Mena e-commerce market hit $37bn in 2022 as internet usage grows

Digital payment platforms, online grocery shopping and expanding tech initiatives driving the sector

E-commerce portals are crucial for today's economies as they bring convenient and quick services to consumers. Alamy

The Middle East and North Africa's e-commerce market reached about $37 billion in 2022 as the use of digital channels expanded, a report from EZDubai has found.

The figure is 16 per cent higher than the $31.7 billion recorded in 2021, and is projected to reach around $57 billion by 2026 at a compound annual growth rate of 11 per cent, the study by the e-commerce zone, conducted in collaboration with Euromonitor International, said.

The growth in the sector comes on the back of the continued increase of internet usage, with trends such as the popularity of digital payment platforms and online grocery shopping, as well as expanding technology sector initiatives, the study said.

Government and economic factors have also contributed significantly: Mena countries' developed infrastructure, supportive policies and economic stability, as well as investments into technology to cater to a young and tech-savvy population, drove the region's strong digital landscape development, the study found.

Saudi Arabia and the UAE, the Arab world's two biggest economies, and Israel accounted for more than 72 per cent of the total e-commerce market. The growth in these countries was attributed to their technologically-advanced populations, high-internet usage rates and strong government finances, it said.

“The Mena region’s e-commerce industry has experienced rapid growth in recent years, driven by a combination of factors, such as increasing internet and mobile penetration, rising consumer demand for convenience and value, and the emergence of innovative business models,” said Mohsen Ahmad, chief executive of Dubai South Logistics District, where the EZDubai is based.

“It is worth noting that government initiatives have also played a vital role in supporting this growth, with several regional governments implementing policies to support digital transformation and encourage entrepreneurship and investing in the necessary infrastructure and technology to facilitate e-commerce operations.”

E-commerce portals are crucial for today's economies as they bring convenient and quick services to consumers. The rise of digital solutions on any platform and device is spurring the use of these channels.

In the Mena region, e-commerce is fast catching up with global powerhouses such as China, with many online retailers scaling up their services to avoid disruptions in supply chains caused by macroeconomic and geopolitical challenges, most notably those that were as a result of the Covid-19 pandemic, EZDubai previously said.

Monday's report showed that companies in the UAE are using dark stores — generally a physical location that is used as a warehouse for fulfilment operations — to streamline inventory management and provide delivery.

The UAE's e-commerce market is expected to be worth $9.2 billion by 2026, up nearly 92 per cent from 2021, as online sales continue to soar in the country, the Dubai Chamber of Commerce said in October.

The Emirates has also become a hub for global e-commerce. Market leader Amazon last week opened a new centre in Dubai South, increasing its total capacity in the UAE by 70 per cent. It is also building the Middle East's most technologically advanced warehouse in Abu Dhabi and opened another major warehouse in the UAE capital last June.

Saudi Arabia, meanwhile, has tapped into its growing population, technological advancements and the development of secure payment systems to strengthen its performance in the e-commerce sector.

Amazon had also launched a new academy in Saudi Arabia that seeks to support the kingdom's human capital programme for the digital economy.

The initiative, which was launched at the Leap technology exhibition in Riyadh in February, is the “largest talent development programme of its kind in the Middle East” and aims to empower small and medium enterprises.

Israel, meanwhile, has seen innovations in its economy and the rising demand for speedy delivery services driving its e-commerce space, the EZDubai study said.

E-commerce revenue in Saudi Arabia, the UAE and Israel are projected to reach $11.98 billion, $11.78 billion and $7.55 billion, respectively, in 2023, data from industry intelligence platform eCommerceDB shows.

“The demand for online shopping services in the Mena region is expected to continue growing,” Engy Naguib, senior engagement manager for Mena at Euromonitor International, wrote in the report.

“To sustain growth, e-commerce players should prioritise the personalisation of the online experience, adopt an omnichannel approach and improve last-mile delivery services.”

Sector-wise, the food and beverage industry in the UAE is projected to post strong growth, with an expected penetration rate of 13 per cent by 2026. The average order size in Saudi Arabia is projected to rise by 50 per cent by the same year, the report said.