FINANCE However, those habits are poised to change tremendously in the near future. Back in 2015, internet sales in the UAE accounted for 3.9 per cent of the total sales in that year. In <strong>2017</strong>, online sales in the Middle East and North Africa (MENA) region are set to top $2 billion, with the UAE leading the e-commerce boom. Those aren’t just numbers pulled out of a hat either. According to a 2016 Digital Middle East report by McKinsey & Company, e-commerce penetration in the Middle East is estimated at a mere two per cent of retail sales. As if e-commerce’s growth in the region needed more evidence, in July this year, Jeff Bezos’ e-commerce giant acquired Dubaibased retail and marketplace platform Souq.com to the tune of $700 million. Shortly after that, Souq – which was growing at such an unparalleled rate that it was dubbed “the Amazon of the Middle East” – went on to acquire Wing.ae, a marketplace for merchants and couriers based in the UAE. The acquisition is expected to boost Souq.com’s last mile delivery. While it is one of the most successful platforms, Souq isn’t the only unicorn to come out of the UAE. Noon, the $1 billion e-commerce platform founded by Emaar Properties chairman Mohamed Alabbar, started operations in the UAE last month. In February last year, Dubaibased Wadi.com raised $67 million in Series A funding with Al Tayyar Travel Group as the lead investor. Elsewhere, Net-a-Porter reported that the average order value in the Middle East is 50 per cent higher than the rest of world. It’s little wonder that in April last year, Alabbar’s Symphony Investments announced a joint venture with Yoox Net-A-Porter Group (YNAP), which will see Alabbar focus his entire online luxury retail activity in the GCC exclusively through the joint-venture, of which Symphony Investments owns 40 per cent. Off-price brands Yoox and The Outnet are set to debut localised sites in the region in 2018, while Net-a-Porter and Mr Porter will launch in 2019. It doesn’t stop. Another big player in the UAE’s e-commerce battlefield is Namshi. Part of the Global Fashion E-commerce Group and created by Rocket Internet, Namshi is a Dubai-based online fashion retailer with over 40,000 exclusive in-house collections and brands posted a $1.8 million profit last year. The timing could not have been better. At a time when Rocket Internet’s seen the collective value of its fashion startups shrink by $2.4 billion, Namshi was its saving grace. E-commerce is the next big step for burgeoning businesses in the region with the market expected to be valued at $10 billion by 2018, according to Frost & Sullivan (market research firm). Those numbers are subject to the growth of complementary industries such as smartphones. Thankfully for anyone involved in e-commerce, the country’s smartphone penetration is the highest in the world at 73.8 per cent, with more than 90 per cent of the population having access to the internet. With that headache basically curing itself, the focus will shift on keeping the target audience happy. The e-commerce industry hinges on millennials to keep it going. According to awok.com, shoppers aged 25-34 comprise 65 per cent of the online shoppers. The longer e-commerce platforms can keep these millennials online, the higher number of daily activities are likely to be conducted. As such, retailers in the region and globally will have to focus on being mobile friendly to offer efficient, convenient and safe click-and-shop experiences for customers. There can only be winners within the industry. Sure, Souq.com dominates its counterparts, and Noon will disrupt that order to a degree, but the market remains largely untapped with figures from AT Kearney showing that e-commerce contributes precious little to the GCC’s economy, accounting for just 0.4 per cent of GDP in 2015. When you look at e-commerce’s 1.8 per cent contribution in France and 2.2 per cent in Japan – countries with similar GDP per capita figures to the GCC as a whole – it’s hard to believe that even the minnows operating in the region would struggle for a decent piece of the pie. 16 EQUITY
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