Abu Dhabi, UAEThursday 29 October 2020

CORONAVIRUS

GCC e-commerce market to more than double to $50bn by 2025 due to pandemic-driven boom

The Kearney Middle East report forecasts the sector will grow by 20% per year between 2020 and 2022

Amazon’s sales in the region grew by 26 per cent to $76 billion in the first quarter of this year. AFP
Amazon’s sales in the region grew by 26 per cent to $76 billion in the first quarter of this year. AFP

The GCC's e-commerce sector is predicted to more than double to $50 billion in the next five years, up from $24bn this year, as pandemic-related movement restrictions lead to a shift in shopping habits in the region, according to a new report.

The report by consultancy Kearney forecasts that the sector will grow at a compound annual rate of 20 per cent between 2020 and 2022, with growth tapering off to 14 per cent per year from 2022 to 2025.

Kearney said that the pandemic has increased growth prospects, without which it would have expected14 per cent growth between 2020 and 2022, slowing to 10 per cent in the following three years.

“Covid-19 caused an unforeseen push and gave a new, accelerated lease of life to the sector, in line with what we have seen in global markets,” Adel Belcaid, partner at Kearney Middle East, said.

This is due to a rapid change in consumer behaviour, spurred largely by the new normal of social distancing, movement restrictions and reduced capacity in physical stores, he added.

E-commerce companies have reported stronger sales after stay-at-home directives to contain Covid-19 prompted people to shop online.

Amazon’s sales in the region grew 26 per cent to $76bn in the first quarter of this year. Meanwhile, delivery app Instashop saw a 70 per cent spike in app downloads while orders spiked by 53 per cent, according to Kearney.

The average percentage of goods that GCC household bought online rose to 8 per cent in 2020, from 2 per cent in 2015, Kearney said. Given that e-commerce growth in developed markets such as the US, China, Korea, and Germany sits between 16 per cent to 25 per cent, there is still significant room to grow.

The report also explores the likely implications of the e-commerce boom on real estate and small and medium enterprises – two key sectors within the retail ecosystem.

New e-commerce marketplaces, increased investment in digital channels by retail giants and declining physical store sales could impact commercial real estate values and challenge the survival of SMEs that are yet to adopt online sales channels, the report said.

A previous survey by the Chicago-based consultancy showed that 36 per cent of UAE SMEs have invested to prepare for an online future, but only 4 per cent are planning to sell online in the near future.

“Those who have already made the investment have weathered the storm and are well positioned to lead in the post-Covid retail revival ... more than ever, those who fail to make the required changes and investments will be sidelined and put their very survival in question,” said Debashish Mukherjee, partner at Kearney Middle East.

All stakeholders should take note and revisit their strategies, operating models and policies to develop their ecommerce operations, he added.

Updated: October 6, 2020 04:47 PM

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