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Emerging Trends in Middle East eCommerce

A hot Arabic sun glistens along the canal as Italian-inspired black gondolas languidly weave past one another, stopping at luxury store entrances, the passengers hopping out in long, maxi-length fashions. It’s a mall in Qatar, the Villaggio, and its surprising transplant-esque appearance transcends the recent booming wealth struck throughout segments of the Middle East, largely from big oil exports and the associated labor.

Commonly viewed as a slowly growing market located within an arguably unstable political climate and nested alongside Africa’s gradually developing economy, retailers have generally been slow to launch eCommerce initiatives within the Middle East. However, as the rapidly growing markets and wealthy pockets within the Gulf States have become noticed by retailers, luxury brands like Burberry, Dolce & Gabbana, and jewelry retailer Blue Nile have launched Arabic-language sites aimed at experiential shoppers in wealthier countries such as the United Arab Emirates (UAE).

With a quickly expanding internet audience and the continued creation of logistics infrastructures from the ground up, the region is poised to become a larger player in the global eCommerce market as time progresses. As of now, the Middle East eCommerce market is valued at $4.9 billion and is expected to expand to $10 billion by 2018. In the UAE alone, the share of B2C eCommerce on total retail sales of goods is forecasted to triple between 2014 and 2019 (eMarketer). Mobile commerce also has extremely high potential in the area; for example, two-thirds of online shoppers in Saudi Arabia made their latest online purchases via smartphone (yStats).

With this growth in mobile purchases, it’s no surprise smartphone usage (and in conjunction the overall internet audience) within the Middle East is increasing. This growth is driven largely by consumers trading up from basic mobile phones to more modern technology as well as new subscribers (typically younger, affluent individuals) who are entering the mobile market at an affordable time. According to MasterCard, the percent of mobile and general internet users making online purchases ranges greatly, from 37% in Oman to a high of 95% in Kuwait. This disparity is predicted to level out in the near future as the availability of technology grows. For example, in 2015, 79% of Saudi Arabia’s entire population used a smartphone, and in the UAE, the corresponding figure was 91% (an increase of almost 20% from the year before). In Kuwait, smartphone penetration rose from 49% to 86% in two years.

From a regional perspective, the Middle East and Africa is a scattered continent of countries that boasts over 606 million mobile phone users, a figure expected to surpass 789 million by 2019. This total is only exceeded by the Asia-Pacific region, another emerging market also currently experiencing strong mobile growth. Combined, the two regions are forecasted to register nearly 80% of the world’s smartphone subscriptions by the end of the decade (Ericsson Mobility Report).

The fragmented nature of the smaller countries in the Middle East also decreases the hesitancy to participate in cross-border commerce. Regarding cross-border sales, 40% of purchases made by digital buyers in the UAE are on apparel, second only to travel and transportation (43%). Luxury items such as jewelry and watches are high in demand as well, with 33% of shoppers purchasing these goods. This should come to no surprise as high-end fashion is evolving into a booming market in the Middle East, with the sales of personal luxury goods reaching $8.7 billion in 2015, a $6.8 billion increase from the year before. In early 2016, Dolce & Gabanna launched their first line of hijabs and abayas in an attempt to capture the market demand, boasting bright prints, vibrant colors, and lace details. If the line is popular with shoppers, other comparable brands including Oscar de la Renta, Tommy Hilfiger, and DKNY are expected to follow suit (Vogue).

In conclusion, as the construction of fulfillment infrastructures is relatively new to the Middle East, eCommerce capabilities and expansion has and will almost certainly continue to be a unique and possibly thriving area in the coming years. Internet accessibility continues to increase throughout the region, especially through the availability of smartphones, and with this mobile commerce itself is naturally expanding. Over the next few years, the cultivation of a prosperous digital economy seems very likely and should prove to be an interesting evolution to come, especially for luxury and fashion retailers.