UAE E-Commerce Logistics Market, which surged ahead with over 21.6% year-on-year growth in 2020, is poised to be a staggering AED 3.0 Bn industry by 2025, as per findings released by Ken Research.
The UAE E-commerce industry has witnessed an upward trajectory over the past 5-6 years with an increase in internet penetration in the region. Escalation in the number of smartphones in the country, high consumer confidence, changing consumer preferences, etc. have augmented the growth of e-commerce leading to surging demand for e-commerce logistics as well in the country. The COVID-19 pandemic has also pushed the demand in the market as the need for social distancing has forced people to rely on online shopping. The growth in the E-commerce orders for logistics has been majorly driven by an increase in internet affinity and demand for value-added services.
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1. Impact of COVID-19 resulted in shift in preference among UAE residents from Cash to Online Payment Methods.
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With initial concerns regarding disruptions in supply chain, Logistics industry of UAE displayed resilience and adapted to ‘new normal’ delivery techniques. 68% respondents have reduced shopping at physical stores and are undertaking online purchases. COVID-19 and followed restrictions prompted customers to switch to undertake online payments over COD. Moreover, imposed social distancing measures and curfews caused a mass switch to online shopping. Furthermore, traditional brick-and-mortar brands started restructuring product offerings to meet new consumer demands by going digital and selling online.
2. Dubai & Abu Dhabi account for more than half of the Total E-commerce Shipments in UAE Owning to Large Tourist Base with Decent Purchasing Power.
Currently more than half of the demand comes from Dubai & Abu Dhabi region. However, this share is expected to come down in future, as tier II and lesser cities will become new demand centers driven by increased internet penetration, increase in number of smartphone users, rise in per capita income and increasing propensity to purchase online. Currently, high proportion of online shoppers that is ~80-85% of them belong to Dubai, Abu Dhabi & Sharjah Emirate. Strategic geographical location with access to large number of markets such as GCC, Africa, Europe, China, India and Japan lead for high concentration of warehouses in this part of UAE.
3. High number of orders are placed in Ramadan, Black Friday & Holiday Season sale Months in UAE with an Average Growth of 20-30% compared to Non Seasonal Days.
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The holiday shopping season (in December near Christmas) is the busiest moment of the year for most retailers. In 2019, searches for ‘Black Friday deals’ were also up ~25%, and started to rise 3 weeks before the moment. Moreover, in the same year, ~50% of consumers noted that they increased their spending during the Holy Month. In 2020, Ramadan related searches started to rise up to 2 months prior to the Holy Month and continued until one week after. Furthermore, Valentine’s Day has become one of the biggest opportunities of the year for digital retailers, with queries like ‘same day delivery (up 22% from 2019)’ and ‘romantic restaurants’ showing massive growth.
4. Initiatives such as Dubai CommerCity & Dubai E-Commerce Strategy have been the Few Government Regulations which Has Promoted the Market.
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Dubai Government has committed to building a free trade zone specifically dedicated to e-commerce, Dubai CommerCity, split into three clusters. The three clusters are Business, Logistics and Social. Additionally, with an area covering 2.1 Mn sq ft and an investment of around $3.2 billion, it is uniquely designed for the best and upcoming e-commerce players. Moreover, the UAE remains the most active in attracting funding, with UAE-headquartered start-ups garnering 30% of all deals and 70% of total funding. This is attributed to continued govt. support, corporate venture interest and growing investor appetite for start-ups. Furthermore, the country has been successful in attracting quality talent and labor from around the world at globally competitive rates.
Because of the COVID-19 outbreak, there has been a shift from offline to online sales, which is expected to continue to grow significantly in the future. The country's e-commerce logistics market is expected to grow as a result of new technologies such as Automation, Blockchain, and the Internet of Things, which will be investigated in order to increase efficiency, improve customer experience, and improve service quality.
