The rise and rise of e-commerce in the Middle East (page 1 of 2)

The Middle East retail landscape is evolving. At this point there seems to be ample cash in the coffers to fund sustained growth in retail both on and offline, but online options fuelled by competition, mobile payments, and an increasingly tech savvy population, have been the main factors in driving a 300% growth in virtual shopping over the past year.

UAE-based Souq.com was born in 2005; a time of minimal competition but notoriously tricky online payment facilities. The site has since established itself as one of a few leading online retailers in the region, and Chief Executive Ronaldo Mouchawar predicts 'really fast' growth for the industry.

"We're really excited that consumers in the region are adapting to the internet," he says. "There's enough offering out there now. E-commerce is worth about $3bn in the GCC ... about 42% of the population are making [or have made at least one or two] transactions online."

A spokesperson from the Middle East division of market research firm YouGov told AMEinfo that these figures could be much higher. Their most recent survey found 51% of Saudis polled have made online purchases, although only 10% of them shopped at least once a week. The figure was higher again in the UAE, where 74% of those surveyed had an online shopping experience.

There are currently 72.5 million internet users across Mena and the Gulf Cooperation Council predicts B2C e-commerce sales will reach around $15bn by 2015. The current total value of offline retail is approximately $425bn - over 28 times as much as online revenues.

The UAE has the highest percentage of internet users who shop online, compared to the rest of the Middle East. B2C sales growth for UAE e-commerce was $2bn in 2010 - 55% to 60% of total GCC e-commerce sales. Saudi Arabia is the second largest e-commerce market, worth an estimated $520m, followed by Qatar ($375m), Kuwait ($280m), Bahrain ($175m) and Oman ($70m).

Startups and burnouts

Several retail outfits shut down or exited the Middle East over the last couple of years, most notably Living Social, a large international group buying site. A few other fledgling enterprises simply failed to take off, but just as many have sprung up, including success stories like Namshi and Jado Pado. Mouchawar remains optimistic.

"You have different models around with Souk.com offering a large selection for retail and now many group buying websites, so it's really exciting," he claims. "We're noticing a lot of investments in the region and internet usage is only going up with connectivity from mobile and tablets.

"Some countries in the region are seeing people spend up to 4 hours a day online, so retailers want to be where they are. Commerce, audience and footfall go together and you just convert them to buyers by the products you offer," explains Mouchawar.

While several retailers have come and gone, the last Q4 saw the Souq.com shopping platform score $45m in funding from international investors. It is the sort of investment that will stir up the competition, while boosting confidence in a growing market.

Dubai headquarted Jado Pado was a year old in September and looked to quickly expand into neighbouring GCC countries.