As internet penetration keeps rising, it becomes more and more convenient to carry out daily activities online – including online shopping. E-commerce is already growing at a rapid pace, with online retailers like Amazon and Alibaba leading the industry. A new study reveals that the sector is also set to receive a major boost in the Middle East, as challenges seem to be tackled more and more effectively by countries in the region. What are the main factors behind this immense growth?
Online payment security and adoption
E-commerce has been in large part aided by the evolving digitization of the global economy. As consumers are getting used to online payment methods, they are becoming more and more open to the idea of purchasing products and services electronically. The rise of alternative online payment methods like PayPal has also helped in this regard, as security of online transactions is one of the top concerns for online shoppers. OWASP (short for the Open Web Application Security Project), is a non-profit network of IT security professionals dedicated to providing unbiased information on application security.
Online payment solutions used by e-shops typically make use of web applications to accept and process orders and payments. OWASP gathers data on web application vulnerabilities and publishes a consensus-based report every couple of years that is entitled OWASP Top 10. It details the top 10 most critical web application risks, like SQL injection, cross-site scripting and sensitive data exposure. Professionals use that data to develop and improve defense tools – and consumers value the sense of safety when making online transactions that include sharing their banking and financial details. Online payment solutions used by e-shops typically make use of web applications to accept and process orders and payments.
Cutting back on red tape
The steady rise of online shopping is also aided streamlining the process of setting up an online business or an e-shop branch for an already existing company. The Middle East and North Africa regions are continuously improving their performance regarding ease of doing business. In 2018, UAE scored 94.06 and claimed the 25th spot globally, while Morocco at 92.99 ranked 34th and Oman at 92.89 ranked 37th in terms of ease of doing business. Mauritania with a score of 92.18 at 46th place and Tunisia claiming the 63rd place with a score of 90.23 completed the top five in the region. Egypt was lower, at 109th place with a score of 84.11, while Saudi Arabia came in 141st with 80.07 points.
Overall, the average score across MENA countries was 80.66, which means that the region claimed the 116th place in the global rank. According to the World Bank and its Doing Business 2019: Training for Reform report, the MENA region has carried out impressive reforms to help propel small and medium enterprises forward when it comes to ease of doing business. In 2018 alone, the region saw 43 business reforms implemented across 14 out of its 20 economies – a steep rise compared to just 29 reforms in 2017. Djibouti is the regional leader in the number of reforms and has ranked among the top 10 improvers globally, counting six reforms which include a one-stop shop for start-ups and broader access to credit.
E-commerce on the rise
Cutting red tape can make room for enterprise growth and attract investment in the region. Both of these developments can help foster the rise of e-commerce, which is already a hot market across investors. The meteoric rise of Amazon in the West and Alibaba in the East has proven that there is money to be made in online retail – and the recent deal between Amazon and Whole Foods has been widely considered a vote of confidence in the up-and-coming industry of online grocery shopping. Shopping online also makes perfect sense when considering the modern, hectic lifestyle – one that is also on the rise across Middle Eastern countries currently undergoing fast-paced economic and structural development.
Perhaps this is why the Middle Eastern e-commerce industry is projected to rise to US$69bn in value by 2020, according to research reported on by entrepreneur.com, with the Gulf region set to lead in terms of growth in the next few years. Overall growth in Africa and the Middle East will proceed at 11 percent CAGR from 2018 to 2022.
According to entrepreneur.com, UAE and Saudi Arabia are the two most mature and largest e-commerce markets in the region. UAE is estimated to represent 45.6 percent of the Middle East market value by 2020 and Saudi Arabia a further 29.1 percent by that same year.
This is particularly impressive if we take into account that, according to the same source, in 2016 just 15 percent of companies in the Middle East were online, while 90 percent of online shopping was from foreign businesses. Out of the total of the retail sector in the region, only 2 percent represented online purchases.
These figures are extremely interesting considering that the Middle East boasts one of the highest penetration rates all over the globe. Yet as the per capita income in the area constantly rises, and more and more foreign tourists are attracted to the Middle Eastern countries, e-commerce is sure to receive a welcome boost.