Middle East E-Commerce Sales To Reach $15bn By 2015

E-commerce is booming but limited number of players in the industry and logistical challenges are hindering the sector’s growth.



E-commerce sales in the Middle East are expected to touch $15 billion by 2015, up from $9 billion in 2012, according to a report by payment solutions provider Payfort.

There are around 4.43 million online buyers in the region spread across countries such as the UAE, Saudi Arabia, Egypt and Kuwait, the report released during the ArabNet said.

The UAE has around 3.6 million e-commerce customers with the lion’s share of them in Dubai, and 27 per cent are in Sharjah and Abu Dhabi.

Almost 60 per cent of e-commerce customers said that competitive pricing and better deals were the motivator to shop online while 56 per cent cited convenience.

However, the industry is still plagued with challenges.

Speaking at the ArabNet exhibition, Aramex COO Iyad Kamal opined that the lack of ample e-commerce players in the Middle East is stifling potential.

“The number of e-commerce players are still less. We always keep talking about four or five names in the region…this is something that we need to look into,” he said.

“We cannot have an e-commerce industry with five, 10 or 20 companies. We need to have thousands of e-commerce retailers starting with the region and we need to promote them. We need to make it very simple for e-tailers to pop-up and sell in this part of the world.”

A report by the logistics firm showed that e-commerce shipments grew 100 per cent in 2013. However, growth was down from 150 per cent in 2012.

Kamal attributed this slowdown to the limited number of e-commerce players, cash-on-delivery method of payment and on-going international trends such as new product launches.

According to Aramex, the largest e-commerce markets in the region are Saudi Arabia, the UAE and Egypt.

“Just Saudi Arabia and the UAE contribute to around 65 per cent of e-commerce in the region. If you add Egypt it becomes 75 per cent,” he said.

However, 80 per cent of online transactions are still cash-on-delivery (COD) impacting the e-commerce ecosystem, Payfort said in the report.

“For merchants that deal with cash-on-delivery as their main payment option, costs can range from $10 to $30 per shipment due to high product returns, re-stocking and re-shelving of undelivered products, cash-handling costs, thefts, and customers abandoning payments on delivery,” the report said.

In addition, merchants might have to wait for weeks before they settle their funds.

On the other hand, customers might also be taking on additional costs while opting for the COD option, as merchants will add it to the cost of delivery, Payfort noted.

Many customers also forget to have enough cash on hand and are unable to receive their products upon delivery, the report stated.

Kamal confirmed that the delivery with the payment option of COD is inefficient and fraught with logistical issues.

He added that deliveries with a COD option are returned most of the time while packages that are already paid for are accepted the first time they are delivered.

“Even after we confirm the delivery address and schedule a time, nine per cent of COD packages come back.

“So COD is important and we love it but its has issues and we need to work together to solve it.”

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