Huba Gaspar

Jul 21, 2016

posted by Huba Gaspar

A Peek Into The Rapidly Growing Middle East eCommerce Market

Ecommerce in the Middle East - a picture of Dubai, UAE

One can hear and read a lot lately about how the online shopping sector is expanding at extreme rates in emerging markets like Southeast Asia, India, and China, however, the Middle East eCommerce sector is showing just as much promise.

The Middle East is an extremely fertile soil for eCommerce. Although many countries have relatively low internet penetration rates, IT infrastructure is developing rapidly across the region. In some places like Bahrein, Qatar, and the UAE as much as 90% of the population already has access to the internet. Another interesting fact about these countries is that for example in Qatar, the country with the third highest per capita GDP worldwide, less than 20% of Internet users made purchases online in 2015. Figures like this indicate, that there is enormous potential for growth in the region. According to a study published by yStats.com last year, the share of B2C eCommerce on total retail sales of goods in the UAE alone is forecasted to triple between 2014 and 2019.

 

Regional leaders

Currently, the Middle East eCommerce market is dominated by a handful of large, local players, like Souq.com and Wadi.com and global businesses, such as eBay, Amazon, and Aliexpress. The rapid growth in the sector and the traction that local companies receive attracted huge investments in recent years. One of the leading eCommerce providers in the region, Soque.com, reportedly completed a USD 275 million funding round last year, becoming the first real unicorn of the Middle East.

Ronaldo Mouchawar, CEO and co-founder of Souq.com, one of the biggest eCommerce business in the Middle East.

Ronaldo Mouchawar, the CEO and co-founder of Souq.com – one of the leading players in the rapidly growing Middle East eCommerce market.

Another regional eCommerce company, Wadi.com has announced to have raised $67m in Series A funding earlier this year with Al Tayyar Travel Group as the lead investor. The enormous investment round came just 10 months after Wadi’s launch.

While these companies are present mostly in Saudi Arabia, Qatar, and The UAE, it’s not only these countries that are seeing enormous growth in the field. E-commerce and the IT sector, in general, is on the rise in Egypt as well. The country ranks alongside the UAE, Saudi Arabia, and Kuwait for the highest number of eCommerce customers in the Middle East, with over 30 million active online shoppers.

 

Barriers to growth for eCommerce in the Middle East

It is no wonder, that in this rapidly growing market environment, a large chunk of new entrepreneurs in the Middle East gets involved in some form of eCommerce activity. However, there are considerable barriers to entry in many countries – both cultural and infrastructural – that hinder the proliferation of eCommerce enterprises in the region. These are more than likely prominent factors in much of the local online buying potential is yet being largely unexploited.

One of such problems is the lack of house addresses and sophisticated postal service, which makes package delivery cumbersome in the region – to say the least. The current system is basically based on giving drivers a bunch of packages and phone numbers and usually, these only get delivered – if at all – after multiple phone calls between the driver and the client. “The way that packages are delivered here in the Middle East, [as well as] Brazil, South America, Russia, hasn’t changed in 30 years” said Joy Ajlouny, one of the founders of Fetchr, a company that aims to solve exactly this issue through a proprietary tech system which schedules package pick-up and delivery using GPS coordinates from a user’s mobile.

Fetchr - a company seeking to solve the eCommerce delivery problems of the Middle East

Fetchr – a company seeking to solve the eCommerce delivery problems of the Middle East

It’s not just eCommerce, but IT in general

With this much attention being drawn to the sector, eCommerce technology providers from all over the world are focusing their efforts on the region as well. The exhibitor lineup of the recently held Ecommerce Show Middle East event showcases this trend perfectly. Sponsors of the event included major global players, such as MasterCard, leading eCommerce platform Magento, and California-based search company, Algolia. The fact that these global providers are trying to tap into the Middle East eCommerce scene underlines that there is indeed enormous, unexploited potential for growth in the region.

Non-commerce related IT businesses are also on the rise in the Middle East. This, in the long term, can radically improve the all-around infrastructure of the region. Uber in Cairo, for example, has shaken the local taxi market and the North African metropolis is now one of the leading markets for the San Francisco-based ride-sharing app, globally.

All in all, the Middle East is becoming more and more a reap target for investors, eCommerce, and IT entrepreneurs. This enormous, largely untapped market will surely give birth to more exceptional businesses, like Soque.com and revolutionary technology services, like Fetchr in the years to come!

 

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