It’s no secret that the international e-commerce industry has been shielded from the economic fallout from COVID-19. After all, Amazon US announced its fourth hiring spree this past September, announcing that it would be looking to employ 100,000 additional staff on the back of its most profitable quarter (Q2 2020) in its 26-year history.
In comparison with the Middle East, a region that is not as in tune with online shopping as the rest of the world, things have been picking up, with consumer shopping and payment trends seemingly shifting permanently. Even online grocery shopping, which has historically been a week segment of the marrket, saw an unprecedented surge after the onset of the pandemic, with sales doubling in the UAE and Saudi Arabia.
Now, a new study dubbed the ‘The United Arab Emirates (UAE) eCommerce Landscape 2020,’ conducted by Visa and the official government body Dubai Economy, has analyzed market activity in the UAE over the last 12 months and, in particular, the impact of the COVID-19 outbreak, highlighting key trends and insights drawn from Visa’s transaction data on how and where consumers have been spending – in addition to new challenges and opportunities that the crisis has created.
As stated earlier, the allure of e-commerce is still quite new to many, in a region that over the years has lagged behind others in some aspects such as that of online retail. The report found that increased confidence in digital payments – something that has been wavering for many years now – will be necessary to sustain this surge in e-commerce interest and demand.
“The digital payments ecosystem in the UAE and wider MENA region was already experiencing strong growth, but the pandemic has helped accelerate the pace of change and progress,” Marcello Baricordi, Visa’s General Manager for Middle East and North Africa, said. “We’ve seen a number of adoption barriers reduce as the demand for eCommerce and contactless commerce skyrocketed during the lockdown.”
The impact of COVID-19: Acceleration of e-commerce and digital payments
The June 2020 findings of another study, Visa’s Stay Secure consumer survey, in partnership with Dubai Economy and Dubai Police, showed that 49% of UAE consumers surveyed have been shopping online more because of the pandemic, with three out of five (61%) now using cards or digital wallets more to make payments online instead of opting for cash on delivery. Increased trust in the safety, speed, and convenience of contactless payments, were the top reasons cited for their increased preference for online payments.
This shift to paying online also means e-commerce will account for a bigger share of total UAE card payment transaction values in 2020, compared to pre-pandemic predictions; up from 19.7% to 21.9%. This figure is expected to continue upward, with e-commerce payments estimated to account for 28.2% of the total UAE card payment transactions value.
Findings from the study also show that while UAE consumers still prefer to pay using credit cards (approx. 35% of transactions), the use of debit cards to shop online has increased by more than 7% between 2018 and 2020, pointing to a higher degree of trust in the transaction process that is reflective of a maturing market.
The UAE is home to the region’s heaviest online spenders
Based on the latest transaction data from Visa, the ‘UAE eCommerce Landscape 2020’ report also compares the UAE to mature and emerging benchmark markets including the US, UK, Australia and Singapore, as well as Brazil, South Africa and Malaysia.
According to the report, in the wider Middle East, North Africa, and South Asia (MENASA) region, the UAE represents the biggest annual spend per online shopper at $1,648. Additionally, the UAE continues to maintain a healthy lead in average transaction size compared to both mature and emerging e-commerce markets. The average transaction value in the UAE was $122 in 2019-20, compared to $76 in mature markets, and $22 in emerging markets.
With more merchants going online and a wider selection of products available in the e-commerce space, consumer demand and online sales volumes have also multiplied.
Looking to the future, online retailers can rest easy, as a recent report by Kearney Middle East titled ‘GCC e-commerce unleashed: a path to retail revival or a fleeting mirage?’ predicts that the e-commerce sector will be the main source of growth in retail post COVID-19.