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INTRODUCTION
Dubai, a modern city within the United Arab Emirates that has a high Internet penetration rate, a tech-savvy population, and a solid infrastructure for business, is a perfect place for launching or expanding e-commerce business. We will discuss the E-Commerce market of Dubai as well as the potential benefits and challenges of starting an online business in this city. Our discussion will cover the business environment, trade growth challenges to start-ups, the state of the mobile market, and the growth forecast for Dubai E-commerce.
COUNTRY BACKGROUND
UAE may be one of the GCC nations bordering Asia and Oman. In spite of the fact that nearly 6 million UAE citizens make up this population, the UN estimates that take into account the large immigrant population place the population at nearly 9.2 million. It is estimated that 50 percent of the population is South Asian, while only 20 percent is Emirati. UAE's strong economy and political stability attract thousands of migrant workers from India, Pakistan, and Bangladesh. According to a 2015 estimate, 85.5% of this population lives in urban areas. A third of the country's population is under 24 years of age, with a median age of 30. In the UAE, there is a severe gender imbalance, with a male to female ratio of 2:1. Most of the country is Muslim, with small percentages of people belonging to other religions.
While the UAE is a resource-rich country that built its economy on oil exports, recent attempts to diversify its economy have proven successful in opening up the private sector and creating a wider range of jobs. Only 25% of oil production is supported by GDP. Comparatively, 42% of Saudi Arabia's GDP comes from these exports. In 2015, the UAE's GDP was around 370 billion dollars.
DUBAI BACKGROUND
Dubai is a popular tourist destination, a thriving financial hub, and a prominent business and finance center in the United Arab Emirates. The country offers a central location within the country and has an open economy, which keeps customs duties low and does not tax corporate profits (except for oil companies). According to Emirates 24/7 News, Dubai's population has just passed the 4 million mark, and Dubai Municipality's Director-General expects the city to reach five million within the next 15 years.
BUSINESS ENVIRONMENT & TRADE
We are going to look at both the workplace and therefore the large-scale trade of Dubai in this section. In addition to telling what proper conduct to follow while expanding your company into Dubai, we will measure GDP and estimate Dubai's market growth long-term.
BUSINESS CULTURE OF DUBAI
It is crucial to understand the business environment in a foreign country so that you can start an enterprise there successfully. Business practices in Dubai differ greatly from those in the United States and other countries. Firstly, let's talk about the most important tenets of conducting business in Dubai - the differences and similarities between this city and us in terms of greetings, calendars, work habits, and the navigation of non-secular norms and gender roles.
In Dubai, a firm handshake will do, even if other Middle Eastern cultures would like to greet by kissing fingers (e.g. Lebanon is a popular place to kiss fingers). Handshakes should be followed by the presentation of an identity card and a polite as-salamu alaykum ("peace be upon you"). Even though it is not necessary to know Arabic due to the expansive expat community, knowing the basics will improve your integration into the community in general. There is often a tiny low chart of key Arabic phrases here. Do not shake hands with a member of the alternative gender; instead, place your hand over your heart.
The working week in Dubai is following a normal geographical week, with a weekend on Friday and Saturday. Ramadan is a month during which most companies, including Western firms, close around 1:00 PM. Meetings should not take place during major Muslim holidays or prayer times. Newspapers and websites regularly print Dubai's prayer times.
Usually, meetings begin in an exceedingly leisurely manner, with plenty of time for small talk and getting to know the other business partners. In most meetings, a cup of tea or coffee may be offered as an informal greeting (that is to say, refusing to offer a cup is uncourteous). A business in Dubai, however, tends to dress very formally. Dressing casually on Thursdays may be the norm for some companies. Dressing professionally should be modest, especially for girls. Expat women are expected to cover their elbows and knees while in public. Emirati businesswomen generally wear abayas (modest garments that cover the arms and touch the floor). There is a general prohibition on public drinking in Dubai, as well as the use of alcohol at company functions and meals. It is illegal to get drunk outside of a licensed hotel. Pork may even be viewed as bad taste at a restaurant.
