
The UAE boasts a modernized digital payment system, with 61% of online shoppers now paying with credit cards or digital wallets instead of cash on delivery.
E-commerce sales in Saudi Arabia
Revenue in the e-commerce market in Saudi Arabia is expected to reach $7,051 million in 2021, with a projected annual growth rate (CARG 2021-2025) of 5.38%, resulting in a projected market volume of $8.697 million by 2025.
This country’s largest e-commerce market lies in the fashion industry, with a projected market volume of $2.285 million in 2021. The average revenue per user is expected to amount to $248.69, with user penetration expected to hit 92.5% by 2025.
Popular e-commerce sites in this country include Haraj.com and Souq.com.
E-commerce sales in Qatar
Revenue in the e-commerce market in Qatar is expected to reach $2,027 million in 2021, with a projected annual growth rate (CARG 2021-2025) of 15.60%, resulting in a projected market volume of 3.619 million by 2025.
This country’s large e-commerce market also lies in fashion, with a projected market volume of $578 million in 2021. The average revenue per user is expected to amount to $1,112.94, with user penetration expected to hit 69.7% by 2025.
The top e-commerce sites in Qatar are Amazon, eBay, and AliExpress, as well as local site, Mzadqatar.com.
E-commerce sales in Kuwait
Revenue in the e-commerce market in Kuwait is expected to reach $1,231 million in 2021, with a projected annual growth rate (CARG 2021-2025) of 6.12%, resulting in a projected market volume of $1.562 million by 2025.
This country’s largest e-commerce market is fashion, with a projected market volume of $358 million in 2021. The average revenue per user is expected to amount to $487.62, with user penetration expected to hit 61.1% by 2025.
E-commerce sales in Lebanon
Revenue in the e-commerce market in Lebanon is expected to reach $796 million in 2021, with a projected annual growth rate (CARG 2021-2025) of 6.99%, resulting in a projected market volume of $1,043 million by 2025.
This country’s largest e-commerce market is fashion, with a projected market volume of $242 million in 2021. The average revenue per user is expected to amount to $259.38, with user penetration expected to hit 50.4% by 2025.
MEM is the Fastest & easiest way to launch your E-commerce website. 0% commission. Advanced Control Panel. Mobile App & more. Book your free Demo now!
What is the Future of Ecommerce in the Mena Region
For many years customers have enjoyed the “destination shopping” aspect of visiting a physical store in the Mena region, but the sudden emergence of the COVID-19 pandemic has encouraged many consumers to try e-commerce for the first time.
In fact, a recent study of ten key markets in the region, including Saudi Arabia and the United Arab Emirates, revealed that 40% of respondents are now shopping more online than ever before. Furthermore, 48% of respondents in the UAE and 69% in Saudi Arabia stated that they would continue these new shopping habits after the pandemic has ended.
So, what other trends are influencing the future of e-commerce in the Mena region?
Let’s take a closer look.
1. An Omnichannel Retail Experience
Businesses in the Middle East have faced many challenges in the last year with the temporary closure of non-essential shops, a fall in consumer confidence, a loss of foreign tourists, and a drop in resident numbers as expatriates left the region.
This has led to not only a shift in the composition of purchases but also in people’s preferred retail channels, with online shopping becoming more popular than ever before.
That being said, with consumers now starting to return to the shops as restrictions ease, e-commerce sites need to work that bit harder to continue to attract shoppers. This is where the importance of an omnichannel retail experience comes into play.
What is an omnichannel retail experience?
In its simplest form, an omnichannel retail experience is a multichannel approach to sales that focuses on providing a seamless customer experience whether the person in question is shopping online from their desktop computer, on the go via their smartphone, or in a physical store.
Why is omnichannel retail so important?
Omnichannel retail has the unique ability to empower brands to reach consumers at every touchpoint of the buying experience, both online and offline. Furthermore, statistics show that shoppers who buy both online and in-store have a 30% higher lifetime value than those who only use one retail channel.
What is the difference between omnichannel and multichannel retail?
There is a very distinct and important difference between multichannel retail and omnichannel retail.
Multichannel retail is when a brand uses two or more channels in isolation to engage with its customers. For example, they offer an on-site experience and a separate in-store experience.
