The UAE's e-commerce market is expected to be worth $9.2 billion in 2026, up nearly 92 per cent from 2021, as online sales continue to soar in the country, according to a Dubai Chamber of Commerce study.
The study, based on data from Euromonitor, also projected that the share of e-commerce in total retail sales will reach 12.6 per cent by 2026.
Growth momentum within the UAE’s e-commerce sector is being supported by rising demand for online shopping and steady investment flows in the sector’s infrastructure, the study said.
E-commerce sales in the UAE grew to $4.8bn in 2021, up almost 85 per cent compared with $2.6bn in 2019.
The Covid-19 pandemic, which led to lockdowns around the world, hastened the move to digital services as consumers switched to cashless payments and online shopping.
Globally, the e-commerce market is expected to hit $55.6 trillion by 2027 at a compound annual growth rate of about 27.4 per cent, from an estimated $13tn in 2021, data from US-based research firm Imarc Group showed.
"The improvement and modernisation of payment systems and services was identified as another key factor that has boosted demand and business activity within the UAE’s e-commerce sector," Dubai Chamber said.
Globally, digital payments are expected to grow to $8.26tn by 2024, from $4.4tn in 2020, Statista said, with the likes of pay later platforms, digital wallets and contactless card models gaining traction.
Meanwhile, investments in the sector have significantly changed the dynamics of the UAE e-commerce market, with the main impact being a downward pressure on prices due to increased competition and supply, Dubai Chamber said.
The study found that in the UAE, consumer electronics was the top selling online product in 2021, accounting for 34 per cent of sales, while apparel and footwear accounted for 31 per cent, food and beverages for 12 per cent, and media products for 8 per cent.
"Among the main product categories offering the most untapped potential in the e-commerce market in 2022 are apparel and footwear, personal accessories, beauty and personal care, and home and gardening," the report said.
More than one third of consumers in the UAE bought a product or service using their smartphone at least once a week, which is above the global average of weekly online purchases, the study said.
The mobile retail market reached $2.6bn last year, accounting for 44 per cent of the total e-commerce market value. It is further expected to record a compound annual growth rate of 15.6 per cent over the 2022-2026 period to reach $4.6bn, the report said.
In the UAE, the growing number of loyalty rewards programmes offered by online retailers also drove up demand for online shopping.
Shoppers based in the UAE preferred local retail websites to overseas retailers, with domestic e-commerce websites accounting for 73 per cent of total sales.
"The increasing momentum of e-commerce activity in the country is expected to provide more business opportunities in payment systems, financial technology, electronic logistics and distribution centres," Dubai Chamber said.
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Rasmi Ragy is a senior counsel at Charles Russell Speechlys, a law firm headquartered in London with offices in Europe, the Middle East and Hong Kong.
Experience: Prosecutor in Egypt with more than 40 years experience across the GCC.
Education: Ain Shams University, Egypt, in 1978.
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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