Complex Made Simple

A boom in digital payments globally, reflected regionally. Brick and mortar retail to subside

Digital sales saw their biggest year yet in 2020. Will the trend continue in 2021?

2020 was the biggest holiday season ever for digital sales, up 50% to $1.1 trillion globally E-commerce sales in Dubai are expected to rise 23% to $27 bn in 2022, according to Dubai Customs Brick-and-mortar business creation is expected to decline further in 2021 in favor of online business creation

Salesforce, the global leader in CRM, today released its 2020 Holiday Shopping Report, highlighting data and trends that shaped the holiday season and the ways in which it will impact how consumers shop in 2021.

Its data shows a 50% increase in digital spend over the 2019 shopping season, making it one of the biggest digital holiday shopping seasons to date. Consumers spent $1.1 trillion online worldwide.

Total Cyber Week digital sales reached $270 billion globally, while the first two weeks of December accounted for $181 bn in global sales. 

With strained shipping systems and consumers prioritizing safety, retailers with curbside, drive-through, and in-store pickup options outperformed those without these services and experienced 54% digital revenue growth year-over-year in the five days leading up to Christmas, compared to 34% growth for those that dRob Garfidn’t.  

Buy now, pay later usage saw a year-over-year increase of 109%.

Sporting Goods and Home Goods were the hottest product categories which grew year on year 108% and 89% respectively with Food and Beverage keeping pace at 80% growth.

“The 2020 holiday season was defined by the pandemic and forced retailers and brands to innovate quickly with the introduction of services like curbside pickup, virtual concierges and a focus on social, messaging and live streaming to reach shoppers in new ways,” said Rob Garf, VP, Industry Strategy for Retail, Salesforce. “We expect to see these new innovations remain in 2021.”

Read: Online payments, digital wallet growth, set the stage for Saudi Open Banking 2022

Read: VISA: 97% of UAE SMBs have embraced new digital technologies to meet changing consumer behaviors

Surge in e-commerce activity in the Middle East region

Between 20-30% of the surge in e-commerce activity propelled by the COVID-19 pandemic is here to stay and will find a permanent slot in overall retail spending in the MEA region, a recent study by Mastercard revealed.

The study found that 73% of consumers in the UAE, as well as in the wider MEA region, were shopping more online than they did before the pandemic.

Adoption by older generations, greater convenience, and lower costs will contribute to the continued growth of digital demand in 2021.

Continued digitalization in MEA is instrumental to financial inclusion and fintech disruption in online banking was identified as a key driver to e-commerce activity.

Brick-and-mortar business creation is expected to decline further in 2021 in favor of online business creation and the adoption of initiatives that connect a merchant’s sales data with access to capital, the report added.

Leveraging technology to connect consumers to small businesses and micro-merchants is another aspect of advancing financial inclusion. With the progress of digital innovation, digital payment solutions such as Contactless, Virtual Card Numbers, and Quick Response codes offer added possibilities.

The Middle East & North Africa (MENA) region has the largest youth population in the world, with over 50% of residents under the age of 25.

In the UAE, this youth bulge stands at 34%.

However, growing youth unemployment is an associated risk, the report said.  

Alongside e-commerce, the report anticipates automation around the Fourth Industrial Revolution (4IR), contactless interaction, local delivery services, and ‘tele-everything’ to be other long-lasting trends.  

“We expect e-commerce sales to rise 23% to $27 bn in 2022, especially since there is a noticeable shift in the consumers’ trends and behavior after the pandemic,” Ahmed Mahboob Musabih, Director-General of Dubai Customs, said in a statement to national news agency WAM.

A June 2020 Visa study in partnership with Dubai Economy and Dubai Police found 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 to make payments online instead of opting for cash on delivery.

According to the report, in the wider MENASA region, the UAE represents the biggest annual spend per online shopper at $1,648.

The average transaction value in the UAE was $122 in 2019-20, compared to $76 in mature markets, and $22 in emerging markets, the report said.