Omnichannel retail, on the other hand, offers an integrated approach to sales and customer experience. This means that they offer a unified shopping experience regardless of what channel is being used.
How does omnichannel retail affect the future of e-commerce in the Mena Region?
Shopping malls are an integral part of the culture in the Mena region, especially in the likes of the UAE and Saudi Arabia. They offer activities, inspiration, and the chance to enjoy human interaction, which most have missed over the past 12 months.
This means that e-commerce sites that are catering to this region need to work hard to replicate online the experience that they offer in-store.
According to Majid Al Futtaim, founder, owner, and president of the Majid Al Futtaim Group, who has launched a “phygital” pop-store where customers can browse the shop’s products through its own mobile app, try them on in-store and then either make a purchase in the shop or online, the future of retail in the Middle East is all about the physical and digital conversion.
What exactly does this mean for businesses in the Mena region?
In a nutshell, if you want to survive in a post-COVID era, you need to be able to strike the right balance between online and in-store shopping experiences in order to deliver an all-rounded and engaging customer experience.
2. The Purchasing Power of Millennials & Gen Z
If you want to explore the future of e-commerce in the Middle East, then you can’t help but delve into the purchasing power of two of the most influential groups of consumers: Millennials and Gen Z.
Who are Millennials?
Millennials, also known as Generation Y or Gen Y, is the name given to those who were born between 1981 and 1996. Thought of as the generation that would rather spend their money on luxury goods and experiences rather than saving for the future, millennials were the first “digital natives” and are rarely seen without their smartphones.
In terms of their spending power, in 2018, the global millennial spending power was a whopping $2.5 trillion. Specifically relating to the Middle East, millennials account for about 60% of the population and are the highest spenders globally. In fact, they spend on average twice as much as their European counterparts.
How do Millennials Shop in the Mena Region?
According to a study by Google, millennials in the Middle East are more loyal to their preferred brands than their peers in the United States, the United Kingdom, and Japan. In fact, a significant number of millennials in Saudi Arabia and the UAE only consider one brand when they go shopping.
Millennials in these countries also love social media, with 9 out of 10 millennials in the Middle East using at least one social media channel every day. Leading the way when it comes to Facebook is Egypt, with a colossal 38 million users each day. Instagram is also proving to be increasingly popular with this demographic, with 63 million users in the Middle East and Turkey being the sixth largest Instagram market in the world.
They are also conscious consumers, with 48% of millennials in this region stating that they only buy from socially responsible brands and 45% revealing that they support local emerging brands as long as they share their ideals.
How to engage with Millennials
- Provide personalized and cross-channel engagement across all social media platforms.
- Showcase your authentic brand story and core values to encourage brand loyalty.
- Focus on visual and video content.
- Offer a seamless mobile experience.
Who are Gen Z?
Generation Z, also known as Zoomers, is the demographic succeeding millennials. Members of this generation are born between 1997 and 2015. In terms of media consumption, the average Gen Zer received their first mobile phone at the age of 10.3 years and have grown up in a hyper-connected world where the smartphone is their preferred method of communication.
With a spending power of a respectable £143 billion, retailers and brands alike are still trying to figure out how best to attract and engage with this new generation.
How do Gen Z shop in the Mena Region?
For many years in the Middle East, brands were focused on how to appeal to millennials. However, with the arrival of Gen Z, many have shifted their efforts towards the buying power of this increasingly powerful and influential demographic.
In terms of how this demographic shops, it is clear that Gen Zer’s spend the vast majority of their time on their smartphones; therefore, brands should plan their strategies around this generation’s behaviors, preferences, and habits in mobile environments.
Furthermore, Gen Z crave individualized shopping experiences that are tailored to them personally and aren’t afraid to switch alliances if a brand does not deliver the bespoke service that they want and need.
How to engage with Gen Z
- Offer seamless interaction across all channels.
- Provide transparency and authenticity.
- Use technology to provide value and convenience.
- Provide an in-store and online experience.
3. Automation Across the Board
The combination of rapid technological advancements and rising customer expectations has transformed the retail industry, not only in the Mena Region but worldwide.
From digital assistants to advanced analytics, AI-driven decision-making to purchase automation, innovative technologies have the ability to revolutionize all aspects of retail, both in-store and online, creating a highly personalized and fulfilling customer experience.