Female entrepreneurship is common and accepted in Dubai, according to Forbes, where girls face as little discrimination as women in New York or London. Despite the fact that women are common and celebrated in the proletariat, Dubai's businesswomen may struggle to advance in their careers. Women are fewer at senior management levels at companies, so they complain that stereotypes make workplaces hostile. Having clear boundaries between men and women in the office is an important part of proper conduct for business meetings - more so than within us! If an expatriate businessman shakes the hand of an Emirati businesswoman without her express permission, it would be inappropriate.
CENSORSHIP
The Open Net Initiative has labeled the censorship of the United Arab Emirates as "substantial". In a recent report, ONI suggested censorship has risen and has mainly been used to censor opposition views and criticism of the government. Most of the population finds the restrictions acceptable, as the authorities claim censorship's goal is to preserve the moral status of the state, although Dubai previously enjoyed it.
PROHIBITED CONTENT
The following is a list of commonly censored content in Dubai and the United Arab Emirates, compiled by Freedom House and Open Net Initiative. Despite free Internet access, the state recently expanded censorship in 2008 to include the town.
Critics of the government and/or human rights practices.
Dubai/UAE societal customs are criticized in this content.
Unorthodox/extremist perspectives on Islam.
Websites for atheists and secularists.
Websites with LGBT and feminist content.
Content that promotes the use of alcohol or drugs.
Gambling or dating-related content.
Education websites related to sexual health.
VoIP websites.
Trade and Country Growth within the United Arab Emirates.
Despite a growth rate of virtually 25% in 2010, the rate of country growth within the UAE has been on a steep decline since then. Despite a decline in speed, trade is still booming. During 2018, the country exported $387,910 and imported $244,646. Petroleum oils accounted for over $100 of exports in 2018.
THE TOP 5 IMPORTS OF THE UAE
Machines 23%
Precious Metals 21%
Transportation 11%
Textiles 6.7%
Metals 6.5%
As shown by the OEC's list of imports for 2018, jewelry and precious metals were the top imports - the majority of which came from India, Italy, and Turkey. Recent numbers indicate modest growth in the refined petroleum market despite a decline since the peak of 11% in 2012. Gold prices in the UAE are highly volatile. Dubai handles nearly 80% of the UAE's imports and exports.
OEC and UN agency data are lacking in data on recent years and growth rates, as well as projections within the UAE. We have compiled here a chart with World Bank data detailing the growth rates of GDP and country imports over the past few years. GDP rate is on the decline but imports are on the rise, with a sharp spike in 2011. It's important to note that this chart does not represent GDP or number of imports, but rather how fast they're growing. Accordingly, it is optimistic that the number of imports will continue to rise within the UAE and, therefore, that the economy will continue to grow.
PROHIBITED IMPORTS INTO DUBAI AND THEREFORE THE UAE
Before expanding into Dubai, make sure your business meets all relevant regulations to ensure cultural sensitivity and to avoid punishment by the authorities. An overview of prohibited imports may be found below. This list is more comprehensive.
Narcotic drugs of all kinds.
Products from boycotted countries or products with Israeli logos.
Gambling-related goods.
Sculptures, statues, print, etc.
Work that is immoral contradicts Islamic teachings or intentionally criticizes them.
Currency forgery
Food forgery
Internet Penetration
A 98.4% internet penetration rate in 2018 makes the UAE one of the most well-connected countries in the Middle East and GCC. Saudi Arabia and Bahrain are the only two countries in the region to outperform this rate. There are currently 9.4 million Internet users in the UAE, both Emiratis and migrant workers. Since 2000, penetration has increased greatly. Social media users in the UAE numbered 9.7 million by 2020. The statistics reflect the acceptance of the internet in Dubai and therefore the UAE as well as the growing reliance on the internet for business and social purposes.
TOP 10 E-COMMERCE WEBSITES IN DUBAI
Here are a few popular online shopping websites in Dubai in 2021:
Amazon.ae
Dubizzle.com
Aliexpress.com
Awok.com
Groupon.ae
Cobone.com
Supermart.ae
Jadopado.com
Namshi.com
The following list of online markets tells us a lot about the state of eCommerce within the UAE. Amazon.ae is the foremost notable website in the UAE, followed by Awok.com, Groupon.ae, and Supermart.ae. Both Awok.com and Supermarket.ae are based in Dubai. In addition to its global headquarters in Dubai, Groupon is a global company. This is the only Groupon office in the Near East, which has offices in more than 50 countries. Although Groupon has recently withdrawn from Morocco and 6 other countries due to the high investment and costs outweighing the opportunity for growth, its presence within the United Arab Emirates indicates a strong and growing online market. Online marketplaces tend to be popular in Dubai in general, as well as both of these websites. This gives a very optimistic view of Alibaba and other online marketplaces in Dubai.
