1.Overview of the Middle East and North Africa Market
Before the COVID-19 pandemic hit in 2020, the Middle East and North Africa was one of the fastest growing markets for the global e-commerce industry.
Despite accounting for just 2% of the local retail market, the Middle East and North Africa e-commerce market has grown 500% over the past five years, from $42 trillion in 2015 to $22 billion by the end of 2020.
Even in the United Arab Emirates, where there is a lot of activity, penetration is only 4.2%. At this stage, consumers, merchants and logistics are very immature, but it also means that there are a lot of opportunities.
The rise in Internet penetration and the spread of 4G networks has turned MENA's young people into digital natives accustomed to online shopping.
Today, half of 18- to 24-year-olds in the Middle East and North Africa say they are significantly more likely to shop online after the pandemic than before. Eighty percent of young Saudis regularly shop online.
The impact of the global pandemic goes far beyond the temporary closure of brick-and-mortar businesses.
Plummeting traffic to bricks-and-mortar stores in the Middle East and tight border controls have led some shops to go from "temporarily closed" to permanently closed. Many consumers are also buying their daily needs online.
This change in consumers' shopping habits has brought huge opportunities for the local e-commerce industry, and also affects the pattern of the future retail market.
According to the forecast, in the next 3-4 years or so, the uae and Saudi Arabia's e-commerce market size will reach $62.8 billion and $8.2 billion respectively.
Speaking of the Middle East and North Africa, the destination countries mainly include the United Arab Emirates, Saudi Arabia and Egypt. The three accounted for 80% of the market in the Middle East and North Africa.
The top three Saudi cities for purchasing power were Riyadh (27.4%), Jeddah (16.5%) and Mecca (7.3%), followed by Dubai (40.7%), ABU Dhabi (26.6%) and Sharjah (12.5%) in the UNITED Arab Emirates.
Internet penetration and purchasing power are also notable highlights in menA.
Saudi Arabia's Internet penetration rate is 88.60%, while the UAE's is 96.90%.
Saudi Arabia, for example, has a GDP per capita of more than $20,000, while the UNITED Arab Emirates has a GDP per capita of more than $40,000. Emerging markets such as Southeast Asia and India obviously cannot reach such purchasing power.
The growth of GMV, a Middle Eastern e-commerce player, confirms this. In just one year, GMV grew 52% in the Middle East and North Africa region.
This growth trend will continue in 2021, with the market expected to reach $30 billion GMV this year.
The huge growth of the e-commerce market has been accompanied by changes in local shopping habits.
Consumers are starting to pre-pay for important items, including groceries, medical supplies, hygiene products and home entertainment products.
Electronic products, fashion and food are the three most popular categories in the local e-commerce market.
Due to the hot climate in the Middle East, summer wear is the main clothing, sunglasses, swimsuits, sun caps, shawls and other summer equipment are also popular, which is why fashion is second only to electronic category.
In addition, the increase in online shopping during the pandemic has also led to a surge in demand for last-mile delivery services, further accelerating the development of local logistics services.
Aramex, the largest logistics and transportation solutions provider in Saudi Arabia, has launched a flexible "last mile" delivery service in Saudi Arabia with the launch of Aramex Fleet, a crowdsourced sharing economy platform.
3.The sea in the Middle East
Low credit card penetration in menA and a lack of local trust in online shopping make COD (cash on Delivery) a necessary way to enter the local market.
Despite the growth of online payments, COD still has a strong local presence because of a lack of consumer-protection regulations, inconvenient returns and logistics.
Studies have shown that consumers who choose COD usually have a strong demand for products "seeing is believing".
Despite high credit card usage in countries like the United Arab Emirates, consumers also prefer to pay for goods on delivery after confirming their quality, according to a Bain & Company report.
However, the COVID-19 pandemic has also had an impact on this shopping habit.
A Mastercard study showed that 70 per cent of respondents now use "contactless payment" as a result of social distancing rules.
There are even fears in Saudi Arabia that the government will ban the payment method if social contact with COD leads to a new epidemic.
As for the unit price of customers, according to ePanda's statistics of 1,000 random orders from cross-border e-commerce packages sent to Saudi Arabia and the UNITED Arab Emirates, the unit price of customers in Saudi Arabia is concentrated in the range of 150-300 riyals (about 40-100 US dollars), and that in the UNITED Arab Emirates is also concentrated in this range, but the amount is slightly lower than that in Saudi Arabia, averaging 200 DIRham (about 53 US dollars).
The epidemic in 2020 greatly accelerated the already booming e-commerce market in the Middle East and North Africa. The prosperity of e-commerce industry under the epidemic has also played a positive role in promoting local logistics and fintech.
The Middle East and North Africa region is deeply rooted in the habit of cash on delivery, reducing dependence on COD, and needs to provide a good shopping experience to help local consumers gradually build trust in online shopping and online payment.
2021.8.18
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