Robotics to facilitate distribution
With online shoppers expecting their goods to arrive increasingly quickly, many brands have turned to robots to automate key tasks such as picking, packing, and delivering. In fact, by 2025, more than 50,000 warehouses across the globe are expected to include commercial robots.
At the moment, Amazon is clearly the biggest player when it comes to robotics, but other retailers are also starting to take advantage of this transformative technology.
In the Middle East, the AI market is set to be worth $320 billion by 2030, with the socio-humanoid robot designed by SoftBank, and known as Pepper, being made available in the United Arab Emirates even before the company rolled out in China and the US. This humanoid robot is designed for use around the general public and is popular in retail environments to welcome customers, provide product recommendations and analyze customer buying behaviors.
Robotics such as Pepper may just be the key to helping retailers bridge the gap between what is happening in-store and what is happening online by providing a seamless omnichannel experience.
Machine Learning
With the ability to help a brand provide personalized product recommendations, optimize promotions, make real-time data-driven decisions, and increase cross-selling, machine learning and data analytics are some of the most effective ways to expand digital operations.
Effectively a tool that allows a machine to automatically learn from past data without the need to be explicitly programmed, machine learning allows retailers to take a customer experience to a whole new level.
Email Automation
Email automation allows you to create emails that reach the right people, at the right time, without having to do the manual work yourself. With a potential conversion rate of up to 77%, email automation offers a highly effective way for e-commerce businesses to increase sales and enhance engagement with their target audience.
4. Maximizing User Experience
It has been suggested that customer experience will soon overtake price and product quality when it comes to choosing brands. However, when it comes to the online user experience in the Middle East, many retailers are still falling short. You only need to look to banking websites where making a simple transaction is a complete pain or to e-commerce stores that make you checkout online but pay over the phone.
So, why are countries such as the UAE, Lebanon, Kuwait, Qatar, and Saudi Arabia not offering a good user experience?
In short, it is because retailers have been so focused on building an online presence that they have failed to realize the importance of UX. That being said, there are many new technologies and strategies that can help e-commerce businesses in the Mena region to up their game when it comes to overall user experience, including:
Brand Insights
Understanding how your brand is perceived by your customers is key to creating a better user experience. E-commerce businesses should be asking themselves:
Do consumers view your brand as you intend to represent it?
Do consumers have positive or negative feelings about your brand?
Are you the first brand they think of within your niche?
By determining the above, brands in the Middle East can get a better understanding of their place in the marketplace relative to the competition, as well as discover new opportunities to engage with their target audience.
PWA – Progressive Web App
In its simplest form, a Progressive Web App is a web application that gives a website the look and feel of a traditional smartphone app when it is accessed on a mobile web browser. Using the latest web capabilities, it brings consistency between web and native apps, which has the ability to revolutionize an e-commerce site.
As mentioned above, mobile usage in the Mena Region, socially amongst the younger generation, is at an all-time high, and with PWAs, brands can offer enhanced speed, security, ease of use, and so much more.
Voice Commerce
A technology that helps reduce the end-users dependence on hardware, voice commerce allows consumers to use voice commands to search and purchase products online. It is predicted that by 2030, voice commerce could claim a 30% share of e-commerce revenue, with the potential in the Middle East to grow the e-commerce market by almost 200%.
Businesses in the Middle East can use voice search to offer enhanced convenience, speed, hygiene and to actively target local searchers.
Conclusion
The future of e-commerce in the Middle East is undeniably bright, as we have explored above, with the COVID-19 pandemic acting as a catalyst for greater internet usage in the region and for businesses to embrace e-commerce solutions.
That being said, although the Middle East has an internet penetration that is significantly higher than the global average, it is still predominantly only the larger retailers that are taken advantage of this fast-growing market. This means that there is a great opportunity for small businesses in the Mena Region to take their offerings online and reach a much wider and more lucrative audience.
If you would like to know more about how you can launch your own e-commerce site in the Mena Region, we can help you. Our e-commerce solution, MEM, is specifically designed to help small businesses in the Middle East take that first step into the world of online sales. Providing support and advice every step of the way, get in touch with our knowledgeable and experienced team, or book a demo here today and discover how we can transform your business.