CHALLENGES TO E-COMMERCE START-UPS
Despite the UAE is the largest and fastest-growing E-commerce market in the Mideast, and nearly 81% of Dubai's adult population buying goods online regularly, there are regional challenges to overcome before starting or expanding a successful business in Dubai.
The main challenge of establishing a web market in the Middle East may be the lack of trust by consumers in online payments. Despite steady growth of e-commerce in the UAE and the acceptance of online payments, most people are still uncomfortable making major purchases online or buying from retailers they don't know. Experts found that more than 75% of domestic payments still take place in cash in October 2015. In the geographical area, 85% of consumers favor using this method over bank cards. Many Dubai-based retailers offer "cash on delivery" payment systems in order to create a sustainable web market. However, this approach results in high levels of product returns and high delivery fees.
Using trusted online payment gateways (like Paypal, CashU) for online money transfers is another solution that has been less problematic to date. In the coming years, the popularity of these systems and the trust Emiratis place in these platforms may lead to a larger E-Commerce market. To create trust among customers, an e-commerce business in Dubai should integrate with a trusted payment gateway. Below are the most popular third-party and integrated payment gateways in Dubai.
MOST POPULAR PAYMENT GATEWAYS
PayPal
2Checkout
Telr
Gate2Play
PayFort
CashU
com
CyberSource
Paytabs
BENEFITS TO E-COMMERCE START-UPS IN DUBAI
The E-commerce market in Dubai is certainly the largest and fastest-growing in the UAE. Online shopping is a regular activity for 81% of Dubai's population. With many of the top malls in the world, this can be an incredibly high percentage. While the market continues to grow and strengthen, starting an e-commerce business in Dubai now has many advantages.
Start a web business in Dubai and you'll be able to do so quickly and cost-effectively. A recent World Bank report titled "Ease of Doing Business" ranked the UAE 34th in the world within 2016 and will likely move up to 25th in 2017. There is little “e-friction”, or little constraint on Internet use (outside of certain areas of censorship discussed above). As well, businesses can be started quickly and easily due to solid infrastructure. In Dubai and also the UAE, registering a business takes an average of 8 days, compared to 20 days per region. In addition, registering a company in the UAE is about half the cost of doing so elsewhere in the Middle East. Creating a web market within the UAE should be an efficient and simple process.
Another great advantage of doing business in Dubai is the greater trust in buying products from local retailers. According to research conducted by Ipsos Media, Souq.com and Amazon.com are the top two most visited online markets in the UAE. MasterCard's 2015 Online Shopping Behavior study found that 45% of its respondents had purchased goods from Souq.com. While 16% had purchased goods from Amazon. The respondents cited bad security and hidden charges on foreign websites as the reasons for this trend. A business based in Dubai might receive a far greater market share from Emiratis and better profits than an overseas business trying to draw in buyers from overseas.
The young and increasingly tech-savvy population of Dubai seems to be able to adapt quickly to a new model of doing business. A lack of trust in online businesses payments was a major deterrent, but this is no longer the case with new models. MasterCard just released its annual study of consumer data, and it's really exciting! Many people felt more comfortable with digital penetration and the use of new payment platforms. But they're also excited about new technologies of the way they shop. Dubai has the potential to become one of the leading e-commerce markets in the world. Due to its increasing normalization of technology, growing business culture, and young population.
HOPES FOR FUTURE E-COMMERCE DEVELOPMENTS
We're proud to announce that MasterCard found in 2014 that over 80% of web shoppers in the UAE are proud of their experience with online shopping. In fact, a recent survey even found that Emiratis are now engaging in online shopping! Did you know? It is likely that you will be inconvenienced by high delivery and repair fees if you buy online. But now, we have the solution for this problem!
MasterCard reports that fewer survey respondents have a preference for brick-and-mortar stores in 2015 than in 2014! This statistic is most credited to the greater convenience and safety of online shopping. As local sites are considered faster and safer than international sites, these preferences are not as widespread as they might seem. An honest solution to increasing website traffic and purchases is to line up a base in Dubai. Beyond the Groupon model, one solution to extending trust among Emirati consumers is to provide secure gateways like PayPal or CashU and offer fast and low-cost shipping. Providing coupons and discounts has been proven to increase customer loyalty and trust in the UAE.
Furthermore, UAE citizens prefer to spend ethically in order to avoid being targeted. MasterCard found that almost half of shoppers value environmentally and socially responsible companies. This includes merchants who sell green products as well as firms that donate to or partner with nonprofits and charities. Emiratis tend to become ethical companies when they shop online with reasonable shipping fees and secure and trusted payment options. The MasterCard study concluded that Emirati consumers would be more comfortable making online purchases if those preferences were met more often.
TOP 10 ONLINE PURCHASES WITHIN THE UAE
Airline Tickets
Hotel Reservations
Event Tickets
Clothing and Accessories
Computer Software
Cell phones
EBooks
Music
Videos and Games
Electronic Equipment
This list reflects the eagerness of Emiratis to shop for goods associated with technology and entertainment online. It also shows that it's increasingly common to shop for tickets and make reservations online for much greater convenience. The one market that doesn’t seem to transition well into the UAE is consumables. But 20% of MasterCard survey respondents indicated that they'd be comfortable window shopping online. Thanks to their perishability and ease of use.
THE STATE OF MOBILE COMMERCE WITHIN THE UAE
In line with a 2016 MasterCard announcement on attitudes toward using phones as payment devices within the UAE. Nearly 40% of consumers within the country have taken an enthusiastic attitude toward technological advancement. The survey found that many respondents wanted to shop online and use mobile payments because of their convenience. It claimed that members of the UAE were demanding "innovation" and "good candidates for introducing new mobile capabilities and increasing the strength of the technology market". As a result, a greater number of geographical region survey respondents reported trusting fingerprint verification (30%) for mobile payments rather than PIN codes (20%). Though Emiratis generally have low trust in online and mobile payment systems. They're receptive to changes in technology that make them safer.
The high rate of smartphone users interacting with online purchases reflects their receptiveness to technology. In 2015, nearly a third of MasterCard's survey respondents reported making multiple mobile purchases. They claimed that this was due mainly to the convenience of shopping from their phones, especially due to the wide selection and availability of mobile shopping applications. Nearly 60% of mobile shoppers within the UAE prefer purchasing through an app to shopping in a browser.
PayPal revealed in 2015 its status in the UAE as the second-largest smartphone market in the world and the world's largest mobile payment system. As mobile payments become more widespread, the trend is expected to continue driving mobile spending upward. PayPal forecast that mobile commerce would almost double its revenue between 2013 and 2016. The most popular markets for mobile commerce in the UAE are airline tickets and phone apps, followed by clothing, hotel reservations, and movie tickets.
RECENT MARKET GROWTH
All e-commerce market reports on Dubai over the past few years have been overwhelmingly positive. According to a 2014 article in Gulf News, the UAE was "leading the Middle East's e-commerce revolution" due to its high internet penetration, tech-savvy population, and increasing confidence in online shopping. It was predicted that the market would reach a valuation of $10 billion in the first half of 2018. In 2014, the full value of the market was only at $2.5 billion. This means that there'll be astronomical growth in this market over the subsequent few years. In 2015, the worth of the market increased by 19%, and similar numbers are expected for 2016. Although experts claim that e-commerce in Dubai may currently be experiencing a bit of a slow-down because of economic uncertainty and lower oil prices, the convenience and the deals available at online markets and shopping apps are still driving consumers online. Start-ups looking to expand into eager online markets might do fine to introduce their business into Dubai now and build trust while E-commerce continues to be rapidly growing and becoming popular.
CONCLUSION
In Dubai, e-commerce has been slow to spread because of recent economic uncertainty and the lack of confidence in online payments. Growth in the e-commerce industry is expected to slow over the next few years, however. Startups in Dubai can expect to find tech-savvy, smart, and young audience members who are looking for trustworthy and ethical companies that offer quality goods and services. This is often a good time to leap into the e-commerce market of Dubai, where the market is powerful and still growing, and while internet and business regulations make commencing an organization easy, it is not always easy to do so.